Sunday, August 11, 2002

Erpenbeck cash buyers sue

By Patrick Crowley
The Cincinnati Enquirer

        FLORENCE - They say they're the overlooked victims in the $107 million Erpenbeck Co./Peoples Bank of Northern Kentucky scandal, unwitting consumers who paid cash for their Erpenbeck-built homes and condos.

        They're say they're overlooked because they're not included in a class-action suit - filed by Cincinnati lawyer Stan Chesley - that covers the 211 home buyers who paid for Erpenbeck homes with checks.

        So an estimated 20 to 25 cash-buyers stung in the scandal have filed their own class-action lawsuit in Boone Circuit Court in an attempt to have banks release the liens on their homes.

        “The people that paid cash ... they are the big losers,” said Florence lawyer Ed Monahan, who, along with partner Jeff Blankenship, has filed the suit.

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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 or Kentucky Enquirer reporter Patrick Crowley at
        A preliminary hearing before Boone Circuit Judge Jay Bamberger is scheduled for Tuesday. The suit is filed on behalf of Steven and Whitney Remley, who in July 2000 purchased a home in the Steeplechase subdivision off Richwood Road in Boone County. According to the lawsuit, the couple bought a $200,000 home from Erpenbeck & Kennedy 1/2ndash 3/4 a defunct arm of the Erpenbeck Co., the Edgewood builder being investigated for bank fraud by federal authorities.

        Mr. Blankenship said a portion of money paid by the Remleys should have been used to pay off a $155,539 construction loan from Firstar Bank, now known as U.S. Bank. And once the money was paid, the bank's lien should have been released.

        But the lien is still on the home more than two years after the closing because the money was never paid to the bank, Mr. Blankenship said.

        As many as 25 homeowners are interested in joining the class-action suit, Mr. Blankenship said. About 50 homeowners who paid cash for their Erpenbeck-built homes still have liens on their property, according to court documents from other lawsuits involving the Erpenbeck Co.

        In each case, cash was paid to a representative of the Erpenbeck Co., Mr. Blankenship said.

        If the class is certified, all 50 buyers will be included unless they request otherwise.

        Four banks are named in the suit - Firstar, Provident, Bank One and Peoples Bank.

        The homeowners' lawyers are asking the judge to release the liens and pay attorneys fees and costs.

        The banks were responsible for seeing that the liens were paid off, Mr. Blankenship said. And he claims the banks are negligent because they sent no one to represent them at the closings, thereby designating employees of the Erpenbeck Co. as settlement agents.

        “The banks weren't watching out for their money,” Mr. Blankenship said. “They were letting Erpenbeck watch their money. It's like the fox watching the henhouse.”

        Spokesmen for Provident and Bank One said they could not comment on pending litigation. Firstar did not return a phone call to comment.

        But Beverly Storm, a Peoples Bank attorney, said the circumstances of cash buyers differ from buyers who used checks to pay for their Erpenbeck homes. She denied the bank has any responsibility.

        “There were no diverted checks in the cash transactions,” said Ms. Storm. “Nobody did anything wrong by taking a check made out to Erpenbeck and depositing it into an Erpenbeck Co. bank account.

        “That's different from accepting a forged check or a check with an improper endorsement,” she said.

        Erpenbeck Co. employees are suspected of taking 211 checks cut at closings and, even though the checks were made out to construction lenders, depositing $16.7 million in checks into Erpenbeck Co. accounts at Peoples Bank. The checks were deposited over a two-year period.

        Mr. Chesley sued Peoples in a class action on behalf of the 211 home buyers. In an attempt to settle the suit the bank has announced it is selling its assets - branches, ATMs, deposits and selected loans - to Florence-based Bank of Kentucky.

        Peoples will take $16.7 million from the sale, put it in an escrow account and eventually use the money - along with funds it can recover from other banks and title companies involved in closings - to pay off the first mortgages of the home buyers. Paying the money will release the liens on the homes and give the homeowners clear title to their properties.

        Mr. Blankenship said the cash buyers have no such recourse at this point.

        “They've been forgotten ... and some of the banks had made overtures that unless the liens are paid off they might begin foreclosing on homes,” he said. “But we think the banks are responsible. That's why we're going to court.”


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