By Patrick Crowley
The Cincinnati Enquirer

Bill Erpenbeck appears at his presentence hearing Friday in this court sketch. (Provided by WCPO/TV9)

Former home builder Bill Erpenbeck faces the prospect of spending perhaps the rest of his life in prison as federal prosecutors say they will push for maximum sentences for his bank fraud conviction and in connection with a witness tampering charge.

During a three-hour, presentence hearing Friday at U.S. District Court in Cincinnati, prosecutors also revealed that, in an ironic twist, Erpenbeck taped conversations with associates for the FBI as far back as spring 2002, when the $34 million banking and home-building scandal was surfacing.

Last week, the FBI arrested Erpenbeck, 43, and his 69-year-old father, Tony, for allegedly pressuring Bill's sister, Lori, to testify in his favor at the bank fraud sentence hearing. The FBI said Lori Erpenbeck wore a recording device and taped the conversations with her brother and father.

At Friday's hearing, a federal prosecutor and Erpenbeck's lawyers argued his fate before U.S. District Judge Arthur Spiegel, who appeared unmoved by calls for leniency.

Though he made no rulings other than denying bond, Spiegel appeared not to be swayed by defense lawyer Glenn Whitaker's argument that Erpenbeck should be given a light sentence on the fraud charge because none of the nearly 300 homeowners caught up in the scheme lost their homes.

"There is a very attractive person over there who sold (homeowners) a bill of goods," Spiegel said as he looked toward Erpenbeck, seated at the defense table in a black and white Hamilton County Justice Center uniform. "It's an outrage," Spiegel said.

Erpenbeck cried as he was led handcuffed into the courtroom. He spent part of the hearing weeping or fighting back tears. At other times he rubbed his hands across his face and brow, wrote notes to his lawyers and shook his head over assertions made by Spiegel and prosecutors.

No witnesses were called during the hearing, most of which was taken up with lawyers arguing over Erpenbeck's role in the scheme. Whitaker also contends that while $34 million was stolen all but about $7 million has been recovered.

Assistant U.S. Attorney Kathleen Brinkman said Erpenbeck was cooperating with authorities in 2002 as they investigated the fraud, which allegedly involved Erpenbeck's dealings with top executives at the defunct Peoples Bank of Northern Kentucky.

Authorities have been investigating John Finan, the former Peoples Bank president, and former Peoples vice president Marc Menne but neither has been charged.

Brinkman said that after Erpenbeck went to the FBI in March 2002 to tell his side of the story, he began secretly taping conversations at investigators' request. She would not say whom Erpenbeck taped.

Bill and Tony Erpenbeck, arrested last week in the FBI sting, reportedly were caught on tape trying to influence the testimony of Lori Erpenbeck. The FBI said the pair pressured Lori to testify that it was she and not Bill who started and oversaw the scheme.

Lori, the accountant at the family's Northern Kentucky home-building business, has pleaded guilty to bank fraud and is awaiting sentencing. She was not in court Friday.

Brinkman said she plans to take the obstruction-of-justice charges against Bill and Tony Erpenbeck to a federal grand jury Wednesday. An indictment could be returned that day, she said.

The two men remain jailed without bond at the Hamilton County Justice Center.

Bill had reached a plea agreement with federal prosecutors and was believed to be facing about 15 years in prison for the bank fraud. But that was before the obstruction-of-justice charge, which carries a maximum sentence of 20 years.

Prosecutors now say they will press for a maximum sentence of 30 years on Erpenbeck's bank fraud charge, meaning he could face up to 50 years in prison. He is set to be sentenced on the fraud charge March 29.

An example of how the Erpenbeck Co. perpetuated the scheme was discussed during Friday's hearing.

Brinkman said to keep construction loans flowing from lenders, the company told them it had installed a sewer system in a community it had built. But all bank inspectors found was a manhole cover in the street, Brinkman said.

E-mail pcrowley@enquirer.com