By James McNair
The Cincinnati Enquirer
BURLINGTON - Addressing 30 lawyers huddled in a semicircle before his bench, Boone County Circuit Judge Jay Bamberger eased the pain of 210 Erpenbeck Co. homebuyers Friday by ratifying a settlement that clears the way for the removal of $16.8 million in mortgages from their homes.
The hourlong hearing was the culmination of six months of legal wrangling among the home buyers, Peoples Bank of Northern Kentucky and dozens of banks and title insurance companies with competing claims. The case only involved people who had paid for their Erpenbeck homes with checks. Countless other claims, covering everything from cash purchases to down payments, subcontractors' billings and delinquent bank loans, remain unresolved.
Nonetheless, it was an emotional event for the dozen or so homeowners. One after another praised their class-action attorneys, Stan Chesley and Brandon Voelker, and thanked Judge Bamberger for his speedy conduct of the case. The homeowners' testimonials so stirred the judge that he moved up, by one month, a hearing to approve details of the $16.8 million mortgage-payoff plan.
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"I hope these people (lawyers) will let this move through so the homeowners will have a clear deed to their home," said Susanne Martin, who had bought a four-bedroom Erpenbeck house in the Claiborne subdivision in Taylor Mill in August 2001, only to learn eight months later that Erpenbeck never used her money to pay off the $157,000 it had borrowed from Kenwood Savings to build the house.
Owners and executives of the defunct Edgewood homebuilder and two former officers of Peoples Bank are under investigation by the FBI for running a suspected bank fraud scheme in which proceeds of home closings were diverted into Erpenbeck accounts at Peoples. By the time Erpenbeck closed its doors in April, it had all but abandoned a dozen projects around the Tristate and reneged on more than $100 million in debts.
The Boone County case was but one action spawned by the Erpenbeck collapse. With Erpenbeck forsaking its obligations, unpaid construction lenders filed loan-default lawsuits against Erpenbeck and subcontractors filed so-called mechanic's liens against the homes they helped build.
Caught in the middle were the home buyers. In most instances, the construction lenders refrained from foreclosing on the homes. But with two large mortgages and a host of mechanic's liens, Erpenbeck homeowners could not readily sell or refinance their homes.
Mr. Chesley, the famed class-action lawyer from Cincinnati, said Friday's settlement will set into motion settlements of related disputes. For example, while Peoples Bank is fronting the $16.8 million mortgage payoff, it expects construction lenders and title companies to pick up a combined 30 percent of the tab. Those talks are under way.
Peoples, based in Crestview Hills, is marking its 10th anniversary by going out of business. Its shareholders will vote Monday on a proposal to sell its branches, deposits and most assets to The Bank of Kentucky for $15 million. Peoples will use its remaining cash to settle lawsuits and pay off shareholders.
Peoples agreed to pay the $1.68 million legal fee of Mr. Chesley and Mr. Voelker.
"There's no doubt in my mind that the class-action suit was the way to go," said Charles Mitchell, a 64-year-old retired Covington policeman who bought an Erpenbeck house in Claiborne with his wife Sherry. "If each homeowner had to do this on his own, we all would have lost."
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