In the reggae-pumped madness of Carlos 'n Charlie's restaurant on the island of Aruba, employees of the Erpenbeck Co. faced the ultimate test of their loyalty.

        Greeting them one at a time was company president A. William “Bill” Erpenbeck, brandishing a bottle of tequila, a cup of beer and a roguish grin. If employees wanted to join the party, they would have to submit to their boss' idea of an initiation rite.

        “You either tilted your head back and let him pour tequila down your throat — or he poured beer over your head,” said one former employee who opted for the tequila.

In January 2001, Bill Erpenbeck (encircled) hosted nearly 170 employees, spouses and guests on an excursion to New Orleans, Jamaica, Puerto Rico, the Cayman Islands and Mexico. The cost to the Erpenbeck Co.: nearly $300,000. | ZOOM |

        To the 150 employees and guests on the Erpenbeck Co.'s annual Caribbean cruise in 2000, this was quintessential Bill. Like a fraternity house president, Mr. Erpenbeck, 41, took it upon himself to entertain his employees, whether it was letting them use the tanning bed in his Crestview Hills mansion or letting them take the company plane to the company condo in Myrtle Beach, S.C. At gatherings, he all but required them to join him in singing his favorite song, “American Pie.”

        After a nine-year run, the music died. Bill Erpenbeck resigned in March, his company has laid off all but eight employees, and the FBI is trying to link its collapse with the bilking of banks and home buyers. What had been Greater Cincinnati's third-biggest home builder in 2000 today can't afford to restore its telephone service.

        But as the Erpenbeck brass enjoyed the high life, the company was in serious trouble.

        On the surface, the Erpenbeck Co. appeared to be a great success. The company had an airplane, an employee getaway in Myrtle Beach and box seats at Paul Brown Stadium and the Firstar Center. Bill Erpenbeck had a $1.3 million house, a waterfront condo in Fort Myers, Fla., a luxury yacht, several luxury cars and a busy travel schedule to tropical resorts.

STORY ARCHIVE

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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.

        But unpaid bills were piling up. Today, the Erpenbeck legacy consists not only of homes and neighborhoods throughout the Tristate, but $75 million in debts and a five-alarm crisis at its primary bank, Peoples Bank of Northern Kentucky.

        At least 200 people who bought Erpenbeck homes have double mortgages. Many live in subdivisions with unfinished roads, unbuilt swimming pools or missing entrance gates. Other people made down payments on homes started, but abandoned to the elements.

        Subcontractors — many of whom were longtime Erpenbeck vendors — were left holding millions of dollars in unpaid bills. Bankers, tens of millions in overdue loans.

        The question gnawing at everyone's mind: What toppled the company of third-generation builders?

        Bill Erpenbeck and his younger brother Jeff Erpenbeck, the company's current president, declined to be interviewed.

        Former employees and business associates grasp for an explanation.

        This much they do know: That Bill Erpenbeck partied — at the company's expense — as if nothing was wrong.

        In town, Mr. Erpenbeck took entourages of employees — mostly men — to the Waterfront in Covington, Dickman's Cafe in Fort Wright or the Outback Lounge in Edgewood for company paid drinking sessions lasting into the early morning hours. The men took turns slugging raspberry-flavored vodka shots, called purple hooters, lined up on the bar. Employees wouldn't see Mr. Erpenbeck until 11 or so the next morning, if he showed up at all.

        “It was a good old boys club,” said Carol Whittaker, who worked in the Erpenbeck purchasing department three years before being laid off last October. “If you were one of the guys, then off you would go. Fishing in Florida. Golfing. For a week at a time.”

        Mr. Erpenbeck hit full form during the company's winter cruises and other junkets out of town.

        On the last cruise, in late January 2001, nearly 170 employees, spouses and guests embarked from New Orleans on a seven-day, all-you-can-drink Carnival Cruise excursion to Jamaica, Puerto Rico, the Cayman Islands and Mexico. The group included Gene Strong, secretary of the Kentucky Economic Development Cabinet, and John Finnan, former president of Peoples Bank of Northern Kentucky.

        Preceded by a night in the French Quarter, the outing would cost the Erpenbeck Co. nearly $300,000.

        On a home video obtained by the Enquirer, a trio of Elvis impersonators called “The Cruisin' Elvi,” enter an Erpenbeck employee social in the cruise ship piano bar. The group includes Erpenbeck business partner Mick Kennedy, Erpenbeck executive Tom Jordan and Mr. Strong. They wail “Are You Lonesome Tonight?” and “All Shook Up” before switching to the company anthem, “American Pie.” Everyone joins in.

        Most former employees interviewed for this story did not want their names printed for fear of repercussions — or because the FBI instructed them not to talk to reporters. Their recollections tended to overlap, however — including their depiction of Mr. Erpenbeck as a generous, if intimidating, leader.

        “Bill's a nice guy,” Mrs. Whittaker said. “He paid for everything on the cruises. Everybody had a drink card. They could get whatever they wanted to drink, as much as they wanted to drink.”

        Mr. Erpenbeck also threw company money around during an antic-filled romp two years ago at a home builders convention in Dallas. There, at a bar he favored because the piano man played requests for cash, he paid upwards of $1,000 to keep hearing his “American Pie” anthem.

        “It was funny at first, but then other people started getting mad and sick of hearing the song,” said one member of the group. “Other people put their money together to pay the piano player not to play "American Pie,' but Bill would just come up with more money to hear the song again.

        “I thought for sure a fight was going to break out,” the group member said. “People wanted to kick our ass, and I didn't really blame them. I was sick of the song by then, but Bill just really enjoyed outbidding them.”

        Subcontractors drank their share of Mr. Erpenbeck's liquor. A select few went on his cruises. So when Erpenbeck Co. started taking longer paying its bills two to three years ago, they cut him slack.

        One of those was Mark Neiheisel, owner of Queen City Concrete Pumping in Sharonville. Having poured concrete for Erpenbeck foundations since 1995, he said he didn't mind when payments were stretched to 45 days. But when six or seven months passed by without being paid, as was the case the last few years, he became vocal.

        Mr. Neiheisel showed up at Erpenbeck headquarters in Edgewood so often that the receptionist memorized his name. In February, he finally got through to someone who could take care of the $6,800 due him.

        “I talked to Jeff Erpenbeck just as he was getting on the elevator,” he said. “Right before the doors closed he told me I'd get my money, that things at the company were going to turn around.”

        Mr. Neiheisel received a $1,500 check shortly after that visit. Another $1,500 arrived several weeks later, but the company called later to say it didn't have the funds to honor it. Queen City Concrete Pumping went on to file mechanic's liens to collect the balance.

        The experience was one shared by many of Erpenbeck's subcontractors. The more they called about their money, the more they found themselves talking to voice mail devices. Meanwhile, they quit doing work for Erpenbeck, forcing the builder to find replacement help.

        The exodus of subcontractors began about two years ago, said Mick Kennedy, a house builder who formed Erpenbeck & Kennedy with Erpenbeck family members in 1996. His son, Matt, a construction manager who dealt with subcontractors on job sites, learned that some subs hadn't been paid in a year.

        “Somebody would tell me they were promised a check on Monday — but the check never came through, so they weren't going to work,” Matt Kennedy said.

        Only after bringing the matter to Mr. Erpenbeck's attention, he said, would the payment be made. Indeed, former employees said, cutting checks was no longer a function of accounts payable. It required an executive decree. And in the past six months, it was the “screamers” — the Erpenbeck term for the most bellicose of unpaid creditors — who tended to be paid.

        Home buyers joined the outcry. Erpenbeck Co. broke promises to fund its newborn homeowner associations, leaving them on their own to finish street paving and pay bills. Knowing of Bill Erpenbeck's extravagance incensed them more.

        “His elaborate lifestyle and flamboyant living, high on the hog, were done at the expense of the very people who got him there,” said Paul Doe, a homeowner in Erpenbeck's Oakwood Lakes condo development in Mason. “He has consistently failed to fulfill his obligation to subsidize association costs.”

        Mr. Doe said Erpenbeck Co. owes more than $87,000 in contributions to the homeowners' association going back to 2001.

        The company's sales in 2001 indicated something was wrong. In what was a record year for home sales in Greater Cincinnati, Erpenbeck Co.'s sales fell 26 percent to $62 million. To “right-size” itself, the company laid off workers and cut spending. It cut out the annual cruise, the company Piper aircraft and the box seats at Paul Brown Stadium.

        It was also in late 2001 that some Erpenbeck employees discovered even graver problems. Checks from home-sale closings were being deposited in Erpenbeck accounts at Peoples Bank of Northern Kentucky, but the money wasn't being used to pay off construction loans on the properties. Meanwhile, loan-satisfaction letters were fabricated on the stationery of banks such as Firstar Bank and Kenwood Savings Bank, giving home buyers the impression that their construction-loan mortgages had been paid off.

        The discovery of what appeared to be financial chicanery sowed an atmosphere of paranoia at the Erpenbeck Co.

        Employees who knew about it were outraged, and the crisis splintered the Erpenbeck family. Lori Erpenbeck, Bill's only sister and an accounting employee, quit a month into 2002. So did brother Gary, who headed project development. In the last week of March, Bill left, too. The only sibling remaining, Jeff, became president.

        In one of his only interviews with the press, on April 24, Jeff Erpenbeck said he wasn't aware of any bank fraud involving his company.

        By the end of April, federal agents had swarmed into Greater Cincinnati. FBI agents began conducting interviews and collecting documents. They were joined by more than a dozen agents of the Federal Deposit Insurance Corp., which regulates banks, and the U.S. Treasury Department, which includes the Internal Revenue Service.

        The federal government is making the Erpenbeck investigation a high-priority case. No federal charges have been filed, but the U.S. attorney's office has placed legal shackles on 25 homes owned by Bill Erpenbeck, Mr. Finnan, former Peoples Bank officer Marc Menne and a fourth Erpenbeck brother, Covington lawyer Richard Erpenbeck.

        For a man at the center of a $75 million scandal, Bill Erpenbeck continued to show signs of his trademark brashness.

        On May 4, Mr. Erpenbeck attended a Kentucky Derby party at the home of a Northern Kentucky physician, where he told guests he would be vindicated in the criminal case. He has also claimed that it was he who urged the FBI to begin its investigation, a claim disputed by Peoples Bank.

        Outside of shuttling his family between Crestview Hills and their condo in Fort Myers, Mr. Erpenbeck has been playing more golf than usual. To his customers and the small businesses to which he owes money, it's a galling scene.

        One such day was May 3, when Mr. Erpenbeck played the exclusive Summit Hills Golf Course abutting his house, which is assessed at $1.3 million, in the Summit Lakes development. Two holes ahead of him was a Northern Kentucky subcontractor owed more than $200,000 by the Erpenbeck Co.

        “I couldn't believe it,” the subcontractor said. “He was out there just having a big time like nothing happened.”

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