By James McNair
The Cincinnati Enquirer

More than a year after the FBI opened a bank-fraud investigation of his defunct home-building company, the government has sent Bill Erpenbeck a proposed plea-bargain agreement, sources close to the year-old investigation said.

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The sources, who asked not to be named, did not know or would not reveal the terms of the proposed deal. They would only confirm that a deal is on the table for both Erpenbeck and Michelle Marksberry, a former Erpenbeck Co. employee who was in charge of its home-sale closings.

Spokesmen for the FBI and U.S. Attorney's Office would neither confirm nor deny the reports. Bill Erpenbeck's criminal defense lawyer Glenn Whitaker - who in previous months vigorously denied having received a plea deal - had no comment Wednesday. Marksberry's lawyer, Bob Carran, did not return phone calls.

The government began investigating the Erpenbeck Co. in March 2002 after being tipped off about the alleged practice of misappropriating home-sale proceeds that should have gone to the company's construction lenders. Sources told The Cincinnati Enquirer in November that the amount diverted was in the high $30 millions.

The Erpenbeck Co., Greater Cincinnati's third-largest homebuilder in 2000, failed to pay off construction loans on about 260 homes, leaving homebuyers in four Ohio and three Kentucky counties with double mortgages and the prospect of losing their homes to foreclosure. Settlement of a class-action suit spared that fate for about 210 consumers who had bank financing, but 50 who paid cash were left to fend for themselves.

The company's shutdown last April triggered millions of dollars in legal claims from banks, suppliers, subcontractors and home buyers. It also led to the demise of Peoples Bank of Northern Kentucky, whose top two officers were fired for having undisclosed business ties with Bill Erpenbeck and are being investigated by the FBI for bank fraud.

After investigators amassed a roomful of Erpenbeck-related documents, the case was introduced to a federal grand jury in Cincinnati sometime in December or January.

Government sources said last year that Bill Erpenbeck faces potential charges that, on conviction, could result in 10 to 12 years in prison. The potential charges take into account his role as president of the Erpenbeck Co., his leadership role in the alleged fraud and the amount of money allegedly taken. Draft plea agreements were said to have been packaged for potential defendants in November, only to be withheld for reasons not entirely clear.

Although no one has been charged with any crime, all five Erpenbeck siblings, including outside lawyer Richard Erpenbeck, have hired criminal defense lawyers. So have former Peoples Bank executives John Finnan and Marc Menne.

Bill Erpenbeck's 9,000-square-foot house in Crestview Hills was sold in a U.S. Bankruptcy Court auction last month for $1.2 million. Erpenbeck and his family vacated the house almost a year ago in favor of their condo in a gated, waterfront community in Fort Myers, Fla.

As the government's criminal investigation enters its second year, many of the victims of the Erpenbeck Co. collapse have lost patience. Many own homes that they cannot sell or borrow against because of construction mortgages that were never paid off. Many live in developments whose homeowner associations cannot afford to do improvements because Erpenbeck did not contribute its share of funding.

While FBI spokesman Jim Turgal would not talk about the grand jury investigation or plea negotiations, he did say the agency is making headway.

"The FBI is sensitive to the public's concern regarding the one-year anniversary of when this case broke, but a case like this takes time, considering the tremendous number of interviews, subpoenas, documents that have to be sorted through, and follow-up interviews," he said.

"I can't put into words how much information we've had to go through to unravel all this," Turgal added. "It's not like someone gave us a road map and said, 'This is how we did it.' "

E-mail jmcnair@enquirer.com.