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Fair fraud?

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A lawsuit brought by peeved taxpayers may not be the only impediment to a controversial land deal that would have middlemen pocketing $11 million in public money.

The transaction we refer to involves 35 acres at the Michigan State Fairgrounds in Detroit. As it stands, the state is set to sell the property to the State Fair Development Group, headed by Joe Nederlander, for $6.1 million. Nederlander, in turn, reportedly has a deal to sell the property for $10 million to the Tartan Organization, a limited liability corporation. What has stirred controversy is Tartan’s subsequent agreement to sell the same land to Detroit Public Schools for $17 million.

Taxpayers filing the lawsuit think the state should sell the land directly to the school district. A preliminary ruling in that case is expected by mid-June.

However, News Hits learned Monday that there could be another roadblock facing Nederlander and Tartan.

According to a May 31 letter from the Michigan Department of Attorney General to attorney J. Leonard Hyman, who represents Nederlander’s State Fair Development Group (SFDG), the state is also raising questions about the deal. (The letter has been reproduced in its entirety and may be reviewed here.)

The original intent was for Nederlander — who oversees fairgrounds operations except for the two weeks a year when the fair itself is in session — to build hotels on the land. But those plans fell through when a lawsuit filed by disgruntled area residents and neighboring cities put the kibosh on construction of an adjacent auto racetrack.

The AG’s office, apparently, is concerned about the change.

“The parties entered into the purchase agreement for the sole purpose of enhancing the development of the State Fairgrounds and not for any other purpose,” according to the letter, which was obtained by News Hits through the Freedom of Information Act. “The State notes that possibly fraudulent representations were made regarding the proposed use of the land during the negotiations.”

However, AG Jennifer Granholm’s office isn’t necessarily going to let a little possible fraud end the relationship with Nederlander. The letter says that “the State may be receptive to other suggestions for uses consistent with the development of the State Fairgrounds. The option needs to be discussed between the parties.”

Attorney Hyman calls the allegations of potential fraud “ridiculous.”

“I asked for an explanation from the state, and haven’t heard anything back from them,” said Hyman.

Regardless of what the AG’s office decides, no property will be changing hands until Wayne County Circuit Court Judge Susan Bieke Neilson decides whether the lawsuit filed by five taxpayers will be allowed to proceed.

Hyman is calling that action “frivolous.”

That remains to be seen.

News Hits is edited by Curt Guyette, the Metro Times news editor. Call 313-202-8004 or e-mail cguyette@metrotimes.com

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