Saturday, May 25, 2002

Bank sues its former president

By Patrick Crowley,
and James McNair,
The Cincinnati Enquirer

        CRESTVIEW HILLS — Former Peoples Bank of Northern Kentucky president John Finnan took legal blows from two sides Friday because of his relationship with troubled home builder A. William “Bill” Erpenbeck.

        Peoples Bank sued Mr. Finnan in Kenton Circuit Court, claiming that he “knowingly breached his fiduciary duties to Peoples” by allowing Mr. Erpenbeck to exceed his borrowing limits at the bank and for doing business on the side with Mr. Erpenbeck without the knowledge of the bank's board of directors.

        Peoples also wants to retrieve $100,000 that Mr. Finnan borrowed through a line of credit he had at the bank, said Covington lawyer Steve Laber, who filed the suit on behalf of Peoples Bank.

        The bank wants the money back from Mr. Finnan — who tapped the line of credit sometime after his April 1 firing from Peoples — “because of his total inability to repay it,” Mr. Laber said.

        Cincinnati lawyer Richard Goldberg said Mr. Finnan has the intention and means to repay the line of credit.

        “He has drawn on it in the past, has repaid it in the past and intends to repay it in the future,” said Mr. Goldberg, who is representing Mr. Finnan.

        “Paying on that line of credit has never been a problem for John Finnan, and it won't be now,” Mr. Goldberg said.

        Meanwhile, the government filed a civil forfeiture lawsuit Friday against Mr. Finnan's two-story brick, Colonial-style house on the same street as Mr. Erpenbeck's home in Crestview Hills.

        The lawsuit, filed in U.S. District Court in Cincinnati, mirrors forfeiture actions filed Tuesday against four homes owned by principals in the Erpenbeck-Peoples Bank affair. The U.S. Attorney's office filed claims then against a Fort Myers, Fla., condominium owned jointly by Mr. Finnan and Peoples Bank executive Marc Menne; a Fort Myers condominium in the name of Mr. Erpenbeck's wife; Mr. Erpenbeck's house in Crestview Hills; and Mr. Menne's house in Villa Hills.

        In its filing Friday, the government said it is not asking the court to seize Mr. Finnan's house “at this time.” But the action serves as a lien on the house, effectively tying it up in the event that the government proves that it was bought with proceeds from bank fraud.

        Mr. Finnan has been trying to sell the house, at 2467 Legends Way, through Huff Realty for $799,000. Huff Realty is owned by Jim Huff, who serves as a director of Peoples Bank of Northern Kentucky.

        Mr. Finnan and Mr. Menne lost their jobs with the bank over a company called Jams. Without the board's knowledge, Jams purchased model homes from The Erpenbeck Co., which then leased the homes from Jams.

        “Finnan deceived Peoples' board of directors ... for the purpose of creating a personal financial benefit to himself, contrary to the best interest of Peoples,” the suit states. “Finnan knowingly breached his fiduciary duties to Peoples.”

        The suit also alleges that Mr. Finnan approved the payment of $1.2 million in checks from Mr. Erpenbeck when he did not have the funds to cover the amount.

        Approving the checks constituted a loan to the Erpenbeck Co., which was already at its legal borrowing limit of $6 million at the bank, according to the suit.

        Current Peoples Bank president Mer Grayson said this week that the $1.2 million in checks was ultimately covered by the Erpenbeck family, but that at one point during Mr. Finnan's tenure, the company was $2 million over the bank's loan limit.

        Erpenbeck is under investigation by federal authorities for allegations of bank fraud, which involve diverting $15 million in cash and checks paid at property closings into Erpenbeck Co. accounts at Peoples.


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