Wednesday, March 17, 2004

Timing of Erpenbeck deal draws scrutiny

By John Byczkowski
The Cincinnati Enquirer

Bankruptcy investigators have found another twist in the collapse of the Erpenbeck family companies, and this one may pay off for creditors.

Three months before the companies fell apart in March 2002, father Tony Erpenbeck transferred shares in four partnerships to a company run by his son Rick - properties that may be worth $1 million or more, according to a deposition given last week by Rick Erpenbeck.

It's the timing that raises questions - and that will be explored more fully today, when the son's deposition continues in the bankruptcy proceeding of Tony Erpenbeck.

"We have alleged that the transfers to that entity are fraudulent," and those assets should come back to Tony's estate, said Michael Baker, trustee in the Erpenbecks' bankruptcies.

Because of the bankruptcy, Tony Erpenbeck has pleaded poverty and is being represented by a public defender. As the trustee finds assets, however, Erpenbeck's indigent status might be changed.

According to the deposition, Tony Erpenbeck transferred the property to the son and First Choice Holdings on Dec. 13, 2001. The next month, daughter Lori - a bookkeeper with the homebuilder - resigned after discovering the depths of the company's financial troubles.

Lori Erpenbeck claims she was pressured by her family to take the fall for the financial disaster. When the homebuilding company collapsed in March 2002, it owed its bank $33.9 million and left more than 260 homebuyers owing mortgages.

Last month, Tony and son Bill were arrested in an FBI sting. They are accused of attempting to coerce Lori into lying to keep Bill out of jail. Tony and Bill were charged with obstruction of justice and are being held without bail

The assets Tony Erpenbeck transferred to Rick included properties that had been in the family for years. According to First Choice Holdings documents examined by the trustee, these assets include:

• Tony's share of A&K Enterprise Inc., founded by his father and siblings. A&K owns nine properties and unspecified other assets worth $9.4 million in 2001, the documents say. The 14.29 percent share transferred to First Choice was valued at $891,667. A 40 percent discount was made because it's a minority share.

• An 18.29-percent share of Erpenbeck Construction Inc., which includes five properties and other assets. The company was valued at $1.6 million, and the share was worth $289,668, before the 40 percent discount.

• A 13.82-percent interest in ERPS Inc., owner of some 200 acres of farmland valued at nearly $5.8 million. "That was my grandpa's farm," Rick said in the deposition. That share was valued at $796,893, before the minority discount.

• A share of Stor-It LLC, owner of a storage facility in Crescent Springs. This was given a negative value because of a large bank loan owed at the time.

What these assets are worth today isn't known, and assets sold out of bankruptcy often bring fire-sale prices. Stor-It, for instance, was valued in these documents at $1.8 million but sold recently for $1 million.

For all this, First Choice Holdings paid Tony $381,693 and agreed to assume a loan of $1.9 million. "I saw it as a good investment," Rick said, explaining why he bought the assets. "He (Tony) had already always, you know, helped the other boys out from the beginning. I was the one who worked two jobs - three jobs through college, two jobs through law school, while he was helping out, you know, the other boys with the Erpenbeck Co., and he wanted to give me the opportunity to purchase these."

If this transfer were found to be fraudulent, the assets would revert to Tony's estate for division among his creditors.

Bill Erpenbeck pleaded guilty last April to defrauding banks and home buyers out of $33.9 million. He is scheduled to be sentenced March 29 on that conviction. Lori Erpenbeck pleaded guilty to bank fraud and is awaiting sentencing.


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