Saturday, February 7, 2004

FBI sting snags Erpenbeck, dad

Homebuilder's sister wore wire for Feds

By James McNair
The Cincinnati Enquirer

Bill Erpenbeck
Tony Erpenbeck
Bitten by their own words in conversations overheard and taped by the FBI, former homebuilder Bill Erpenbeck and his father were jailed without bond Friday on charges they asked a government witness to give less-damaging testimony against Bill Erpenbeck in a sentencing hearing.

The witness? Lori Erpenbeck - Bill's sister, Tony's daughter.

The charges of obstruction of justice followed three days of surveillance work by the FBI, who eavesdropped on conversations between the three family members through a transmitter that Lori Erpenbeck agreed to wear. On Thursday night, FBI agents surrounded their car in the parking lot of the Courtyard by Marriott hotel in Covington and arrested Bill and Tony Erpenbeck. They were taken to the Hamilton County Justice Center, where they spent the night with 1,706 other inmates.

Handcuffed and escorted by federal marshals into the courtroom of U.S. District Judge Arthur Spiegel on Friday morning, Bill Erpenbeck cried quietly, but uncontrollably, and buried his face in his hands at one point, as he sat next to his lawyer, Glenn Whitaker. He wore blue jeans, a golf shirt and a dark blue jacket, not the black-and-white striped jail uniform he had worn the night before.

The series of events was the latest twist in a scandal that rocked Greater Cincinnati in 2002. Hundreds of people who thought they owned their Erpenbeck-built homes free and clear were shocked to find them encumbered by unpaid construction mortgages. Banks and subcontractors filed dozens of lawsuits and liens. Owners in several Erpenbeck developments in Kentucky and Ohio are still coping with problems left untended by the family-owned Erpenbeck Co.

Bill Erpenbeck pleaded guilty last April to defrauding banks and homebuyers out of $33.9 million. He now faces the possibility of an additional 20 years in prison if convicted on the obstruction of justice charge.

Tony Erpenbeck, 69, also faces a 20-year prison sentence if convicted on the same charge.

The FBI affidavit
Erpenbeck affair at a glance
Spiegel appointed to replace Dlott
Q&A: Obstruction of justice
Anatomy of the Erpenbeck sting
Bill Erpenbeck, 42, began the week hoping for probation in the bank fraud case. In a Jan. 23 court filing, Whitaker wrote that Erpenbeck had paid an "enormous price" for his crime and was "deeply remorseful." He attached character reference letters from 24 people, including emotional pleas from Erpenbeck's wife, Marcia, and their three children.

The U.S. Attorney's Office wants a sentence of at least 27 years on the fraud conviction. Sentencing is scheduled for March 29. The two sides were scheduled to debate Erpenbeck's pre-sentence report Friday, and the government had called Lori Erpenbeck to testify against her brother.

But last Tuesday, Lori Erpenbeck's lawyer, Patrick Hanley of Covington, told the FBI that Tony Erpenbeck, 69, had called Lori Erpenbeck on Monday and asked her to lie on Bill's behalf at the hearing. She met him Monday in his car at a bank parking lot. There, she told the FBI, Tony asked her he if she was going to testify that Bill thought about killing her. The following exchange was related by Lori to the FBI and was presented to the court in a 19-page affidavit as having been said "in substance:"

"If you say that, I will kill myself," Tony said.

"If you kill yourself, it won't be because of me," Lori said.

"Why are you trying to do this. His (Bill's) son (Matthew) needs his father," Tony said.

"He should have thought about that a long time ago," Lori said.

Lori Erpenbeck agreed to wear an FBI transmitter at a follow-up meeting with her father Tuesday night.

According to the affidavit, Tony told Lori to blame the crimes on two other former Erpenbeck managers, one of whom died last year. Tony said he didn't want Lori to "bury" Bill in her testimony. She asked to meet with Bill the next night, and Tony agreed to arrange it.

Lori and Tony met at the White Castle restaurant in Richwood and rode together to meet Bill at the Courtyard by Marriott in Covington. Sitting in Bill's car, the FBI affidavit said, the two men steered Lori toward a story line that depicted Lori as initiating the fraud to help the company's cash flow, then losing control and letting Bill assume responsibility.

According to the affidavit, Lori Erpenbeck balked, but Bill Erpenbeck persisted. "Kathy Brinkman (the federal prosecutor) is going to come after your ass at 100 miles an hour after she comes after me," Bill said. "I told Dad that if you would say what I said to say, your ass would be 10 times better off because you didn't do something illegal. You did it to help and you got in over your head," the FBI quoted Bill as saying.

According to the FBI, Lori said she didn't know if she could lie under oath - or even remember what Bill wanted her to say. "Meet me again tomorrow night," Bill said. We'll "write it down."

Bill brought the alleged script Thursday night, said FBI agents who monitored the conversation electronically from their own vehicle nearby and arrested the Erpenbeck men about 9 p.m.

Spiegel, who took over the case after Judge Susan Dlott withdrew, ruled Friday afternoon after an hourlong hearing that the Erpenbecks be held without bond. A U.S. Marshal's Office spokesman said they were returned to the Hamilton County Justice Center downtown. Any sentence Erpenbeck receives in the fraud case will be served in federal prison, he said.

"It's good to see him in handcuffs," said Linda Harlow, a Villa Hills resident who owned - then lost - an Erpenbeck house saddled by two mortgages. She said Bill and Tony's alleged attempt to coach Lori on the witness stand came as no surprise to her. Harlow was among the estimated three dozen fraud victims, law officers and others who packed Spiegel's courtroom for the hearing.

Brandon Voelker, a Covington lawyer who filed the class-action suit that led to the erasure of unpaid first mortgages on 210 Erpenbeck-sold homes, was a wide-eyed spectator at Bill Erpenbeck's teary morning appearance.

"It's shocking, but the whole case has been surreal from the get-go," Voelker said. "It makes you doubt anything that's been reported about his sincerity and his wanting to get on with his life."

Brinkman would not say if the obstruction of justice charge will prompt the government to seek a rescission of its plea deal with Erpenbeck. Whitaker deflected the question to Brinkman.

Fred Alverson, a spokesman for the U.S. Attorney's Office, said the new charge should not enter into Erpenbeck's fraud sentence.

"They're separate incidents and separate cases and they'll have to be treated as separate cases for sentencing," he said.

Enquirer reporter Jane Prendergast contributed to this report.


FBI sting snags Erpenbeck, dad
The Erpenbeck affair at a glance
Spiegel appointed to replace Dlott
Q&A: Obstruction of justice
Anatomy of the Erpenbeck sting
The FBI affidavit

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