Rothenberg Ventures could face fines over setting up its office in a building zoned for residential use

Things seem to be going from bad to worse for Mike Rothenberg, the founder of Rothenberg Ventures, which was more recently renamed Frontier Tech Ventures.

According to documents obtained by TechCrunch, San Francisco’s Planning Department was notified earlier this month that Rothenberg Ventures has been operating out of two floors in a building that’s not permitted for use as a general office, despite authorizations for two previous tenant improvements from the city’s Department of Building Inspection.

Rothenberg purchased the property in 2015 for $4.5 million, according to a source with financial knowledge of the firm.

It was described as a multiple tenancy building in a 2013 advertisement, which said the seller was seeking a “creative type” for the 12,000-square-foot, three-story brick and timber building. The listing said that at the time that the third floor was “occupied by a tenant who could remain with new lease or vacate with notice for an owner-user.” The second floor was vacant when the ad was published. The first floor was being leased at the time to the national restaurant chain Extreme Pizza.

Asked how he planned to respond to the Planning Department’s enforcement letter, Rothenberg suggested he was unaware of it, as well as of any zoning laws that the office might be violating.

“1062 Folsom has not been converted at any point as long as we’ve been here,” he wrote TechCrunch in an email. “I’m not aware of any zoning laws being violated, and I’m glad you reached out to clear the misconceptions.”

The violation, presumably brought to the city’s attention by a person or parties who want to hamstring Rothenberg, looks highly problematic for the beleaguered investor. To correct it, says the city, Rothenberg Ventures must “contact the staff planner listed above to arrange for an inspection of the Property within 15 days from the date of this notice,” marked October 19th — this coming Wednesday.

If a “general office use is confirmed [to be in] operation on the second and third stories at 1062 Folsom Street, then you must cease all operations of the general office use,” it continues. Finally, it says, to “prevent further enforcement action and avoid accrual of penalties, the responsible party must provide adequate evidence to demonstrate that either no violation exists or that the violation has been abated.”

Rothenberg has two weeks from Wednesday to resolve the issue or face penalties of up to $250 per day. As if that weren’t bad enough, Rothenberg Ventures may be subject to an additional $1,308.00 fine, plus any additional accrued time and materials cost for the investigation.

A source close to the matter tells TechCrunch that Rothenberg had carved out most of the building for office use, as well as a co-working space for startups and portfolio companies. Liquidspace, for example, says it occupies 8,000 square feet of the building.

Meanwhile, sources close to Rothenberg have told TechCrunch the firm is nearly out of money. We’ve also been told Rothenberg has been looking for outside investments and was recently trying to raise new funding for the firm in Arizona.

Rothenberg is further facing a proposed class-action lawsuit launched by one former employee who says the firm systematically failed to pay employees in back wages. A separate lawsuit alleges Rothenberg owes one former employee at least $109,000 for credit card charges made on behalf of the firm.

Rothenberg could potentially face a public relations backlash, as well. The tech community has endured a famously strained relationship with San Francisco residents for years, owing to the scarcity of rental units in a flourishing city with very little area for development available.

Indeed, with rents in San Francisco soaring to some of the highest prices in the country, even many high-paid tech workers have expanded their housing searches into neighboring cities, including Oakland.