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Convicted swindler in city housing deals
One of firm’s major players has felony past
(Published May 21, 2001)
By JOHN DeVAULT
and KATHRYN SINZINGER
On an evening in May 1999, in an elementary school meeting room in Southeast Washington, Scott Nordheimer and others on his development team made their pitch to a small group of public housing residents.
The residents had some concerns. No, Nordheimer told them, if the group that included his company – Mid-City Urban LLC – won a $40 million contract to tear down their decrepit houses and put up 600 new mixed-income townhouses in their place, the new variety of building designs would not signal who was on welfare and who could afford to buy their own home.
There were other, more mundane questions. Yes, said Nordheimer, the new Henson Ridge development – which would combine the sites of the Frederick Douglass and Stanton Dwellings on Alabama Avenue SE – would have routine pest inspections.
And at the end, Nordheimer reminded the residents of a recent edict by then-D.C. Housing Authority head David Gilmore: "Individuals with criminal records," he said, "will not be allowed to move into the new development."
But Nordheimer didn’t add what he might have: that while he could partner – as Mid-City Urban was in fact doing – with the D.C. Housing Authority to compete for millions of federal tax dollars, Gilmore’s no-criminal-records rule barred Nordheimer himself from moving into one of the houses his company would build. Nordheimer has a recent criminal record – for real estate fraud.
Court records show that in May 1993, a U.S. District Court judge in Alexandria sentenced Nordheimer to serve two years in prison, followed by two years of supervised probation, for his role in a real estate scam that cost a Seattle investment company more than $2 million. His brother, Gary Nordheimer, was sentenced to 27 months for the same offenses.
U.S. District Court Judge Albert V. Bryan Jr. also ordered the Nordheimers to repay the Seattle firm, Security Properties Inc., $2.4 million.
In addition, in an unrelated matter, the D.C. Office of Tax and Revenue’s current "Top Delinquent Taxpayers" list, posted on its Web site, shows that Nordheimer owes the D.C. government $18,121 in unpaid back taxes.
According to Mid-City Urban president Victoria Davis, Nordheimer is a principal of the company. She said Mid-City Urban has four principals: herself, Nordheimer, Lois Fried and William Harvey. She called Nordheimer’s fraud conviction "irrelevant ... because he’s not an owner, and he’s not an officer."
Mid-City Urban is a Silver Spring-based firm specializing in redeveloping aging public housing properties and other urban tracts. The company helped to rehabilitate the Congress Park 1 and 2 public housing complexes in Southeast Washington and also worked on the revitalization of the area around the Silver Spring Metro station. The firm also has done projects in Baltimore, Memphis, Tampa and Greensboro, N.C.
Most of Mid-City Urban’s projects have been substantially financed with public tax dollars.
As it turned out, the Mid-City Urban/D.C. Housing Authority team was successful in its bid to win the $40 million contract to develop Henson Ridge, receiving a U.S. Department of Housing and Urban Development Hope VI grant in 1999. In addition to $30 million in HUD Hope VI funds, the development package includes $10 million from other HUD-funded programs through the D.C. Housing Authority and the D.C. Department of Housing and Community Development.
The Mid-City Urban/D.C. Housing Authority team was able use that funding to secure additional investment, for a total package of about $81.8 million. (The Mid-City Urban/DCHA team also includes the Integral Group, a minority-owned partner, and a local community development corporation called Just You Wait And See.)
Earlier this month, a partnership between Mid-City Urban and local residential real estate giant William C. Smith Co. won the right to build 80 mixed-income residences and a commercial strip, including a new Giant Food supermarket, on a 25-acre parcel across Alabama Avenue from part of the Henson Ridge site. Funding for this project, on the site of the abandoned Camp Simms National Guard post, is expected to include several million dollars in local and federal government funds.
That award was the object of protests by some residents who believed the Camp Simms contract should have gone to local African-American developer Kevin Williams, who also bid on the job. Williams and his partners are suing the city over what they say was an improper contract award process.
The administration of Mayor Anthony A. Williams has made the Henson Ridge and Camp Simms developments, both in economically depressed Ward 8, a high priority. Williams personally awarded both contracts to Mid-City and its respective partners in public ceremonies. Earlier this month, he told a crowd gathered at the Camp Simms site, "Today, we put another piece of this puzzle together in creating a healthy neighborhood."
According to court documents, the Nordheimer brothers’ scam involved the Yarrow Hotel, a ski resort in Park City, Utah. After buying the hotel to convert it into time-share condominiums, the Nordheimers got commitments for about $4 million in sales. But they also forged signatures onto 40 fake purchase agreements, totaling $1.7 million. The Nordheimers used the phony agreements, for which no buyers existed, to obtain $2.4 million in additional financing from Security Properties Inc. of Seattle. When problems with the property’s title prevented any sales from being finalized, the Nordheimers’ original banker foreclosed, and Security Properties lost its whole investment.
"Yes, I pled guilty" to the fraud charges, Nordheimer said May 19 in a telephone interview. "It was wrong, but I paid my dues. ...The experience left me with a renewed commitment to the community."
However, Nordheimer contested company president Davis’s statement that he is a "principal" in Mid-City Urban.
"That’s not factually accurate," he said. "I’ve had the opportunity of originating some things, but I’d describe my role as mostly marketing."
But interviews with some long-time observers familiar with Mid-City Urban’s history and business practices indicated that Nordheimer is indeed a major player in the company.
Nordheimer "started Mid-City Urban," said one person who has worked closely with the company in recent years. Eugene Ford – founder of a related company, Mid-City Financial – provided the start-up cash for the company, this source said, but Nordheimer took the lead in developing the firm. Nordheimer "is the driving force in the company," said the source. "He’s the one out there making the deals. To me, he’s the head of the company."
Another source, Howard Moskof, who described himself as "the day-to-day Mid-City representative" in 1999 on the company’s Lexington Terrace public housing redevelopment project in Baltimore, said Nordheimer played a major role in the company.
"Scott Nordheimer was my supervisor," he said. "He was involved very heavily in the project. He knew everything that was going on and participated in decisions. He negotiated with the city of Baltimore for Mid-City Urban."
At the public ceremony held earlier this month at Camp Simms to announce the awarding of the development contract to the Mid-City Urban/William C. Smith team, it was Nordheimer who accepted the contract for Mid-City Urban from Mayor Williams and other city officials.
"I’m pleased that people view me as leading the company," Nordheimer said, "but that’s just because I’m out on the front end of things."
Nordheimer’s fraud conviction was fully disclosed to both the D.C. government and to HUD when applying for government funding, said Mid-City Urban principal Harvey.
"Disclosure was made, and they assured us this was not a problem," he said.
HUD and D.C. Housing Authority representatives did not respond to requests for comment.
Tia Matthews, a spokeswoman for the D.C. Department of Housing and Community Development, confirmed that the city knew about Nordheimer’s felony conviction when it awarded Mid-City Urban the Camp Simms deal and other multimillion dollar housing contracts.
"Mr. Nordheimer’s conviction is a well-known fact," Matthews said. "He’s paid his dues, and he’s working to re-establish himself in the real estate business. He is working above board on the deals he’s doing now, as far as we know."
She also said that "the due diligence process has not yet been carried out" on the Camp Simms deal. "They’ve only passed the first hurdle," Matthews said. "They haven’t bought the (Camp Simms) land yet."
The Mid-City Urban/William C. Smith team still has to demonstrate its fitness before a number of financial, zoning and other boards in coming months, she said.
On the Henson Ridge project, one such hurdle comes at 7 p.m. May 21 when the D.C. Zoning Commission convenes a public hearing on the housing development plans. The meeting will be held in Suite 220 at One Judiciary Square, 441 Fourth St. NW.
According to city documents, Nordheimer’s tax debt to the city – approximately $20,000 with accrued interest, according to a city tax official – relates to his position as president of Old World Coffee Inc., a Delaware corporation that operated a chain of espresso shops in the Washington area in the mid-1990s.
Nordheimer said he is unaware of any tax debt in his name.
He described himself as "an originator" of Old World Coffee, as well as a "minor" investor in the venture, which he said opened seven or eight Starbucks-style coffee shops in the Washington area.
"While I was incarcerated, the other investors asked me to withdraw from the company," Nordheimer said.
After he left Old World Coffee, he said the company was bought by a bigger chain of coffee shops, which eventually went bankrupt.
The city revoked Old World Coffee’s license to operate a business in the District in 1996. The most recent documents from the company that the D.C. Department of Consumer and Regulatory Affairs could produce from its files show Nordheimer as the company’s president.
Gary and Scott Nordheimer have been active in the private real estate market in Washington since the 1980s. In 1980, they and a third partner bought the Georgetown Inn on Wisconsin Avenue NW for $7.3 million and refurbished it. Also in the 1980s, the brothers were part of a team that bought the Parkside garden apartment complex in Bethesda for $36 million and converted it to condominiums.
But since the mid-1990s, Nordheimer seems to have concentrated on government-financed property development.
Copyright 2001, The Common Denominator