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DETROIT-The state attorney general’s office has halted the completion of a purchase agreement of 35 acres to developer Joe Nederlander, claiming the new owner defrauded the government in plans for Detroit land.

“Your client indicated that it intended to build hotels on the property, not to sell it to someone else, who in turn sold it to the Detroit Public Schools for more money than what the state would have sold it to them if it knew the school district was interested,” says assistant attorney general Matthew Rick in a letter to Nederlander’s attorney, Leonard Hyman. “In fact, your client indicated during negotiations that the property was not worth the $6.1 million ultimately agreed upon by the parties.”

Nederlander was to purchase the land for $6.1 million as part of his lease of the state fairgrounds at Woodward Avenue and Eight Mile Road. He said he sold it to a real estate investment trust, headed by a former business partner, for $10.5 million after local residents and four cities, including Detroit, Ferndale, Pleasant Ridge and Huntington Woods, filed a lawsuit to prevent the construction of a Grand Prix racetrack at thefairgrounds. The suit is still in the discovery process.

The trust has offered to sell the property to the Detroit school district, which would build a new high school, for $17 million. The district would use 24 acres, and sell the rest to Home Depot Inc. for $9.5 million for a new store.

Nederlander wants to build some sort of race track and an amphitheater on the leased property. He says he wanted to build a large hotel on the 35 acres of adjacent land. The hotel idea died when a lawsuit to prevent the track dragged on, Nederlander says.

Hyman says the sale of the property was always known to be “as is,” and plans changed once the race track option died.

“I am disturbed by these representations and trust they were either made out of pique for some reason or for some reason that is not apparent,” Hyman said in a return letter.

Rick says the AG’s office recognizes the race track’s death hurt the $200 million in redevelopment plans for the fairgrounds, but the developers should have been aware of the risks. A race track idea was also shot down by residents in 1997. Rick says the new plans were only approved because Nederlander had assured the state that he was working with neighbors of the fair to get the track approved.

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