As Minneapolis landlord Stephen Frenz begins sentence, some see more charitable side

Minneapolis landlord Stephen Frenz will report to the Hennepin County workhouse on Tuesday to begin a sentence for lying in court after the implosion of his multimillion-dollar apartment building empire.

The sentence is the culmination of four years of turmoil for Frenz, who started buying apartment buildings in the 1990s and became known for his work sprucing up low-income properties, even installing fitness centers and computer rooms. But he couldn't weather financial fallout from the recession, along with mounting complaints from city officials and renters who decried what they called poorly maintained buildings and squalid conditions.

Flora Dominguez lived in an apartment building in the 3100 block of S. Pleasant Avenue that Frenz once owned but now has been forced to sell. She recalls roaches throughout the unit and a stove that didn't work.

"I would ask for repairs and people from the office would answer, but they wouldn't come for a long time," Dominguez said.

But the sentence is also a blow to those who knew Frenz outside of his business dealings.

"I can't believe he would do these things," said the Rev. Kevin Kenney, former presiding priest at Our Lady of Peace Church in south Minneapolis, where Frenz attends. "That is not the person I would know him to be."

In letters sent to Judge Robert Awsumb before his sentencing, Frenz was described as a man committed to charitable works. He hired unemployed renters to work in his buildings, underwrote the cost of renovating an apartment for a member of his church who had cancer and was a leader in his Catholic parish.

Frenz declined to be interviewed for this story.

Thomas Berthiaume, a former board member at the Whittier Alliance, a neighborhood organization, called Frenz a "solid neighborhood asset" in a letter to Awsumb.

"Steve is Catholic and Republican, I am agnostic and liberal Democrat," but he said Frenz was "tolerant and understanding of differences." Asked in a short interview about the allegations against Frenz, Berthiaume said, "It doesn't fit with my experience."

City officials have a different view. Mayor Jacob Frey formed an alliance with Frenz's angry renters early in his tenure.

"Protecting renters is one of 4 corners of my housing agenda," Frey wrote on Twitter in 2018, a few months after he was sworn in as mayor of Minneapolis. "Preventing another landlord like Frenz from exploiting tenants is central to that mission."

Lawrence McDonough, director of pro bono work at Dorsey & Whitney law firm and a former managing attorney for housing at Mid-Minnesota Legal Aid, said Frenz stood out for the level of fraud he committed, which led to his perjury conviction and the revocation of his rental licenses.

Frenz has been in legal trouble since 2016. He was fined $187,390, the largest fine in state housing court history. He agreed to pay $18.5 million to more than a thousand tenants in an unprecedented class-action settlement. Tenants alleged poor conditions, including vermin infestations and heat and plumbing problems.

The City Council unanimously revoked 60 of his rental licenses. In October, a Hennepin County jury convicted Frenz of perjury during a housing court trial.

One of seven brothers and sisters, Frenz grew up in the Twin Cities and graduated from Benilde-St. Margaret's High School in St. Louis Park in 1982. He graduated from the College of St. Thomas, now University of St. Thomas, in 1986 with a degree in accounting and economics and a concentration in finance.

"He came off as an intelligent, bright guy," recalls Pete Wareham, cross-country coach at St. Thomas and a former cross-country teammate of Frenz at the college. "He had a lot of motivation and he was goal-oriented." Frenz earned a master's in business administration from the University of Chicago Graduate School of Business, now the Booth school, in 1988.

Frenz got involved in the apartment business in the 1990s and, working with another landlord, Spiros Zorbalas, bought a large number of apartment buildings. Then the 2008 recession hit, dealing Frenz a number of financial setbacks.

With Zorbalas being forced out of the rental business by the city of Minneapolis for repeated housing violations, Frenz announced he'd bought out Zorbalas. Then-City Attorney Susan Segal and then-City Council Member Gary Schiff hailed the purchase at the time.

"Renters won't be displaced, and Spiros Zorbalas is out of business," Schiff declared.

But while Frenz assured city officials he and his wife were the sole owners, he and Zorbalas had secretly formed a partnership. They created Equity Residential Holdings LLC and the National Housing Fund to operate the buildings together. Zorbalas became manager, CEO and CFO, overseeing the financial operations, and had an 80% interest. Frenz became the public face as executive of the Apartment Shop, which rented the units and was in charge of repairs.

Under the arrangement, payouts to Frenz from Zorbalas would be limited unless he held expenses down. United Renters for Justice, a tenants group, began organizing to help tenants who complained about substandard conditions.

It came to a head in 2016 during a January cold snap, when tenants in one of Frenz's south Minneapolis buildings sought legal help because of a faulty furnace and an infestation of bugs and mice.

With a team of attorneys, Michael Cockson, a pro bono lawyer with Faegre Baker Daniels, filed suit on behalf of tenants. Frenz moved to get it thrown out, arguing a majority of tenants opposed the lawsuit. As proof, he gave the court three leases of people who had not joined the suit, plus his affidavit attesting to their authenticity. The leases were fakes.

A tenants' lawyer touring the building looked in on one apartment that had children's shoes lined up but no toys. With more research they found the apartment was vacant and the shoes were props. Cockson exposed the phony leases, and Frenz lost the case. Along the way, Faegre lawyers uncovered evidence that Zorbalas still controlled the properties. The city confirmed the revelation and revoked Frenz's rental licenses on about 60 buildings.

Frenz owns a house on the 4500 block of E.Lake Harriet Boulevard. The state Department of Revenue filed a tax lien on his house in July for $1.1 million, but the department said that by law it cannot disclose why.

Frenz has sold off most of his properties and is negotiating with tenants who want to buy five buildings on the 3100 block of S. 22nd Avenue.

He must serve 30 days in the workhouse this year and 30 days in 2021, in addition to 200 hours of community service. He also must pay a $1,000 fine.