Detroit landlord Kefallinos paid $300,000 to settle housing discrimination lawsuit

A controversial Detroit landlord and real estate investor paid $300,000 early this year amid allegations of housing discrimination against people with children in violation of federal law.

Dennis Kefallinos, in federal court documents, denies running afoul of fair housing law — and says he regularly rents to people with children.

However, he agreed to the $300,000 consent order with the nonprofit Fair Housing Center of Metropolitan Detroit in January after more than two years in court. One-quarter ($75,000) of that created a fund that pays up to $2,500 each to people found to have been discriminated against, according to the order filed in January. Another $124,265 in damages was awarded to the center to further its mission, plus about $100,000 in attorney fees.

Court documents also reveal that Kefallinos was under federal investigation by the U.S. Department of Justice as part of the case. In a February 2018 email, Luttrell Levingston, an assistant U.S. attorney, wrote that “the United States has an open investigation related to some of the same claims that are at issue in the current litigation.”

“Our office did have an investigation relating to the same claims that were alleged in the private civil lawsuit but that investigation has since been closed,” Gina Balaya, a spokeswoman for the DOJ in Detroit, said in an email. “The resolution reached in the private lawsuit contains terms that we would have sought if we had actually filed suit.”

However, Kefallinos did notch a key win in state appeals court last month when the court upheld a summary dismissal of a 2014 class-action lawsuit brought against him by dozens of current and former tenants who said they leased apartments or lofts from Kefallinos when he knew he had no certificates of occupancy for any of the buildings and that there were safety hazards.

The consent order is a drop in the bucket for Kefallinos.

He said in a court deposition for the case that the building that prompted it all, the River Park Lofts at 227 Iron St. across from Mt. Elliott Park, has no debt and brings in $60,000 a month alone, not to mention his 10 other residential properties and other commercial buildings and businesses he owns, including Niki’s Pizza and Bouzouki, a strip club in Greektown.

But it’s helpful for the fair housing center, which executive director Steve Tomkowiak said fielded 319 fair housing complaints last year on its budget of about $400,000 and a payroll that fluctuates between five and eight staff members

“I’m not a publicity seeker. I don’t litigate things through the press. I’m not out to get anybody,” Tomkowiak said. “The objective is fair housing, not to bring somebody down or drive somebody out of business or point them out as a bad person. If people violate the fair housing laws, they need to be held accountable, but the purpose of it is so that we have fair housing compliance.”

The Fair Housing Center in the June 2016 lawsuit alleged that it received a complaint that a mother with two young children, ages 2 and 5 at the time, was refused an apartment in Kefallinos’ River Park Lofts property because she had kids. The mother recounted her interaction with the leasing agent in a deposition.

“She pretty much told me like, ‘Oh, I’m sorry, it’s a no kids policy,’ and then she explained to me why they didn’t want (them) there was because of dogs walking around with no leashes and the simple fact that the walls are thin, and you can hear people having sex and everything of that nature, and a lot of the tenants didn’t really like to hear all the kids’ noise and being that the walls are so thin,” the mother said in a deposition. Her attorney, Stephen Thomas, could not be reached for comment.

After receiving the complaint, the center then “conducted a series of tests” the next two months “confirming the policy of exclusion of families with children,” the lawsuit says.

The leasing agent, an employee of Kefallinos’ Boydell Development Inc. real estate company, allegedly told one Fair Housing Center tester that his properties “don’t take any kids,” the complaint says. “There are no kids at all in our building. Not appropriate for kids,” the woman is quoted in the complaint as saying.

Kefallinos’ attorney argued that the potential renter “sustained no damages” and that he “could not legally rent out units at the time complained of in the plaintiff’s complaint because defendants did not have a certificate of occupancy.”
They also argued that the Kefallinos employee is originally from Poland and that English, her a second language, is an issue “which she still struggles with” and which “further complicates the interactions between (her) and the testers.”

An April 16, 2015, voicemail from the employee allegedly says: “I am not allowed — actually, basically every manager from Boydell, we are not allowed renting any spaces to people with kids and especially under six years old by 10 age.”
Kefallinos attorney Gonek said his client has complied with the consent order and removed the woman in question from her managerial position.

“She was concerned about a single mother wanting to rent a studio apartment on the first floor where a lot of the occupants had medical marijuana cards,” Gonek said. “She gave the applicant other locations that might suit her needs better.”

He said Kefallinos’ staff has also been sent to training with the Michigan State Housing Development Authority to ensure that they comply with housing laws.

That was required under the Jan. 10 consent order. In addition, Kefallinos’ Detroit-based Boydell is required to develop and implement nondiscrimination standards and procedures, which would have to be approved by the Fair Housing Center.

The order also says that Boydell is to “arrange for the publication of” a notice to potential victims in the Detroit Free Press, Detroit News and Michigan Chronicle. The ad costs are paid out of the $75,000 Aggrieved Persons Fund, which limits victims to $2,500 in damages each.

The consent order is effective for three years until Jan. 10, 2022.

But Kefallinos notched a win with the June 25 unpublished state appellate court ruling.

That case stemmed from an incident seven years ago on July 25, 2012, when residents of Kefallinos’ Universal Lofts building at 5805 Lincoln St. were ordered to “desist in the use of this building for residential purpose.”

Kefallinos, who came to the U.S. from Greece as a teenager, said in a deposition that the units at Universal Lofts were “always habitable” and denied that there was lead paint in one of the plaintiff’s apartments, one of the key contentions in the lawsuit.

He said he requested an extension to comply with city construction rules but a clerical error resulted in a certificate of occupancy not being issued.

Kefallinos also said in the deposition that he wasn’t aware if from 2008-14 all of the buildings had valid certificates of occupancy because “it is not (his) Boydell Development Co.’s duty to obtain” them.

Alyson Oliver, managing partner of Troy-based Oliver Law Group PC, which represented the tenants in the matter, said she does not plan to take the case to the Supreme Court after the appeals court ruled against her.

“There is a written exception in the Michigan Consumer Protection Act that says if an activity is sanctioned by a government entity, it can’t be the basis of a consumer protection claim,” she said. “If I want to file a consumer protection over a recalled drug and I wanted to sue, I would get kicked out of court because the FDA approves drugs. In this case, the defense argued that renting properties is governed by the Detroit city code.”

Kefallinos has been active in Detroit real estate for decades.

His portfolio of buildings has generated interest from deep pockets lately, and pumped tens of millions into his own.

One of them, a former Wayne State University pharmacy school building called Shapero Hall in the city’s Lafayette Park neighborhood, and the land it sits on sold for $16 million a year ago to Lafayette Acquisition Partners LLC. It paid $2.3 million for the 151,000 square foot building in 2007.

Lafayette Acquisition Partners, an affiliate of Novi-based Ginosko Development Co., plans 374 residential units, including a new mid-rise building, to take Shapero Hall’s place. The old building was torn down earlier this year; a fence with a scrim surrounds the now-vacant land.

In November 2017, D & K Investments Group LLC, a Kefallinos affiliate, sold the Harvard Square Centre building at 1346 Broadway St. downtown to billionaire real estate mortgage mogul Dan Gilbert for $6.25 million. Kefallinos paid just $700,000 for it in 2008. Gilbert plans a mixed-use redevelopment there, although no work has started.

In August 2017, Crain’s reported that Kefallinos had listed his nonresidential buildings for sale based on an offering memorandum it obtained. All told, the buildings totaled more than 2.3 million square feet sitting on north of 100 acres.

Kefallinos later claimed that they were put on the market without his authorization and said they weren’t for sale.

Among his real estate portfolio are the Roosevelt Hotel at 2250 14th St. across from Michigan Central Station in Corktown, now owned by Ford Motor Co. after a $90 million sale last year; the Russell Industrial Center; the Michigan Building and former Michigan Theatre at 220 Bagley St.; a former hospital at 2401 20th St.; a large former Boy Scouts of America campground in Lupton about 10 miles from the Huron National Forest totaling 630 acres; and a large Corktown building at 1448 Wabash St. totaling 437,000 square feet.