Tuesday, February 10, 2004

Facade of success hid strife in family

Erpenbecks split, case details reveal

By James McNair
The Cincinnati Enquirer

Like a story line from a Shakespearean tragedy, the demise of the Erpenbeck home-building empire stemmed from a desire to appear successful, a facade of family unity and, ultimately, a female member's backlash against a male-dominated hierarchy.

The Erpenbecks, a three-generation family of Northern Kentucky home builders, already were a troubled clan when two of its elders - Bill Erpenbeck and his father, Tony - were arrested on federal obstruction-of-justice charges Thursday. The two men were accused in an FBI sting of tampering with a witness at an upcoming sentencing hearing for Bill Erpenbeck. The witness, who wore an FBI transmitter during their conversations, was his sister, Lori Erpenbeck.

According to testimony and statements Friday in U.S. District Court, strained relations between some Erpenbeck family members gave way to a death threat, a suicide threat and fear.

Assistant U.S. Attorney Kathleen Brinkman said Tony Erpenbeck, 69, not only was a "danger" to his daughter, but had "treated badly" Phyllis Erpenbeck, his second wife and stepmother to his five children.

Brinkman said that Phyllis Erpenbeck indicated an unwillingness to post her husband's bond, if it had been granted.

"It's not only a bad, but a poisonous, family situation here," Brinkman told U.S. District Judge Arthur Spiegel at a bond hearing Friday.

Spiegel ordered Bill and Tony Erpenbeck held without bond in the Hamilton County Justice Center, where they remained Monday.

Spiegel also ordered that a suicide watch be placed on both men. In the FBI affidavit filed on last week's sting, Tony Erpenbeck threatened to take his own life.

With the new charges, Bill Erpenbeck, 42, faces the possibility of an additional 20 years in prison, on top of the 30-year maximum he faces from his bank fraud conviction. Tony, who suffers from diabetes, a bad heart and arthritis, also faces 20 years behind bars. Lori, 41, who also pleaded guilty to bank fraud in connection with the Erpenbeck Co.'s 2002 collapse, faces up to 30 years in prison.

Just four years ago, the Erpenbecks appeared to be in peak form. The company owned by brothers Bill, Jeff and Gary Erpenbeck was the third-biggest home builder in Greater Cincinnati. Bill gave time and money to civic and charitable causes and hosted political fund-raisers. He, his wife, Marcia, and three children lived in a $1.3 million house in Crestview Hills.

Behind the scenes, though, trouble was brewing. Lori Erpenbeck, then in charge of the company's accounting department, was embezzling money, her lawyer said Friday. The lawyer, Patrick Hanley of Covington, said he did not have a "hard and fast" figure for what she took. "The scope of the embezzlement was not nearly as broad as has been made out," Hanley said. "It had nothing to do with the bank fraud." The embezzlement was not part of her guilty plea.

The bank fraud began in late 1999. Erpenbeck employees, under orders from Bill Erpenbeck, started misappropriating proceeds from home sales, keeping the money instead of paying off construction mortgages and bills.

The company's denouement came in early 2002. Lori quit in January, followed by Gary, whose role for the company included land acquisition. She told the FBI that she spent the night of Feb. 2, 2002, in a hotel "because she was afraid family members might do something to her," according to an FBI statement filed in court Friday.

But two days later, accepting her father's invitation to see him alive "one last time," she went to his house. There, the FBI document states, Bill Erpenbeck tried to persuade her to falsify company financial records. She refused, and her father collapsed. When she tried to help, her brother Bill pushed her away and blamed her for the incident, the FBI says.

Last week, according to an FBI transcript of conversations between Lori and Tony Erpenbeck, Tony said Bill was worried that Lori planned to testify, at a sentencing hearing for Bill, that Bill "said he was going to kill you." The FBI said Tony tried to persuade Lori to absorb more of the blame for the fraud scheme - for the family - while going easy on Bill.

"This is a man who would sacrifice one member of the family for a more preferred member of the family," Brinkman told Judge Spiegel.

Bill further discussed Lori's return to grace with the family, according to the affidavit. Bill, the FBI said, "intimated that if she testified as he said, she would be welcomed back to the family."

Hanley said Bill and Tony's attempts to steer her testimony last week wasn't out of the ordinary. "Bill and Tony Erpenbeck have been intimidating and taunting this woman like this for a long time," Hanley said.

Bill Erpenbeck's lawyer, Glenn Whitaker, denied the government's assertions that Bill was a threat to his sister.

"I would submit to you that Lori Erpenbeck is a questionable person to be making these statements. She's a person who has pled guilty to fraud herself and has substantial reason to assist the government against Bill," Whitaker said.

C. Ransom Hudson, Tony Erpenbeck's court-appointed lawyer, said the 69-year-old Erpenbeck is not a threat to anyone.

Until the Erpenbeck Co. fell in 2002, that family togetherness was most evident during Thanksgiving gatherings at Bill's house. But a source close to the family said the strife of the past two years killed the tradition. Still, a partial reunion took place last Christmas at Jeff Erpenbeck's home. Tony and Phyllis Erpenbeck were there, as was Rick Erpenbeck. However, Bill, Lori and Gary were not, the source said.

In spite of Tony's pleas for unity, presenting a family defense in a criminal case doesn't always succeed when several family members are charged, said Jack Chin, a former University of Cincinnati professor of criminal law now teaching at the University of Arizona.

"The theory that blood is thicker than water breaks down when people look at the possibility of serious prison time," Chin said. "The government might be saying, 'Why should you be so loyal to someone who got you into so much trouble?'"

Key players in the Erpenbeck matter

Tony Erpenbeck, 69, whose five children include Bill and Lori Erpenbeck, was arrested by the FBI last week and accused of trying to persuade Lori to soften her testimony against Bill at a pre-sentencing hearing.

Status: Held without bond at the Hamilton County Justice Center.

Bill Erpenbeck, 42, was the president of the Erpenbeck Co. before the homebuilding business collapsed under a fraud scheme in 2002. He pleaded guilty to bank fraud and could be sentenced to up to 30 years in prison for the crime.

Status: Arrested along with his father, Tony, last week in the FBI's witness-tampering sting and held without bond at the Hamilton County Justice Center.

Lori Erpenbeck, 41, ran the Erpenbeck Co.'s accounting department and has pleaded guilty to one count of bank fraud. Key figure in last week's FBI sting against her brother and father.

Status: Free while awaiting sentencing on the bank-fraud charge. The U.S. Attorney's Office has agreed to a reduced sentence in exchange for her testimony against Bill.


E-mail jmcnair@enquirer.com

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