Minneapolis landlord accused of inventing tenants for unoccupied apartments to dodge lawsuit

The apartments had furniture inside. There were names on the mailboxes, even children's shoes by the door.

But the scene, laid out in court documents filed by attorneys representing tenants suing landlord Stephen Frenz, was allegedly a ruse.

Lawsuits brought by a neighborhood group on behalf of tenants must be backed by a majority of a building's tenants. By staging three empty apartments as if they were occupied, the tenants' lawyers argue, Frenz was falsifying numbers, trying to get the case dismissed.

It didn't work. Hennepin County Housing Court Referee Jason Hutchison ruled the tenants' group had enough residents supporting the suit to proceed.

When the allegations of fake tenants, staged apartments and false leases came to light in March, Frenz's lawyers withdrew documents that had been submitted and resigned from the case. Hutchison put the trial on hold, giving tenants a chance to investigate further and Frenz time to find new legal representation.

The trial resumes Thursday.

Hutchison has said he wants to first focus on tenants' complaints of substandard conditions at the apartment building on 14th Avenue S., which prompted the lawsuit. It is unclear whether Frenz will face charges or sanctions related to the fraud allegations.

Matthew J. Schaap, one of Frenz's new lawyers, declined to comment on the fraud accusations, but said there have been major repairs at the apartment building.

"It's unfortunate that this issue is distracting somewhat from the good work and substantial improvements that are occurring at this property," Schaap said.

Joseph Daly, emeritus professor at Mitchell Hamline School of Law, said the fraud allegations are "quite weird."

"It involves a lot of planning and scheming and a huge amount of risk if he's discovered," he said. "If it's true, [Frenz] is risking a large sanction by the housing court, he's risking the possible loss of his license to rent housing in Minneapolis, he's risking a possible perjury investigation and a criminal charge."

Tenants' attorneys said they grew suspicious after Frenz gave them a tour of the apartment building. They saw children's shoes, but no toys, and a small amount of furniture.

The day the tenants' attorneys disclosed to Hutchison some of the details suggesting a scam, Frenz withdrew his affidavit claiming he had 11 occupied units. Frenz's two attorneys from Fredrikson & Byron law firm withdrew the questionable leases and resigned from the case.

The tenants' lawyers were able to show there were only eight occupied units. And, ultimately, it didn't matter whether there were people living in all the units. A group helping organize the tenants, Inquilinxs Unidxs por Justicia (United Renters for Justice), got occupants of six units — a majority of the tenants — to sign on to the suit.

Tenants' attorney Michael Cockson of Faegre Baker Daniels law firm, which represents the tenants pro bono, suggested in court last month that Frenz could face perjury charges that carry a five-year prison term.

Hutchison issued a memorandum Wednesday saying that while the tenants' attorneys could not seek punitive damages related to the fraud allegations, the accusations could be addressed by a motion seeking sanctions or a second lawsuit.

John Stanoch, former Hennepin County chief judge, said: "You have to tell the truth to judges. This alleged violation, if true, would be egregious."

Frenz is one of the biggest landlords in Minneapolis. In 2012, with the approval of the city, Frenz bought 40 properties belonging to Spiros Zorbalas, who was forced to sell after the city threatened to revoke his rental license. Zorbalas had racked up more than 2,100 housing violations.

In their lawsuit, renters who live in Frenz's building in the 3000 block of 14th Avenue S. allege that the heating system did not work properly during one of the winter's worst cold snaps in January. And the units were infested with roaches, bedbugs and mice, they said.

In court Thursday, housing inspectors are expected to testify on violations they've found. Tenants are seeking repairs and the monitoring of repairs by the court, as well as a rebate on recent rents.

The tenants' lawyers have sought access to Frenz's recent e-mails to determine if he conspired with others to defraud the court. An independent forensic firm has searched Frenz's phone and computer, and Hutchison is expected to issue a ruling on what tenants' lawyers can see.

Randy Furst • 612-673-4224

Twitter: @randyfurst