Wednesday, May 08, 2002

Firstar bought 90 homes from troubled Erpenbeck

By James McNair,
The Cincinnati Enquirer

        The bank that loaned more money to the Erpenbeck home-building empire than any other has bought about 90 residences from its troubled client and parked them in a subsidiary called Sand Trap Properties.

Bill Erpenbeck
Bill Erpenbeck
        The company was created by Firstar Bank, which courthouse documents show made at least $13 million in loans to entities headed by Crestview Hills builder A. William “Bill” Erpenbeck. Unlike other lenders, including Bank One and Provident Bank, Firstar has not commenced foreclosure against the projects it financed. That's where Sand Trap comes in.

        Sand Trap was formed in November to serve as a holding tank for real estate acquired in lieu of foreclosure. All told, Sand Trap has 80 condominiums, five single-family houses — all unsold and unoccupied — and two empty lots from Erpenbeck.

        Firstar provided Erpenbeck with construction financing for houses in Fowler Ridge in Kenton County and the following condo projects:

        • The Fairways at Wetherington, in West Chester Township.

        • The Lofts at Wetherington, also in West Chester.

        • Grand Cypress at Legendary Run, in Clermont County.

        • Wellington Place in Erlanger.

        Banks sometimes form subsidiaries to hold and manage real estate they have taken as collateral from “non-performing” loans. Sand Trap Properties has sold three homes and is actively marketing the rest as they are prepared for sale.

    If you have any information about the investigation of The Erpenbeck Co. or the inner workings or business practices of the company, please contact Enquirer staff writer James McNair at 513-768-8498 or at
        “The function (of Sand Trap) is to liquidate the property that is being held,” Firstar spokesman Steve Dale said. “We're trying to do the right thing for everyone involved, including the homeowners and the bank.”

        Greater Cincinnati's fourth-biggest home builder in 2001, Erpenbeck Co., has all but closed after liquidity problems shut down construction sites and triggered a volley of lawsuits and liens this spring. The FBI is investigating the company for possible bank fraud. No charges have been filed.

        John Finnan lost his job as president of Peoples Bank of Northern Kentucky because of the bank's ties to Erpenbeck.

        Peoples, likewise, was exposed to Erpenbeck's declining financial health, but Mr. Finnan and another bank officer, Marc Menne, chose to help their client in a different manner.

        Instead of setting up a bank subsidiary, the two men formed a separate company, Jams Properties, to acquire at least 18 properties — mostly model homes — from Erpenbeck. Although Mr. Finnan said the the practice was legal, Peoples directors were displeased to learn of the relationship and have banned the practice.

        April 26, Dean Huffman bought a $156,000, three-bedroom house in Fowler Ridge that he thought was owned by Erpenbeck. At the closing, he found out that he was buying the house from Sand Trap Properties. But he closed when Sand Trap boosted his cash rebate to $4,000.

        “We could have been screwed had Firstar not stepped up and honored the terms of the contract,” Mr. Huffman said.

        And since Firstar held the underlying construction mortgage on the home, he knows that the closing proceeds will be properly applied to that loan — not disappear as it did in other Erpenbeck transactions.


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