Saturday, May 18, 2002

Plan seeks changes in home-selling rules

Erpenbeck case inspires Ohio proposal

By Spencer Hunt,
Enquirer Columbus Bureau

        COLUMBUS — Ohio needs tougher laws to protect home buyers and banks from unscrupulous builders, a state lawmaker said Friday.

        State Rep. Michelle Schneider, a Madeira Republican, said she will work with Ohio's home builders, contractors, banks and title companies to close any legal loopholes that might have helped divert $15 million to a Northern Kentucky home builder's bank accounts.

        “We can't ignore what happens when innocent buyers and lenders are bilked by scam artists,” Ms. Schneider said at a news conference that included members of the Ohio's home building, banking and contractor lobbies.

        Ms. Schneider's comments mark the first legislative response to a growing controversy involving the Erpenbeck Co., formerly one of Greater Cincinnati's largest home builders.

        At least 200 homeowners in the region were left with no clear title to their houses and condos after $15 million in checks never made it to the proper lenders.

        The checks were cut by title companies at closings and should have gone to the banks that made the construction loans. Instead, the money was deposited in Erpenbeck accounts at Peoples Bank of Northern Kentucky.

        The FBI and the U.S. Attorney's office in Cincinnati are investigating accusations of bank fraud involving Erpenbeck. No charges have been filed against the company.

        Several homeowners are suing the builder. Cincinnati lawyer Stan Chesley also has filed a class-action suit against Peoples Bank in Boone County Circuit Court.

        Erpenbeck Co. was the region's fourth-largest home building firm, logging sales of $84 million as recently as 2000. It is now not clear that the firm has enough money to stay in business.

        Ms. Schneider, Rep. Jean Schmidt, R-Loveland, and Rep. Tom Niehaus, R-New Richmond, said they don't yet know what legal changes are needed to shield home buyers and banks.

        All three expect to produce a reform bill after talks with industry officials later this summer. Ms. Schneider said the bill could simply bar builders from accepting money meant for lenders and subcontractors.

        Nothing in state law prohibits a title agency from making a home builder its agent to forward checks to the banks and companies they are made out for.

        Shawn Bunt, lobbyist for the Ohio Bankers League, said it's too early to say what legal protections banks might seek.

        Vincent Squillace, vice president of the Ohio Home Builders Association, said strong criminal and civil penalties for misdirecting money are already in place. He said laws could be changed to make sure everyone involved in a home sale does his job.

Related stories:
New Erpenbeck lawyer seen as top trial talent
Peoples Bank names chairman


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