Thursday, September 05, 2002

FBI: Ousted bank execs ran loan scam

Affidavit adds allegations about Erpenbeck Co.

By James McNair,
The Cincinnati Enquirer

        CRESTVIEW HILLS — An FBI affidavit made public Wednesday accuses the ousted top two executives of Peoples Bank of Northern Kentucky of engaging in a no-money-down property-buying scheme that helped the Erpenbeck Co. sell 24 homes and duped three other banks into loaning more money than the homes were worth — and put money in their pockets.

[photo] Deputy U.S. Marshals Robin Maley (left) and Craig Shelton post a notice of forfeiture on the front door of A. William “Bill” Erpenbeck's house in Crestview Hills on Wednesday. The house was one of 14 properties in Northern Kentucky owned by Mr. Erpenbeck or Jams Properties on which the notices were posted.
(Patrick Reddy photos)
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        The allegations, under seal until Wednesday, were part of the government's asset-forfeiture lawsuit filed in U.S. District Court in Cincinnati in May. The Enquirer read the affidavit of FBI agent Kevin Gormley after it was attached to 14 houses in Northern Kentucky, including A. William “Bill” Erpenbeck's Summit Lakes home here as well as 13 others owned by Jams Properties, a venture between the former Peoples bankers, John Finnan and Marc Menne.

        In the seven-page affidavit, the government repeats earlier assertions by Peoples that Mr. Erpenbeck directed the steering of $25 million in home sale proceeds — money intended for construction lenders — into his company's accounts at Peoples. About $15 million took the form of checks made out to banks. The rest consisted of cash tendered at closings by buyers of Erpenbeck Co.'s new homes.

        “That's an FBI person's version of what occurred,” Mr. Erpenbeck's lawyer, Glenn Whitaker of Cincinnati, said. “It's not all of the facts.”

[photo] Deputy U.S. Marshal Craig Shelton takes a photograph of A. William “Bill” Erpenbeck's house in Crestview Hills after posting a notice of forfeiture on the front door Wednesday. The photograph is documentation that the notice was posted, he said.
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        Where the affidavit breaks new ground is in its accusations against Mr. Finnan, who was Peoples' president, and Mr. Menne, who was its executive vice president before the two men were forced to resign in April.

        Through asset-forfeiture filings against the Northern Kentucky homes of Mr. Finnan and Mr. Menne — and their shared Florida condominium — the government had already placed the former bankers under suspicion of bank fraud. The Gormley affidavit accuses them of the following:

        • Originating four loans, totaling $5.9 million, from other, undisclosed banks from February 2001 to March 2002. The other banks thought the money was intended for Erpenbeck real estate projects, but the money was actually applied to the overdrawn Erpenbeck Co. account at Peoples. None of the loans was presented to — or approved by — the loan committee of Peoples' board of directors.

        • Forming Jams Properties with their wives and buying 24 Erpenbeck model homes — at or below cost — from 1997 through December 2000. Contrary to federal documents submitted after their purchase, Jams made no down payments on the homes.

        Moreover, the FBI said Jams financed the properties with loans “in excess of what it paid for them” and received cash from the closings, as well as deeds. Mr. Gormley wrote that Mr. Finnan and Mr. Menne withdrew money from the Jams account at Peoples and used it “for their own purposes.” He also said a witness involved in the transactions said part of the money was used to pay cash kickbacks to Mr. Erpenbeck. The agent said Mr. Erpenbeck has admitted to it.

        Lawyers for Mr. Finnan and Mr. Menne did not return phone calls Wednesday.

        Although the government alleges in the asset-forfeiture lawsuits that 24 homes were purchased with proceeds from bank fraud, it has not filed any charges.

        Staff writer Patrick Crowley contributed to this report.


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