Cincinnati Enquirer
Hammer home-builder fraud
Two pairs of local white-collar criminals are prison-bound for similar fraud schemes that ripped off banks and home buyers. Bankers John Finnan and Marc Menne were sentenced Tuesday in federal court in Covington to 63 and 54 months respectively for their roles in the $30 million Erpenbeck home-building fraud. Eleven days earlier, Fairfield home builder Chester Calkins and his wife, Antonette, pleaded guilty to a similar $5 million scam.

Editorial
January 28, 2005 
Hammer home-builder fraud
Two pairs of local white-collar criminals are prison-bound for similar fraud schemes that ripped off banks and home buyers.

Bankers John Finnan and Marc Menne were sentenced Tuesday in federal court in Covington to 63 and 54 months respectively for their roles in the $30 million Erpenbeck home-building fraud. Eleven days earlier, Fairfield home builder Chester Calkins and his wife, Antonette, pleaded guilty to a similar $5 million scam. They will be sentenced April 29, and could face up to 30 years in prison and $1 million fines each. Both frauds diverted home buyers' payments at closings that were supposed to have paid off construction loans.

Stiff sentences are essential to deter white-collar crime and keep this region's home building boom rolling. But they are no substitute for banks and home buyers doing their own due diligence "home work" in advance, or hiring professionals who will.

The Erpenbeck and Calkins frauds occurred between 1999 and 2002. They victimized some of the same banks. Some of the victimized home buyers in the Erpenbeck case consider the bankers' punishment too light. At his sentencing, John Finnan, who was founder, president and largest shareholder of the now-defunct Peoples Bank of Northern Kentucky, accepted full responsibility for his crimes. He covered up Erpenbeck's overdrafts with multi-million dollar loans and sucked other banks into the same sinkhole of loss. Erpenbeck is doing 30 years in a Florida federal prison.

Just as we should never let home builders blur the line against scamming buyers at closings, there's no excuse for bankers who cross over into helping deceive their board, other banks and home buyers.

Chester and Antonette Calkins may seem like the new kids on the white-collar crime block, but Homes by Calkins' finances were already crumbling in 2003. Chester, president and sole stockholder, was convicted in Ohio for writing bad checks. Although his crimes in Kentucky involved 47 condo units in Cold Spring and Florence, his plea deal on Jan. 14 involved only one count of bank fraud. Antonette, as closing agent, pled to aiding and abetting bank fraud.

Buyers paid cash at closing without obtaining a mortgage, so there were no buyers' lenders monitoring the closings. Both scandals are remarkable for how long it took anyone to catch on that closings were taking place and yet bank construction loans weren't being paid off. In Erpenbeck's case, the relationship between builder and the bankers was so cozy they even lived near each other and moved in the same social circles.

Banks ought to monitor more closely home building projects they finance, and home buyers need to understand that title insurance at most closings protects banks, not them. They can better protect themselves by taking out owners' title insurance and hiring their own lawyers.

Tough sentences can help reinforce that closings can be risky for buyers and for so-called non-violent white-collar criminals.