Originally created 02/09/00

Former cotton broker faces fraud, money-laundering charges



STATESBORO, Ga. -- Former Statesboro cotton broker David Prosser will appear in court this week to face 84 counts of mail and wire fraud, money laundering and interstate transportation of stolen property.

It will be one of the few times Mr. Prosser has appeared publicly after farmers accused the well-known hometown broker of stealing millions of dollars' worth of their cotton two years ago.

Friday's federal indictment charges Mr. Prosser, the owner of the defunct Sea Island Cotton Trading Co., with defrauding nearly 100 farmers and buyers of $5.5 million in cotton and illegally using that money to invest in the futures market.

"Between January 1997, and February 1998, Mr. Prosser traded heavily in the risky cotton futures market and lost a net total of approximately $4.5 million," reads the indictment by the FBI, the Internal Revenue Service, the U.S. Department of Agriculture and the Georgia Bureau of Investigation.

Neither Mr. Prosser nor his attorney, Alex Zipperer of Savannah, was available for comment Monday.

About $271,000 of the money in question belonged to De Strickland and her husband, Lloyd. Bulloch County farmers created The Cotton Group, a cooperative effort by Mr. Prosser's farm clients to pay legal fees.

The Georgia Legislature passed a $10 million indemnity fund for the farmers involved in Sea Island's collapse.

Ms. Strickland said farmers feel vindicated by the indictment after some lawmakers hesitated to create the indemnity fund, suspecting some farmers might have been involved in the scandal.

"The farmers lost a lot more than just their cotton money. It's been emotionally trying," Ms. Strickland said.

Mr. Prosser's job was to sell farmers' cotton to buyers and advise them when to sell to get the best price, based on the fluctuating market. The farmers turned over their cotton warehouse receipts to Mr. Prosser to trade. The buyers gave Mr. Prosser money to purchase the cotton.

But no farmers got their money. And no buyers got their cotton.

Agencies claim Mr. Prosser spent lavishly on items that included a 1996 Mercedes, a 1996 Ford Explorer and an interior designer he paid $14,700 to decorate his home.

"While Prosser spent more and more, he stole more and more cotton," the indictment reads.

Federal authorities say Mr. Prosser did not get permission from every farm client to sell the cotton. In other cases, he got their permission but the farmers didn't get their money.

In February 1998, just before his checks to farmers bounced, Mr. Prosser bounced checks to two investment companies through which he was hedging the futures market.

As the price of cotton on the futures market dropped, Mr. Prosser "failed to meet two margin calls required by his brokers to cover his losses due to his risky trading," according to the indictment. The two checks totaled $1.15 million.

At the end of February, the members of The Cotton Group forced Sea Island into bankruptcy. Mr. Prosser soon voluntarily filed bankruptcy for his personal finances.

His debt was estimated in 1998 at $1.8 million, compared with about $1 million in assets.

Mr. Prosser has frustrated farmers, Ms. Strickland said, with his refusal to answer questions in Bankruptcy Court related to his financial downfall. He has consistently pleaded Fifth Amendment protection against self-incrimination.

In April 1998, he faced his creditors. When a lawyer asked what caused his financial problems, Mr. Prosser answered, "The fall of my company."

"Can you be more specific?" the lawyer prodded.

"No," Mr. Prosser said.

Few people who once knew Mr. Prosser and his family have heard him speak since, according to many of the farmers who lost money. Most have been told that he is working for a concrete company in Savannah.

Ms. Strickland said her family will wait for Mr. Prosser's day in court to get the answers they now want about where their year's profit was spent.

"We're just so pleased to see the legal system coming through," she said.