Thursday, May 09, 2002

Peoples Bank sues builder Erpenbeck

Chesley plans class-action suit against bank

By Patrick Crowley,
By James McNair,
The Cincinnati Enquirer

        CRESTVIEW HILLS — Peoples Bank of Northern Kentucky filed suit against the Erpenbeck Co. and its various home-building partnerships Wednesday — one of several legal developments involving the Crestview Hills home builder.

        The bank wants to foreclose on Erpenbeck-owned property to recover an undetermined amount of money that the bank thinks it is owed.

[photo] Carrying an armload of civil summonses, Kenton County Sheriff's Deputy Sgt. Damian Stanton knocks on the locked door at the Erpenbeck Co. in Edgewood Wednesday. He was able to deliver the legal papers.
(Patrick Reddy photos)
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[photo] Another stop for Deputy Stanton: The home of A. William “Bill” Erpenbeck in Crestview Hills.
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        Covington lawyer Mark Arnzen, a Peoples board member, said the bank is not only seeking money it thinks it is owed by the Erpenbeck Co. but also a declaratory judgment from Kenton Circuit Court.

        “There are so many players in this case — banks, title companies, insurance companies — we want the court to determine everybody's position and then try to resolve what is owed to everybody,” Mr. Arnzen said. “If we can't resolve it we'll go to arbitration, mediation or the court to resolve it.”

        The flurry of activity Wednesday also included:

        • A. William “Bill” Erpenbeck, the former head of the Erpenbeck Co., has hired Cincinnati lawyer Glenn V. Whitaker of Vorys, Sater, Seymour and Pease. The Erpenbeck Co. is under investigation by the FBI for bank fraud. No charges have been filed.

        Mr. Whitaker was not available for comment, but his biography on the law firm's Web site states that he once worked for the U.S. Justice Department and now represents “individuals and corporations in complex civil litigation and criminal proceedings.”

        Mr. Whitaker's clients have included PNC Bank; Norwood Mayor Joe Hochbein, exonerated in 2000 of all but a misdemeanor illegal use of a taxpayer identification number after facing 14 counts of theft in office and falsification; and Timothy A. Ross, the former president of Future Healthcare Inc. who was sentenced to 18 months in prison in 1997 for masterminding an accounting fraud that led to the demise of the Cincinnati firm.

        • Well-known Cincinnati plaintiffs lawyer Stan Chesley confirmed that he and Covington lawyer Brandon Voelker plan to file a class action suit today against Peoples Bank of Northern Kentucky in Boone Circuit Court. The suit will be filed on behalf of Charles and Sherry Mitchell, an Independence couple who bought an Erpenbeck home and then discovered that the first mortgage on the property had never been paid off by the Erpenbeck Co.

        The suit accuses the bank of “fraud, negligence and unlawful conversion” and seeks undetermined damages, Mr. Chesley said. It will be open to others “who feel their money has been misapplied” by the bank, a number that could reach 200 or more, he said.

        Peoples bank officials have said that in the last year, the Erpenbeck Co. took $15 million in checks at property closings that were made out to banks and then deposited the money in Erpenbeck accounts at Peoples.

        Newly installed Peoples president Mer Grayson said Wednesday that he could not comment directly on the suit because he had not seen it.

    If you have any additional information on the business dealings of the Erpenbeck Co. or Peoples Bank of Northern Kentucky - or on the involvement of any parties not yet identified in our coverage - please email Enquirer business reporter James McNair at or Kentucky Enquirer reporter Patrick Crowley at
        “I know our interest and the interest of the other banks involved is to resolve the check problem and solve these homeowners' problems in the process,” Mr. Grayson said. “I don't know if (the class action suit) hampers or facilitates that.”

        Mr. Grayson was brought in last week to replace former president John Finnan, who along with Peoples vice president Marc Menne resigned because of the Erpenbeck fiasco.

        • Citizens Bank of Northern Kentucky joined the growing list of lenders filing foreclosure actions against the Erpenbeck empire.

        The Newport-based bank, which has $147 million in assets, alleged Wednesday in Boone County Circuit Court that Erpenbeck's Steeplechase Builders owes it $808,494 for 10 condominiums awaiting sale at The Reserve at Steeplechase in Union.

        In a second lawsuit, Citizens said Bill Erpenbeck has defaulted on $173,410 due from a note secured by 25 acres of undeveloped land west of the Mount Zion Road exit on Interstates 71/75.

        David Van Horn, Citizens president, said he doesn't expect the legal action to have any negative effect on the bank.

        Already filing foreclosure suits against Erpenbeck projects are Provident Bank, Bank One, Peoples Community Bank and First Security Trust Bank, whose claims total almost $16 million.

        Depending on how the banks do in recovering what is owed them, other creditors — including subcontractors and home buyers — have no idea how they will come out of the Erpenbeck collapse.

        “Generally speaking, secured creditors — banks — are going to stand in line ahead of unsecured creditors,” said Bert Ely, a banking consultant in Alexandria, Va. “Oftentimes, people who put down a deposit for a home or who have warranty claims are totally screwed.”

        How much money is left over after banks take their share will come down to remaining construction costs, legal costs, the residential real estate market and the ratio of bank loans to resale values, Mr. Ely added.


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