Sunday, April 28, 2002

Builder watches dreams collapse


FBI investigation follows developer

By Patrick Crowley, pcrowley@enquirer.com
The Cincinnati Enquirer

        CRESTVIEW HILLS — A. William “Bill” Erpenbeck spent years building a company that today appears to be crumbling.

        He oversaw a once-booming home building company, had access to politicians and power brokers, ran up tabs at fine restaurants and trendy clubs and lived in a million-dollar home abutting a country club.

Bill Erpenbeck
Bill Erpenbeck
        He threw lavish parties, went on extravagant vacations and owned expensive cars and boats.

        But amid a federal investigation into allegations of bank fraud, Mr. Erpenbeck, 41, a Northern Kentucky native and former high school and collegiate star athlete, may be on the verge of losing everything.

        He has already been removed from the Erpenbeck Co., the Edgewood home building company that he started but may now have destroyed. The company faces 11 lawsuits in Tristate courts. A bank is foreclosing on his $1.3 million home in Crestview Hills. The back yard luaus featuring live music and dead pigs are likely a thing of the past, as are the rounds of drinks at Summit Hills Country Club, the regular dinners at The Waterfront.

        “Bill lived large,” said Greg Shumate, a Villa Hills lawyer who attended Covington Catholic High School with Mr. Erpenbeck and has remained his friend.

        “Everybody knew him. He was somewhat of a local celebrity,” said Mr. Shumate, who attended many of Mr. Erpenbeck's parties that sometimes attracted 1,000 or more guests. “He was a great host. And everything he did was big.”

        Including, it appears, submerging the company he built into a nearly $100 million a year enterprise in a financial scandal that has attracted FBI agents. It may eventually involve hundreds of homeowners, dozens of subcontractors and vendors and tens of millions of dollars.

[photo] A bank is foreclosing on Bill Erpenbeck's home (left), which sits near the entrance to an Erpenbeck Co. development in Crestview Hills.
(Patrick Reddy photo)
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        The FBI declined to comment on the investigation. No charges have been filed.

        “It's sad and it's shocking,” said Eric Deters, an Independence lawyer who knows Mr. Erpenbeck mainly through politics. Until news of the investigation broke last week, Mr. Erpenbeck was finance chairman of Mr. Deters' campaign for Kenton County attorney.

        “I was worried about Bill,” Mr. Deters said. “I stopped and saw him (Wednesday). He knows he is in for a difficult time because of some financial problems.

        “And unfortunately a lot of innocent people are going to be affected,” he said, declining to elaborate.

The allegations

        The scope of the Erpenbeck Co.'s legal and financial problems is still unraveling. What is known is that Mr. Erpenbeck, who did not respond to requests for an interview, is under investigation for cashing checks that were not his and depositing the money into his business' accounts at Peoples Bank of Northern Kentucky in Crestview Hills.

        According to Peoples' executives and board members, here's what happened:

        • The Erpenbeck Co. borrowed money from banks to build houses and condominiums in Greater Cincinnati, operating as many as 20 developments in Hamilton, Warren, Butler, Clermont, Boone, Kenton and Campbell counties.

        • When a house was sold, a buyer would write a check to the bank that financed the Erpenbeck-built home. Such checks usually eliminate all debts attached to the home.

        But beginning in mid-2000, Mr. Erpenbeck and possibly other people at the company would take possession of the homebuyers' checks. Instead of turning them over to the bank that financed the construction, the checks would be placed into an Erpenbeck Co. account at Peoples. The banks that funded the developments never knew this, because the Erpenbeck Co. did not report sales to them.

        (Typically, a title company handling a closing takes or sends these types of checks to the bank. Some large Tristate developers were allowed to carry the checks, but local title firms say they have discontinued this practice — a move they say was unrelated to Erpenbeck's woes.)

        • After the checks were cashed at Peoples, Mr. Erpenbeck kept interest payments current on the loans for some time. But eventually, some home owners discovered that Mr. Erpenbeck's bank still owned part of their homes — because Mr. Erpenbeck hadn't paid its bank. The home owners contacted their lenders and, eventually, the FBI got involved.

        Jeff Erpenbeck, Bill Erpenbeck's brother and the co-owner of the Erpenbeck Co., says he knows nothing about what his brother was doing. About a month ago, he and other senior managers at the firm announced they were buying Bill Erpenbeck out of the business he founded in 1993.

        It will be months for the entire episode to be sorted out. Peoples Bank and various title companies are expected to battle in court over the culpability of handling closing checks. Jeff Erpenbeck is restructuring what is believed to be millions of dollars in loans made by other Cincinnati-area banks to the Erpenbeck Co. in an attempt to keep the company solvent. Buyers of Erpenbeck homes are scrambling to determine if they are affected. Vendors and subcontractors owed money by the company want to be paid. And the FBI probe continues.

        While investigators are active, Bill Erpenbeck has hunkered down, not answering the phone or the door at his home. Jeff Erpenbeck has said little, maintaining much of what has happened has been news to him.

        Lenders and lawyers close to the Erpenbeck Co. and its ex-president suggest the company may have been overextended, growing too fast and building too many projects. Many building companies live on the edge of economic trouble — putting up money for projects that won't be sold until many months later.

        Yet freewheeling spending was part of Bill Erpenbeck's life. Poor investments were a part of his past, although it's unknown whether they were part of his present.
       

A standout

        Anthony William Erpenbeck grew up in Edgewood. His father, Tony, was part of a family-owned Northern Kentucky construction business that dated to the 1920s.

        Mr. Erpenbeck attended St. Pius X grade school on Dudley Road in Edgewood and went to Covington Catholic High School, where he was a standout baseball and football player. Just last year he was elected to the school's Hall of Fame.

        Some of Mr. Erpenbeck's pitches traveled 90 mph, said Mr. Shumate, who played on the CovCath football team with Mr. Erpenbeck, a star tight end.

        After graduating in 1979, Mr. Erpenbeck attended the University of Michigan on an athletic scholarship, playing on a Wolverine baseball team that included former Cincinnati Reds' star Chris Sabo.

        Though he did earn a varsity letter, records at Michigan show Mr. Erpenbeck played in just four games during the 1980 season, pitching 11 innings and giving up a less-than-impressive 24 hits, 19 walks and 22 runs.

        Friends say he was slowed by arm problems and transferred to Northern Kentucky University, where he fared better against lesser competition. Playing three seasons from 1981 to 1984, he still holds the school record for the lowest earned-run-average for one season at 1.77, according to NKU.

ERPENBECK PROJECTS
    The Erpenbeck Co. was founded in 1993 by A. William “Bill” Erpenbeck, a third-generation residential developer and builder who left his family's construction business. The company grew into the fourth-largest locally-based homebuilder, with sales of 436 units valued at $84 million in 2000.
    The Erpenbeck Co. specializes in condominiums, but also has built houses and townhouses in seven local counties, including the following projects:
    • Belmont Park, Union
    • Brookstone, Union
    • Chestnut Park, Miami Heights
    • Claiborne, Taylor Mill
    • Erlanger Lakes, Erlanger
    • The Fairways at Triple Crown, Union
    • The Fairways at Wetherington, West Chester Township
    • Fort Mitchell Pointe, Fort Mitchell
    • Grand Cypress at Legendary Run, Pierce Township
    • Hearthstone, Union
    • Laurel Glen, Springboro
    • The Lofts at Wetherington, West Chester Township
    • Oakwood Lakes, Mason
    • Pond Creek, Alexandria
    • The Reserve at Steeplechase, Union
    • Sherwood Lakes, Mount Zion Road, Boone County
    • Stonehaven at Aston Oaks, North Bend
    • Union Village, Union
    • Wellington Place, Alexandria
    • The Woodlands at Fowler Ridge, Independence

        After leaving NKU, Mr. Erpenbeck went to work for the family's home building business and married Jennifer Krebs, his high school sweetheart.

        The couple had three children. Mrs. Erpenbeck died of cancer in 1990. That same year Mr. Erpenbeck left the family business. In 1993, he formed his own upscale home building company.

        Working with other family members, including his brother Jeff, the company began developing homes and condos throughout the region. One of the most exclusive developments is Summit Lakes, located between Thomas More College and St. Elizabeth Medical Center South and on the Summit Hills Golf Course.

        Mr. Erpenbeck eventually remarried and moved his family into a $1.3 million home in Summit Lakes in 1997. By 2000, the Erpenbeck Co. was listed by Builder magazine as the fourth-largest developer in Greater Cincinnati with sales of $84 million.

        Mr. Erpenbeck began living a lifestyle that friends say he craved. With his good looks and gregarious personality, he would light up a room, acquaintances say.

        His Legends Way home was perfect for partying. It featured an outdoor pool with a cave, a 20-seat movie theater, an indoor batting cage and a sauna. In the basement were pinball machines, video games and framed football jerseys signed by quarterbacks who had played for the Washington Redskins.

        Each August, he had a luau complete with live music and roasted pigs. It was a “who's who” of the business, political and social elite of Northern Kentucky, Mr. Shumate said.

        “Bill knew how to throw a party,” he said. “Everybody wanted to be there.”

        Mr. Erpenbeck also courted political power, apparently having little concern for the ideology or platform of a candidate. He gave money to and hosted campaign fund-raisers for Democrats and Republicans — including U.S. Rep. Ken Lucas, a Richwood Democrat, and Kenton County Commissioner Barbara Black, a Taylor Mill Republican.

        His connections paid off last year when Gov. Paul Patton, a Democrat, appointed him to NKU Board of Regents, considered one of the top political appointments in the region.

        Mr. Erpenbeck would often buy rounds of drinks in the clubhouse at Summit Hills Country Club and would entertain sometimes dozens of people at The Waterfront, the Covington restaurant and nightspot owned by Jeff Ruby.

        He and his wife, Marcia, own a $270,000 condo in Fort Myers, Fla., own a 40-foot boat and drive luxury cars that include a BMW and a Mercedes-Benz.
       

"A big customer'

        Because he was such a good customer, Mr. Erpenbeck was permitted to run a tab at The Waterfront and other restaurants owned by Mr. Ruby.

        The tabs, however, reached several thousand dollars — the exact amount is not known — and Mr. Ruby had to recently work out a payment arrangement with Mr. Erpenbeck.

        “He was a big customer and he could sign for his bills,” Mr. Ruby said. “What he owes now is minimal.

        “Bill was a great customer,” Mr. Ruby said. “Whenever I asked him to give to a charity or help somebody out, he would. He took care of the employees who waited on him.”

        Mr. Erpenbeck was among those stung in 1997 by investing in an investment scheme known as Ben Mar.

        More than 300 people, including prominent business people and sports figures in Cincinnati and Northern Kentucky, invested in an option fund called Ben Mar. The firm actually ran a Ponzi scheme, a deal in which money paid by new investors is used to pay artificially high returns to original investors to attract more money. About $12 million was lost and one of the Ben Mar operators went to prison.

        At one point, court documents show, Mr. Erpenbeck had an account of $721,270 with Ben Mar, though it is not clear how much of that money was lost. The involvement in Ben Mar proved to be a professional and personal embarrassment for Mr. Erpenbeck and many of the other prominent people involved.
       

Falling behind

        As the economy cooled at the end of the 1990s, the Erpenbeck Co. began falling behind on taxes and payments to vendors.

        Kenton County Attorney Garry Edmondson said the company owes about $90,000 in back taxes, though it had been making regular payments until a few weeks ago.

        Revelations about the company's woes have rocked Northern Kentucky's tight-knit home building community, a business of German descendants with names like Drees, Fischer, Toebben and Krumpelman.

        “We're all shocked,” said Dan Dressman, a vice president at the Home Builders of Northern Kentucky, where Mr. Erpenbeck once served as president.

        “As far as I'm aware, Bill had a solid reputation,” Mr. Dressman said. “Everybody is just really disenchanted with the situation right now.”

       



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