This story was originally published in July 2003.
PHOTOGRAPH BY RYAN KURTZ
It turned out to be such an easy thing: bypass the title company representative and deposit the check into an Erpenbeck Company account. Doing the crime the first time was probably the hardest part, back in 1999, when someone from the Northern Kentucky development firm pinched a $73,925.50 check that should have paid off the lender for a home construction project.
It would happen again. Almost 300 times, allegedly, from 1999 until April 2002, when Federal officials announced that developer A. William Erpenbeck was under investigation for suspected bank fraud. He was accused of siphoning off nearly $34 million dollars in mortgage money intended for eight area banks.
The result was a home-title tsunami that hurled hundreds of businesses, banks and homeowners on both sides of the Ohio River into panic. In late April after about a year of incessant news coverage, legal wrangling, a move to Florida and an auction of his Crestview Hills mansion, the 42-year-old Erpenbeck took the deal dangled by the Feds, pleading guilty to one count of bank fraud. Though at press time he hadn’t been sentenced, Erpenbeck faces repayment, fines and up to 30 years in prison.
But for those tossed in the Erpenbeck wake, the scandal is far from over. They’ve lost their savings, investments, businesses, and their lives will be changed for years to come.
Louie Morris – Contractor
Louie Morris is the kind of guy who starts his day at 6:30 a.m., works Saturdays and reviews project notes each evening at home. When he says he will do a job, he’ll get it done. If he can’t, he’ll tell you up front. That’s how he likes people to deal with him, too.
So when Bill Erpenbeck promised that the Erpenbeck Company would make good on a post-dated check for $258,000 – just more than half the money owed Morris Heating and Cooling – Morris believed him. Right up until the moment Erpenbeck skipped town with his family to Ft. Meyers, Fla., last year.
“Erpenbeck was a slick operator,” the white-haired, soft-spoken Morris says. “He would overstate things, give you the impression that everything was going to be all right when it wasn’t. I learned early on not to believe all the stuff he’d tell you, but I sure didn’t think things were going to end up the way they did.”
Morris landed his first job with the firm in the mid-‘90s, doing heating, cooling and duct work at Valley View, a multi-family Erpenbeck project in Crestview Hills. Within a couple of years, Morris was working on up to 20 different projects at once for Erpenbeck. “It wasn’t uncommon for us to work on 500 single- and multi-family units a year… we were their primary subcontractor for heating and cooling.”
By 2001, though, Morris says it was clear the developer was in financial trouble. “We noticed around then that it was getting longer and longer between payments from him. He’d tell me it was because they were going through growing pains, and we accepted his word.” In November Erpenbeck brought Morris and a couple dozen other contractors in for a meeting. Erpenbeck asked everyone to “work with him,” Morris says. “They were going to pull out of this, and he would reward those were loyal to him.
“There certainly was a sense that if you didn’t hang in there with him, you weren’t going to get any more work from him.” Even while Erpenbeck asked subcontractors to be patient about payment, he wined and dined with expensive cruises and parties at his magnificent Crestview Hills mansion. “You heard everyone in the trade talking about how slow he was in paying, but then you go on a cruise and he was buddy-buddy with John Finnan [President of Peoples Bank, the bank that served as the largest conduit for misappropriated funds]. You just got this feeling that, hey, if the guy is that close to the banker, everything must be OK. Maybe they would pull out of this slump.”
But instead of improving, the situation got worse. Morris says that as 2001 rolled into 2002, the residential developer was no longer mailing payments to him or other subcontractors. It seemed the only way to get paid was to see Erpenbeck in person. It was on one of those visits in April 2002, Morris says, that Erpenbeck totally violated his trust. “I’d called ahead, and Bill said to come on over,” Morris says. “So I’m there, shooting the breeze, and I get a check from him. I didn’t think anything about it at the time.”
Morris didn’t bother to closely examine the $258,000 check – which had been post-dated by a month – until trying to deposit it later. “That’s when the ordeal started,” he says. “I went back over to his office, and they said he was out at the dentist getting his teeth fixed.” (Later rumor was he’d received an unfriendly greeting from another unpaid subcontractor). After Erpenbeck had taken off for Florida, Morris tried to get his money from Peoples Bank, where the account was held. That’s when he learned the worst. “When I went into Peoples the teller kind of grinned at me,” he recalls. “She said there’s no money at all in that account.”
Morris filed criminal charges for theft by deception in Boone County court, but Judge Michael Collins ultimately dismissed the case last summer, stating that Kentucky criminal law exempted post-dated checks, which were in fact treated as promissory notes. Morris says he’s out nearly $500,000. “Sure, it hurt us financially,” he says. “We need the money. We’d do things like add new trucks ad equipment. But, financially, we’re really better off now than we were then. We’re watching our billing a lot more closely now. Another [Erpenbeck-type] situation won’t happen to us again.”
Morris says that he is pursuing other legal action, but win or lose there will probably always be unanswered questions. “I’d really like to ask him why he gave us all this false impression that he was going to take care of me, like I was his friend,” Morris says. “If you were a true friend, a real business partner, you wouldn’t lead me on. You’d give me some kind of a hint, like, ‘go somewhere else for your business.’ Don’t stay here and take the hit.”
PHOTOGRAPH BY JEROME VIEH / GOGO PHOTO
Steve and Whitney Remley – Homeowners
From the first, Steve and Whitney Remley liked the look and feel of Erpenbeck’s Steeplechase subdivision in Boone County. For Whitney, a fifth-generation Lexington horsewoman, the property was a touch of home. For Steve, who works for the Grant County Board of Education, it was so much more convenient than the 90-minute drive he’d been making from Lexington.
The rolling hills and horse farms around Steeplechase in many ways represented the pinnacle of the Erpenbeck Company’s image: classy homes built in pristine settings, a themed community that homeowners could proudly tout to friends and family. The Remleys moved into their new $200,000 house in July 2000. They paid cash—and never dreamed that that was a grave mistake. But like nearly 50 other homeowners swept up in the Erpenbeck scandal, paying cash left them exposed to lawsuits and liens from banks and subcontractors.
The Remleys didn’t learn about their involvement until after their daughter’s birth in March 2002. Born with heart disease, Paris Remley has been in and out of hospitals in Lexington and Cincinnati. It was after Paris’s medical problems began that a neighbor—former Erpenbeck Company employee—warned the couple that there might be trouble with their title claim. “She was really like a little bird singing to us,” Whitney Remley says. “She warned us that she had seen our property listing come across her desk [sometime in March 2002], and she knew we were going through heart surgery for Paris. She suggested we investigate our purchase.”
The Remleys did a title search and discovered that a payment of $155,539 that should have gone to Firstar Bank (Now U.S. Bank), which has loaned Erpenbeck the money for the home construction, was never paid. By May 2002, the Remleys were hiring attorneys and seeking redress in court. “[Attorneys] took our case to Judge [Jerry] Bamberger in Boone County to file a class action suit,” she says. “We had about 50 people wanting to join in the class action with us, but Judge Bamberger ruled that there wasn’t enough commonalty among our group to constitute a class.”
The Remleys and the others who sought to join them were stunned. Now, Whitney says, she is trying to keep her hope and faith in the system alive. “What else are you going to do? I’m not going to collapse. I’ve had battles to fight before—nothing like this before. But we’ll pull through. I know we will.”
Ken Perry – Realty Executives
The red-brick, three-bedroom house looks a bit tattered after being vacant for the better part of a year. But Ken Perry flashes a smile as he checks off a list of positives at the Park Hills property. “We’ve got it priced to move,” the owner of Realty Executives says. “It’s all cleaned up. And all the liens have been taken care of.”
The mechanics’ liens, of course, had been the real stumbling block to the property moving at all since it was first listed in 2002. The people who lost this house were some of what Perry calls the silent victims of the Erpenbeck tragedy: the owners of little service companies who fell into the disgraced developer’s financial maelstrom. These companies were burned for $10,000 here, $20,000 there, for trim work or landscaping or other subcontracted labor. They never got paid. Probably never will. Their losses were real enough to cost them their homes. Like the landscaper who lost the Park Hills home, they will likely never be invited to a class-action suit. Instead, they’ve had to deal with their own mortgages and car payments and other living expenses while at the mercy of the developer for their outstanding labor and materials used. “I’ve probably represented five or six properties like this,” Perry says. “A guy who built a few decks on the back of some houses for Erpenbeck, somebody who subcontracted to do some interior carpenter work. They [were] all knocking on Erpenbeck’s door trying to get paid, but they don’t do enough work to get in front of some of the other subs, so they waited and waited.” And when the builder was gone, he says, they lost out.
The Cold Spring, Kentucky, realtor says that although he knew Bill Erpenbeck and had been to his house, he always kept his distance from the extravagant, high-flying home builder. Erpenbeck was, Perry says, “the definition of flamboyance. Huge, beautiful house. Always going on expensive vacations and beautiful cruises. You might think this guy’s got it made.”
“I own a business, and I know that you don’t stay out until 3 a.m. and show up last at work every day and keep this all going. You’re the first one in and the last to leave. That wasn’t Bill.”
Perry says he steered his own customers away from Erpenbeck when he saw signs that made him leery of the Edgewood firm. Complaints from unpaid subcontractors were making the rounds, and he says that he worried when he saw lumber piled up at building sites long before construction, a sign Erpenbeck was eager to get his next draw from the bank, ostensibly to start a new home project. “I just had a feeling that this was a guy who couldn’t get his hands on enough cash. But I, like everybody else, just thought that this was a business that was going under, I had no idea he was diverting checks.”
Diverted checks should never have happened, and Perry says there is a culprit in the Erpenbeck disaster that has not seen much publicity. He’s not shy about laying blame with them. “A lot of this problem lies with the title companies. Title companies need to be more diligent.” Yes, he says, letting homebuilders and real estate agents handle closing checks has been customary. “But it should not have been done.”
Some title companies tasked with making sure all steps were taken during the closing process might have failed to make sure any and all liens from builders and banks were removed from their homes following the purchase.
“They were just lazy,” Perry says. “Had these guys done their jobs, Erpenbeck would have been caught a lot sooner. There would have been a lot less grief than there is now.”
PHOTOGRAPH BY RYAN KURTZ
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