A Hennepin Court housing court referee has ruled that Stephen Frenz, one of Minneapolis’ biggest landlords, deceived the court in a deliberate and elaborate scheme to get a lawsuit dismissed. Once the ruse failed, the ruling said, Frenz offered testimony that was not credible.
The referee, Jason Hutchison, ordered that an independent administrator be appointed to oversee one of Frenz’s apartment houses at 3057 14th Av. S. that was the subject of a lawsuit alleging it was in disrepair and overrun by bedbugs, roaches and vermin.
Hutchison has yet to rule on other matters in the case, including a motion for sanctions against Frenz, punitive damages, and a recommendation by tenants’ lawyers that the case be turned over to the Hennepin County attorney’s office to consider criminal perjury charges against Frenz.
The tenants have been represented pro bono by lawyers from the Faegre Baker Daniels law firm, including lead attorney Michael Cockson.
“We’re thrilled with the court’s well-reasoned and detailed analysis,” Cockson said Wednesday.
Neither Frenz, operator of The Apartment Shop rental company, nor his attorney, Matthew Schaap of Apple Valley, returned phone calls Wednesday.
Sanctions, which Faegre’s lawyers are seeking, could be commensurate with legal fees and costs incurred by the tenants’ attorneys to uncover the misconduct. Faegre attorneys have said in court that their bills had reached $1.1 million.
City officials have been following the case.
Besides the allegations of fraud and housing violations, they must weigh Frenz’s admission during the trial that Spiros Zorbalas still has a controlling interest in Frenz’s properties. The city ordered Zorbalas, described by officials as the city’s biggest slumlord, to sell all his rental properties in 2012. When Frenz announced he’d bought them, the deal was applauded by the city.
Tenants’ attorneys argued during the trial that the sale from Zorbalas to Frenz was a sham.
“There is a range of options available to the city,” City Attorney Susan Segal said Wednesday. “Ultimately the city ordinances allow us to revoke rental licenses in appropriate situations. The city has been closely monitoring the lawsuit and the city wants to make sure every tenant in the city is living in decent, safe housing.”
Before the trial began, Frenz’s lawyers had asked that the case be dismissed because a majority of tenants had not signed on to the lawsuit as required by state law.
But in court, it came to light that Frenz staged three empty apartments with furniture and children’s items to make it look like the building had more tenants who had not signed on to the lawsuit. He also fabricated three leases to further the scheme, according to Hutchison, and got a pest control company to produce fake invoices to suggest work had been done in unoccupied units on behalf of the fictitious tenants.
The Faegre lawyers “proved by a preponderance of the evidence, that Frenz engaged in a deliberate and elaborate misrepresentation to inflate the number of occupied units in the property,” Hutchison wrote in Tuesday’s ruling.
“This was not a knee-jerk, trivial or negligent misrepresentation,” Hutchison wrote. He characterized Frenz’s actions as “well-orchestrated deception.”
Hutchison said the tenant lawyers proved housing violations existed at the time of the lawsuit, including a front door that did not lock and infestations of roaches, bedbugs and mice. Frenz failed to complete repairs as directed by city inspectors and heat in the building in the winter “dipped slightly below the 68-degree Fahrenheit standard established by ordinance.”
Frenz and his attorneys argued he made substantial efforts to resolve the problems, but Hutchison ruled that Frenz only acted after the lawsuit was filed. He wrote that Frenz and his company’s “lack of credibility precludes the court from making an affirmative finding that any of the violations have been remedied as of the date of this order.”
Hutchison said he will appoint an administrator for the building to oversee remedial action and asked the Faegre firm to provide a roster of names.