Saturday, June 22, 2002

Erpenbeck fallout: selling tools to pay bills


Contractors at end of line for those seeking money

By James McNair, jmcnair@enquirer.com
The Cincinnati Enquirer

        Desperate is the contractor who has to sell his power tools to pay his bills.

        Two months ago, Phil Tromm of rural Campbell County did just that.

[photo] Phil Tromm did a $5,100 job for the Erpenbeck Co. and was never paid.
(Michael E. Keating photo)
| ZOOM |
        Mr. Tromm, 33, owns Tromm Construction Co. It sounds more impressive than it is. His house on Schababerle Hill Road serves as its headquarters, a steel-sided barn its operations center. His fall 2001 ad campaign consisted of his sister-in-law mailing promotional fliers to builders.

        Now, Mr. Tromm would love to have taken one of those fliers back. It was mailed to the Erpenbeck Co. in Edgewood, then the fourth-biggest home builder in Greater Cincinnati. After he did a $5,100 job for Erpenbeck and found himself in a long line of other subcontractors who hadn't been paid for their work, it left him in a financial bind that forced him to deplete his savings — and his toolshed.

        “I had to sell some of my tools — a table saw, a radial arm saw, a wet saw, ladders, scaffolding and stuff like that — to my dad to make ends meet,” Mr. Tromm said.

        The business owner has rebounded from that — and from a dirt bike accident in March that broke his left arm and fractured his right elbow and a kneecap. He still wants his $5,100, though. But with Erpenbeck Co. facing a federal bank fraud investigation, he and other subcontractors whose claims total millions of dollars can only hope to be paid.

        Mr. Tromm's travails are typical of what subcontractors and suppliers experience when developers and builders stumble. State laws give subcontractors the right to attach liens to homes or buildings for unpaid debts. But by the time banks and other higher-priority creditors assert their claims, there often isn't much money left to pay the so-called subs.

        “Subcontractors in the construction industry are at the bottom of the food chain,” said Thomas Yocum, a Cincinnati lawyer who represents the local chapter of the American Subcontractors Association.

        “That's the reality of the cash flow on these construction projects; and if there's a problem upstream, subcontractors and suppliers are the last to get paid.”

STORY ARCHIVE
Click here for all Enquirer reports on Erpenbeck Co.
INVESTIGATION
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 jmcnair@enquirer.com or Kentucky Enquirer reporter Patrick Crowley at pcrowley@enquirer.com.
        Mr. Tromm, who supports a wife and two children, had no reason to suspect trouble when he took the call from Kevin Schneider of Erpenbeck Co. in January. He said he was excited about the prospect of working for such a big, reputable company.

        “I thought it was going to be a good thing,” he said. “Their name's everywhere. Everything they did seemed like top of the line. They seemed to be the kind of people you'd want to work for.”

        So when Mr. Schneider asked him for a quote on building an access ramp for a disabled homeowner in Erpenbeck's Wellington Place in Alexandria, Mr. Tromm readily agreed. The company faxed him a contract. He ordered $2,500 worth of treated lumber and started work in February.

        The job was done in one week, and Mr. Tromm sent Erpenbeck a bill in March. He expected to be paid in a month, in spite of an admonition by an Erpenbeck employee about the company's tardiness in paying.

        A check never arrived, Mr. Tromm said. He tried to ask Mr. Schneider why.

        “I started calling them probably three or four times a week, at least,” he said. “I could never get ahold of him. He wasn't in the office or was in a meeting.”

        When he finally reached Mr. Schneider, Mr. Tromm said he was referred to someone at Firstar Bank, which he was told had taken possession of the property. A Firstar executive told him that wasn't the case.

        Mr. Schneider could not be reached for comment. Telephones at Erpenbeck Co. remain out of service.

        Ordinarily, the late payment would not have wreaked havoc for Mr. Tromm. But after the motorcycle accident, his left arm was in a cast for three weeks and his right arm was in a sling.

        “I couldn't do anything physical,” he said. “I couldn't lift anything. I had a helper who did some jobs for me while I gave him direction.”

        In June, Mr. Tromm hired a lawyer to file a lien against the condo property. Many subcontractors don't take that step because it costs more money. Those who do file liens understand that relief isn't guaranteed.

        “Even when they file a mechanic's lien, it only has value if there's equity in the property,” Mr. Yocum said. “Generally, the banks are going to have mortgages that come first; so if a property falls into foreclosure and the value is eaten up by the mortgages, very frequently, the subcontractors get nothing.”

        Mr. Tromm said a pickup in business spared him the need to liquidate other items. But he's disappointed in the outcome of his Erpenbeck deal and the absence of a better safety net for subcontractors.

        “It's unfortunate that it happened, but when you think about how easy it could happen, there should be some way to get a certain percentage back,” he said.
       



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