Wednesday, April 24, 2002

Builder target of inquiry

FBI looks into finances of Erpenbeck

By Patrick Crowley,
James McNair,
The Cincinnati Enquirer

        One of the Tristate's biggest home builders, the Erpenbeck Co. of Edgewood, is under federal investigation for a suspected bank fraud that could affect lenders, subcontractors and home buyers.

        FBI spokesman Ed Boldt confirmed the investigation Tuesday but offered no details. People who have been interviewed by FBI agents, however, said federal investigators are interested in financial transactions involving the Erpenbeck Co.'s former president, William Erpenbeck.

        No charges have been filed, but the FBI's involvement punctuates the dramatic fall of Mr. Erpenbeck, one of Northern Kentucky's most prominent business executives and political fund-raisers. About a month ago, Mr. Erpenbeck was replaced as president of the company he co-founded in 1993. Now, he also faces loss of his spectacular $1.3 million house in Crestview Hills to foreclosure.

        Mr. Erpenbeck did not return telephone calls Tuesday. Efforts to reach him at his home also were unsuccessful.

        Until now, Mr. Erpenbeck appeared to be the epitome of success. Builder magazine ranked Erpenbeck Co. as the fourth-biggest home builder in Greater Cincinnati, behind only the Drees Co., Fischer Homes and Crossmann Communities. The 41-year-old former Covington Catholic High School football player owns a getaway home in Florida and, until recently, a 40-foot yacht.

        But people who did business with Erpenbeck Co. — and government officials — have a different view.

        In liens and lawsuits filed by subcontractors and suppliers over the past year, Erpenbeck Co. is depicted as a deadbeat builder that was in default on nearly half a million dollars in debts. Kenton County Attorney Garry Edmondson said the company is delinquent on more than $90,000 in county and state property taxes and has reneged on a negotiated payment plan.

        Home buyers also had a feeling that all was not well with Erpenbeck Co.

        In March 2001, Patricia Stedam gave Erpenbeck Co. a $3,000 deposit toward a Miami Heights condominium that she was promised would be ready in September. Later, she was told she could occupy it in January, then March, then May.

        “I went over to the condo site recently because nobody would return my phone calls,” Ms. Stedam said Tuesday. “It's just a frame with a roof on it.”

        Erpenbeck Co. has built hundreds — and possibly thousands — of houses and condominiums in Northern Kentucky and Southwest Ohio through the years.

        Mr. Erpenbeck's younger brother, Jeff Erpenbeck, who is now running the company, would say nothing other than that he has not been approached by the FBI.

        Another family member, company lawyer Richard Erpenbeck, whose relationship to William and Jeff wasn't clear, did not return calls.

        The company's principal response came in the form of a two-sentence prepared statement that said it is “researching the situation.”

        “We are working with our lending institutions in a coordinated attempt to create a financial restructuring that will facilitate an orderly resolution,” the company said.

        John Finnan, president of Peoples Bank of Northern Kentucky in Crestview Hills, said the matter has attracted the attention of state and federal banking regulators as well as the FBI. He said Erpenbeck Co. owes money to Peoples and at least 18 other area banks.

        “The fact is they deal with, I think, 19 banks,” Mr. Finnan said, “all of whom are working closely with the Erpenbeck Co. ... in trying to decide how they can go forward.”

        Mr. Finnan, who said he was interviewed by FBI agents last week, said investigators are trying to determine whether Mr. Erpenbeck diverted mortgage payment checks written by people who had bought homes from Erpenbeck Co.

        Although the scope of Erpenbeck Co.'s problems has alerted banking regulators, a spokeswoman for the Kentucky Department of Financial Institutions said no state-chartered banks in the region are in danger of insolvency. Mr. Finnan said Peoples' loans to Erpenbeck Co. were within the bank's lending limit of $6 million to any one borrower.

        “We have been receiving inquiries recently regarding the issues facing the Erpenbeck Development Co. and our business relationship with them,” Mr. Finnan wrote in an April 19 letter to the bank's 7,000 account holders. “Erpenbeck Development is a longtime customer of Peoples Bank, and we are working with their management team to address issues.

        “I would like to take this opportunity to reassure you that Peoples Bank is strong and healthy and will continue to be so.”

More problems

        Meanwhile, William Erpenbeck's troubles keep mounting. Family members want to buy out his share of the company. Tuesday, First National Bank of Northern Kentucky named him in a foreclosure suit filed in Kenton County Circuit Court. The Fort Mitchell bank says he defaulted on the $450,000 loan he took out in 1994 for his home in Summit Estates.

        People in Northern Kentucky's building industry, while not familiar with the extent of Mr. Erpenbeck's problems, expressed regret that the Northern Kentucky University trustee might be in serious trouble.

        “I think everybody's saddened when they see one of their own go down like that. It's a shock,” said Dan Dressman, executive vice president of the Home Builders Association of Northern Kentucky.

        Vendors owed large sums of money by Erpenbeck Co. also have a hard time understanding the builder's fall. Becky Morris, whose Morris Heating & Cooling in Burlington claims $480,000 in unpaid bills from Erpenbeck Co., said Erpenbeck wrote Morris a $258,000 check in February that bounced. Morris Heating hasn't sued, nor has it filed bad-check charges, she said.

        “We'd always had such a great working relationship with Bill,” Mrs. Morris said. “We've had dinner with him and went on cruises with him, and he always said his subcontractors were like family. So it hurt to know that you were used. It was a killer.”

        Erpenbeck Co.'s financial problems have spilled into local courthouses with greater frequency since January. In civil lawsuits filed on both sides of the Ohio River, subcontractors and suppliers claim Erpenbeck Co. owes them nearly half a million dollars.

        Clear Channel Cincinnati sued Erpenbeck Co. in March, alleging that the builder owes $102,108 for radio spots aired during Reds and Bengals games in 2001. Matthew MacLeid, a Cincinnati lawyer for Clear Channel, parent of the teams' flagship station, WLW-AM, said Erpenbeck Co. has become unresponsive.

        “They made proposals to make payments, but the proposals seem to have stopped,” Mr. MacLeid said. “The last thing I heard was that they are refinancing and are going to pay off everybody in full, but I haven't heard anything more on that.”

       Staff writer James Hannah and contributor Ray Schaefer assisted in this report.


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