Wednesday, June 05, 2002

Associates, kin burned in Erpenbeck scheme


Many houses worth less than is owed

By James McNair, jmcnair@enquirer.com
The Cincinnati Enquirer

        The check-diversion scheme that has left more than 200 Erpenbeck Co. customers with double mortgages on their homes has also affected home purchases by the company's bankers, by a business partner's family member and by its current president, Jeff Erpenbeck.

        All have this in common: They bought their homes before A. William “Bill” Erpenbeck resigned in March as president of the Edgewood home builder. And the money they and their lenders brought to the closing table was never applied — as it should have been — to pay off original construction loans.

STORY ARCHIVE
Click here for all Enquirer reports on Erpenbeck Co.
INVESTIGATION
If you have any additional information on the business dealings of the Erpenbeck Co. or Peoples Bank of Northern Kentucky - or on the involvement of any parties not yet identified in our coverage - please email Enquirer business reporter James McNair at jmcnair@enquirer.com or Kentucky Enquirer reporter Patrick Crowley at pcrowley@enquirer.com.
        As a result, all of these properties remain saddled with two mortgages. Banks, title companies and home buyers are scrambling to wrest themselves from the multimillion-dollar predicament. Cincinnati lawyer Stan Chesley, aiming to represent the 200-plus home buyers as a group, has sued Peoples Bank of Northern Kentucky for allowing Erpenbeck Co. to deposit home-sale proceeds.

        But the practice wasn't limited to hapless home buyers. Houses owned by some of Bill Erpenbeck's closest confidantes are similarly mortgaged beyond their worth.

        One such house, in the Fowler Ridge subdivision in Independence, belongs to Bill Erpenbeck's younger brother Jeff and his wife, Pamela. The couple bought the house in December 2000 for $165,000. They borrowed $125,600 from Metropolitan Bank & Trust of Highland Hills, Ohio, a suburb of Cleveland.

        A year and a half later, the original mortgage of $99,300 from Erpenbeck & Kennedy Builders to Firstar Bank still encumbers the house at 2223 Fedders Court. Phone calls to Jeff Erpenbeck's lawyer, Mike Barrett, were not returned. Telephone service to the Erpenbeck Co. has been cut off.

        Failure to pay off a construction loan cost the Erpenbeck family its business relationship with home builder Mick Kennedy. He was a minority owner of Erpenbeck & Kennedy, the single-family home-building arm of Erpenbeck Co. He left the firm in March.

Bill Erpenbeck
Bill Erpenbeck
        Mr. Kennedy said one of his children — he didn't want the name printed — bought an Erpenbeck & Kennedy house in the Claiborne subdivision in Taylor Mill in May 2001. Everything appeared fine, he said, until he learned in March that a release on the original $114,000 mortgage to Firstar had not been filed.

        After confronting Bill Erpenbeck about it, Mr. Kennedy said he received a letter from Firstar confirming that the loan had been paid off. Suspicious about the authenticity of the letter, he said he again went to Mr. Erpenbeck. This time, he said, Mr. Erpenbeck cut a check to Firstar, which Mr. Kennedy hand-carried.

        Soon afterward, Mr. Kennedy received another payoff confirmation letter from Firstar. The signatures of the loan administrator, Carol Neely, are clearly different on the two letters.

        The other insiders who were party to home closings gone bad were John Finnan and Marc Menne, the former Peoples Bank officers whose Jams Properties bought Erpenbeck model homes.

        Jams bought 19 houses and condos from Erpenbeck over three years. The company went to small banks in Corbin, Ky., and Eaton, Ohio, to finance their purchases. In almost half of its deals, the money from the new loans wasn't used to pay off the old.

        For example, Jams received a $568,800 loan the Bank of Corbin in July 2000 to buy a $236,000 house at 709 Stablewatch in Taylor Mill from Erpenbeck & Kennedy. The sale was recorded Aug. 2, 2000, yet the original construction mortgage of $151,000 to Firstar sits unaltered in the Kenton County courthouse.

        Jams also received $744,300 from Bank of Corbin in December 2000 to buy three E&K homes in Taylor Mill and Independence. The purchase prices totaled $561,500.

        But only one of E&K's construction loans was paid off. The other two mortgages, a $134,500 note to Heritage Bank of Burlington and a $134,000 note to Guardian Savings Bank of Colerain Township, have not been released.

        The FBI is investigating Erpenbeck Co. for bank fraud. No charges have been filed, although the U.S. Attorney's Office has filed civil forfeiture actions against 24 houses owned by Bill Erpenbeck, Mr. Finnan, Mr. Menne and Jams.

       Staff writer Patrick Crowley assisted in this report.
       
The Cincinnati Enquirer/PATRICK REDDY Jeff Erpenbeck's house in Fowler Ridge in Independence is among about 200 sold by Erpenbeck companies that did not have their construction loans paid off at purchase.

       



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