By Pat Crowley
The Cincinnati Enquirer
FRANKFORT - A consumer protection bill inspired by the Erpenbeck Co. scandal easily passed the Kentucky House of Representatives on Friday by a vote of 93-2.
The bill, sponsored by Rep. Jon Draud, R-Crestview Hills, is designed to prevent another situation similar to the $100 million Erpenbeck Co. scandal that affected hundreds of Tristate homeowners and dozens of subcontractors never paid by the homebuilding company.
Draud spent months last summer meeting with Realtors, home builders, bankers, lawyers, title agents, legislators and others while crafting the bill.
"This is a consumer protection bill that is badly needed because a lot of people were hurt by this and we want to try to prevent it from happening ever again," Draud said.
The problems with the Edgewood-based Erpenbeck Co., long one of the Tristate's dominant home builders, began to surface last spring.
The FBI confirmed in April 2002 that it was investigating the company and Bill Erpenbeck, its president, for bank fraud in connection with suspected misapplication of home-purchase proceeds.
As the investigation proceeded, it became clear that more than 200 homeowners in Ohio and Kentucky were still liable for mortgages the high-living builder had failed to pay off with closing funds.
Homeowners' checks from the closings were instead deposited into Erpenbeck Co. accounts as the company fended off contractors' bills.
Subcontractors, banks, homeowners and other creditors sued the Erpenbeck Co., and Bill Erpenbeck.
People's Bank, implicated in the transfer of funds into the Erpenbeck business accounts it held, forced its co-founder and president John Finnan and commercial executive vice president Marc Menne to resign. People's was sold to The Bank of Kentucky for $15 million.
Erpenbeck and wife and children have moved to Fort Myers, Fla. His $1.3 million mansion in Crestview Hills and its contents is set to go on the auction block March 15.
No criminal charges have been filed in the case, but the FBI confirms that it is continuing its investigation.
The U.S. Attorney's Office in Cincinnati has filed nearly two dozen liens on properties owned by Erpenbeck, Finnan, Menne and Richard Erpenbeck, one of Bill Erpenbeck's three younger brothers and the Erpenbeck Co.'s outside attorney.
The Draud bill proposes that title companies in Kentucky be licensed and would regulate the verification of mortgage closing liens by builders and banks.
Draud said he was happy to get the bill out of the House and that Sen. President Pro-Tem Dick Roeding, R-Lakeside Park, has agreed to carry the bill in the Senate.
"This was a lot of work and took a long time to get done. But now the next step is getting through the Senate and with Sen. Roeding's leadership position, he should be able to get it done. This is a very important bill, not just for Northern Kentucky, but for the whole state because it's a consumer protection bill for people when they are buying their homes."
House majority caucus chairman Jim Callahan, D-Wilder, and Rep. Paul Marcotte, R-Union, commended Draud for his work on the bill.
"A lot of people are going to end up going to prison over this and they should," Marcotte said.
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