CRESTVIEW HILLS — A Peoples Bank of Northern Kentucky teller caught a trusted customer, the Erpenbeck Co., depositing a check made payable to another bank into an Erpenbeck account in 2001, bank officials said Thursday.

        The man who then led the building company, A. William “Bill” Erpenbeck, promised the manager of Peoples' Edgewood branch that it wouldn't happen again.

Peoples president Merwin Grayson discusses the Erpenbeck case Thursday.

        But it happened again, as it apparently had before. And the bank says that by the time it saw a pattern, at least 50 checks totaling $15 million to $16 million for Erpenbeck's lenders were deposited into Erpenbeck accounts.

        Peoples officials Thursday discussed more details of the bank's role in the unfolding Erpenbeck fiasco, which has left some homeowners without clear titles to their homes and has triggered dozens of lawsuits by banks and contractors who are owed millions by the home builder. The Peoples officials revealed that:

        • The bank exceeded a federal lending limit to any single borrower with $8 million in loans to the Erpen beck Co. The bank's limit was $6 million. FDIC officials would not comment on the apparent violation of the agency's rules, saying its investigation is continuing.

        • The bank can withstand its current financial chal lenges and is not for sale. New procedures will prevent similar problems with checks.

        • Former bank president John Finnan and vice president for commercial loans Mark Menne were asked to resign after an internal investigation. The bank previously had said the pair, who had a side business to buy homes from Erpenbeck Co. and then lease them back, had left the bank voluntarily. The bank, however, does not believe the former executives had any involvement with the check cashing. No other employees have been dismissed.

        • It was the bank that first alerted federal authorities about possible bank fraud involving the Erpenbeck Co. Mr. Erpenbeck's lawyer said his client blew the whistle.

        “We've got this Erpenbeck guy out there saying he called the FBI,” Peoples president Merwin Grayson said. “We called the FBI.”

        Last week, after Mr. Erpenbeck was charged by the Boone County Sheriff's Department with writing a bad check for $258,399 to a subcontractor, one of his lawyers told reporters that Mr. Erpenbeck not only started the investigation but continues to work with the FBI and the U.S. attorney's office in Cincinnati.

        Told Thursday about bank officials' claims that they tipped off authorities and banking regulators, the lawyer, Glenn Whitaker, stood by his earlier comments.

        “I've got news for them,” said Mr. Whitaker, who has defended other Tristaters accused of white-collar crimes. “They may honestly believe that, but they are dead wrong.”

        FBI agent Ed Boldt would not say Thursday who made the first call to the agency's Cincinnati office or when it was alerted about problems involving the bank and the building company. The FBI confirmed April 23 it was investigating possible bank fraud by the Erpenbeck Co.; it has filed no charges.

        Mr. Arnzen, a Fort Thomas lawyer, said he and other Peoples board members first became aware of problems related to the Erpenbeck Co. when Mr. Finnan called him March 26.

        Mr. Finnan told Mr. Arnzen that over the previous weekend, Mr. Erpenbeck had either resigned or been fired from the company he founded in 1993. Jeff Erpenbeck, Bill Erpenbeck's brother, had taken over operation of the company.

        Mr. Finnan also revealed that he and Mr. Menne, the bank's senior vice president, had been buying model homes from The Erpenbeck Co. and then leasing the homes back to the company through a partnership called Jams Properties. (Jams in is an acronym for the first names of the bankers and their wives.)

        March 27, Mr. Arnzen, Mr. Finnan and Mr. Menne met with the Erpenbeck Co.'s management at Erpenbeck's Edgewood office.

        “At the March 27 meeting, I learned of the fraudulent checks that had been placed through Peoples Bank,” Mr. Arnzen said.

        A special meeting of the bank's board was convened the evening of April 1 where Jams — which presented problems of conflict of interest for the bank — and the checks were discussed.

        The next day, the bank notified the FBI and the Federal Deposit Insurance Corp., the government agency that oversees bank deposits. “That's when the investigation started,” Mr. Arnzen said.

        Because of their role in Jams, Mr. Menne and Mr. Finnan later were asked to resign after an internal investigation conducted by the bank, Mr. Arnzen said. The resignations were announced April 30. Mr. Grayson, who had retired in 2001 after leading Huntington Bank's Greater Cincinnati division, took over the next day.

        Mr. Erpenbeck and Mr. Finnan — who previously lived on the same Crestview Hills street — are both staying in condos they own in the same Fort Myers, Fla., neighborhood.

        Mr. Menne, who lives in Villa Hills and has not left town, has hired Covington defense lawyer Harry Hellings to represent him.

        “Marc Menne has not been charged with anything ... and he hasn't talked to the FBI,” Mr. Hellings said. “Everybody is getting out of town but he is standing tall and staying right here in town.”

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