More than 200 Erpenbeck Co. customers whose homes are double-mortgaged because of home closings gone awry will proceed as a class in a civil lawsuit seeking reparations from Peoples Bank of Northern Kentucky.

        The ruling was made Monday by Boone County Circuit Judge Jay Bamberger in a lawsuit filed by Charles and Sherry Mitchell. It allows other Erpenbeck Co. customers to join the case if their home purchase proceeds were not used to pay off prior construction loans.

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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.

        By certifying the case as a class action, the judge is essentially allowing all qualified victims to join the case without having to file separate lawsuits, thus expediting their claims.

        Peoples Bank officials have said about $15 million tendered at closings — mostly money from banks financing the home purchases — was directed by Erpenbeck employees into the builder's accounts at the Crestview Hills bank. The government suspects bank fraud.

        “Stuff happens,” the Mitchells' lawyer, Stan Chesley of Cincinnati, said Monday. “It happened.”

        The judge left open the possibility of adding defendants if it is determined that Erpenbeck redirected closing checks into accounts at other banks. W.R. Patterson, a Louisville lawyer representing Peoples, said his client thinks the practice extended to other banks. He did not identify them.

        Peoples did not oppose the class-action certification, but it wanted Judge Bamberger to grant its motion to add up to 92 other parties — mostly other banks and real estate title insurance companies — as third-party defendants.

        Mr. Patterson argued that the other parties contributed to the loss of the money. Title companies, for instance, signed federal documents stating that closing checks were properly conveyed, he said.

        “There are other entities who need to be made part of this litigation so that we can resolve this issue,” Mr. Patterson told the judge. “There's potential liability all over the place. Most of all, we need to add Mr. Erpenbeck to this case.”

        But Mr. Chesley countered that admitting the other defendants would impede the case and jeopardize a quick resolution for home buyers. Waving a chart of 75 lawyers already involved in the Erpenbeck affair, he said Peoples wants to stall the case by putting his clients into a “jackbox” with other parties.

        Judge Bamberger denied Peoples' motion.

        Although rebuffed Monday, Peoples Bank of Northern Kentucky has a separate lawsuit against the other banks and title companies. That case is now in federal court. Lawyers for all parties have met informally twice to hash out settlements in which everyone but home buyers will bear part of the losses.

        Mr. Chesley had further reason for Judge Bamberger to keep his case moving along. He said four of the Kentucky and Indiana banks that participated in Peoples-brokered loans to Erpenbeck are preparing to file suit against Peoples. The four banks have about $24 million in Erpenbeck loans among them, he said.

        Mark Arnzen, a Covington lawyer and Peoples board member, scoffed at Mr. Chesley's remark. He said that only one of the banks, Community Bank of Southern Indiana of New Albany, had serious reservations about the delinquent Erpenbeck loans.

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