SF vs. Frank Lembi

Real estate mogul stonewalls its tenants and the city as the banks foreclose
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One of San Francisco's largest and most notorious landlords and the many shell corporations under his control have been withholding money from their tenants, the banks that financed their rapid real estate acquisitions, and even San Francisco's public treasury.

But while the banks have acted, seizing property from the delinquent borrowers, city officials have let Skyline Realty, CitiApartments, Lembi Group, and related corporations stonewall the city and pay far less property taxes than they should have owed, depriving city programs of hundreds of thousands of dollars.

The various corporations run by real estate mogul Frank E. Lembi (who has not returned our calls seeking comment) have earned a terrible reputation in San Francisco, even as they've expanded their rental property holdings in recent years.

An award-winning, three-part Guardian series ("The Scumlords," March 2006) documented how the companies used intimidating goons and an arsenal of nefarious tactics meant to drive out low-income tenants from rent-controlled units, prompting City Hall hearings and an ongoing lawsuit against the enterprise by the City Attorney's Office.

Then, earlier this year, many tenants joined a class action lawsuit against the Lembi enterprises, alleging the landlords have been illegally withholding deposits from departing tenants as a routine business practice, even after admitting that the tenants were entitled to full refunds (see "CitiApartments once again accused of mistreating tenants," Politics blog, July 15).

Attorneys for the firm Seeger Salvas LLP filed the complaint, which tells several appalling stories, including that of Joy Anderson. When Anderson went to retrieve the deposit she was owed, CitiApartments employees allegedly threatened her in front of her eight-year-old son, telling her that if she wanted her money back, she should talk to a lawyer.

Yet in that lawsuit and the one filed by City Attorney Dennis Herrera, which deals with harassment of tenants and other business practices that the city contends are illegal, Lembi's empire has refused to cooperate, employing a variety of delay tactics. The city's lawsuit has been stuck in the discovery process for years.

A court filing by the city alleges Lembi's enterprise has participated in "well over a year of discovery gamesmanship." New counsel for the defendants has promised to speed things up, but Herrera told us it is still an ongoing battle. "It has been incredibly hard to get documents and information in this case. He's been stonewalling us," Herrera told the Guardian.

Seegar Salvas attorney Brian Devine said six defendants named in his complaint didn't respond to discovery requests and were found to be in default by the judge, meaning they basically opted not to contest their culpability. Meanwhile, 75 other defendants did respond but haven't turned over any documents to the plaintiffs, dragging out the discovery process.

"It'll take sometime for anything to happen," Devine told us. "There's no Matlock moment where it all comes to a head. There are a lot of procedures to go through."

And apparently the Lembi enterprises know a little something about how to use legal and bureaucratic procedures to hang onto their money for as long as possible, judging from how they've worked the process to avoid paying the full amount of property taxes on their holdings.

At last count, there were 13 property foreclosure lawsuits pending on Lembi properties because he couldn't pay the loans. The banks have seized many of his properties and started selling them off.

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