Thursday, March 18, 2004

Erpenbeck's victims get their say

By James McNair
The Cincinnati Enquirer

For a couple dozen Greater Cincinnati residents, a hearing in federal court Friday morning will give them the opportunity to tell a judge how they were hurt by the Erpenbeck bank fraud scheme - and how the central figure in the $34 million case, Bill Erpenbeck, should be punished.

The hearing is scheduled for 10 a.m. in the courtroom of U.S. District Judge Arthur Spiegel. The veteran federal judge, who assumed the case Feb. 6 from U.S. District Judge Susan Dlott, is scheduled to sentence Erpenbeck March 29, and the event Friday will allow him to hear the victims first-hand.

"If it's part of the sentencing, it's not particularly unusual for the judge to hear from victims," said Mark Godsey, a former federal prosecutor who now teaches law at the University of Cincinnati. "He wants to hear everything before he makes up his mind."

But testimony from victims is usually heard in conjunction with sentencing - and not made the subject of special hearings.

What might set the Erpenbeck case apart is the volume of victims, from homebuyers to banks. Mark Grawe, a federal probation officer in Cincinnati, said invitations were mailed to about 350 people in the victim categories described in Erpenbeck's April 2003 plea deal.

Grawe said a "couple dozen" people who received the notices indicated a willingness to speak at the hearing. Kathleen Brinkman, the assistant federal prosecutor handling the case, said she knew nothing about the number of speakers or the expected duration of the hearing. Erpenbeck's lawyer, Glenn Whitaker, likewise professed to be mostly in the dark.

"My understanding is the folks, whoever they are, have a limited time to say their piece and that's it," Whitaker said. "I think the people who are going to be speaking are individuals, not banks."

The bank fraud, which occurred between 1999 and early 2002, involved the diversion of home-purchase money that should have been remitted to the Erpenbeck Co.'s construction lenders. Instead, the money went into Erpenbeck Co. accounts at the former Peoples Bank of Northern Kentucky, itself a victim of the fraud, and U.S. Bank. As a result, several hundred homebuyers were saddled with double mortgages or lost down payments.

Linda Harlow of Villa Hills is one Erpenbeck homebuyer who plans to speak Friday. She estimates her loss at $55,000, mostly from the foreclosure on her house in the Fowler Ridge development in Covington in 2003. Now she lives in a condominium her parents own.

"My standard of living went way down," Harlow said. "My credit is shot. I can't borrow the money to buy a cup of coffee."

Meanwhile, Whitaker has filed a motion asking Spiegel to give Erpenbeck credit for his cooperation with federal authorities.

Last year, the U.S. Attorney's office agreed to recommend a shorter prison sentence. But that recommendation was rescinded after the government charged Erpenbeck and his father, Tony Erpenbeck, with obstruction of justice. The two are accused of trying to influence the testimony of a witness at a Feb. 6 sentencing hearing for Bill. The witness was Bill's sister, Lori Erpenbeck, who also has pleaded guilty to fraud and is awaiting sentencing.


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