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Metro miscue?

Firm bidding to build another big project failed to disclose key figure’s conviction

(Published October 22, 2001)


Staff Writer

Scott Nordheimer, standing at microphone, and Councilman Vincent Orange, at right, address residents during a recent meeting about proposed development at the Rhode Island Avenue Metro station in Northeast Washington.

Mid-City Urban LLC, a Silver Spring-based development firm that has received millions of federal and D.C. tax dollars to build residential and commercial projects in the Washington area, failed to disclose the criminal past of one of its leading figures when it recently bid for the right to develop Metro property.

A multimillion-dollar proposal for development around the Rhode Island Avenue Metro station, submitted June 29 by Mid-City and its partners to the Washington Metropolitan Area Transit Authority (WMATA), asserted that "No member of the development team has been convicted of a felony."

However, Scott Nordheimer, who from 1994 until earlier this year was a Mid-City Urban managing director and who currently is general manager of Mid-City Legacy, which oversees Mid-City Urban’s operations, was convicted in 1993 of two counts of felony securities fraud in connection with a real estate scam that cost a Seattle lender more than $2 million.

Following his guilty plea in U.S. District Court in Alexandria, Nordheimer was sentenced to two years in federal prison, followed by two years of supervised probation.

WMATA Board of Directors Chairman Decatur Trotter and other board members told The Common Denominator they also were not made aware of Nordheimer’s criminal past before the board voted earlier this year to award Mid-City the right to develop the area surrounding the Silver Spring Metro.

"If the persons who were putting this [Silver Spring] project together – and that includes our staff – had any knowledge about this, they should have put it before the board, and they didn’t," Trotter said.

Edward Maginnis, Metro’s assistant general counsel, said WMATA regulations say applicants for development rights must supply "detailed information regarding any critical indictments or felony convictions of the developer or any other member of the development team."

"We want to know who we’re doing business with," Maginnis said. "We expect and anticipate that proposals will be complete and accurate."

The Common Denominator reported in May on Nordheimer’s background in connection with Mid-City’s partnering with the D.C. Housing Authority on a $30 million taxpayer-funded redevelopment of the Frederick Douglass/Stanton Dwellings public housing projects in Southeast Washington. On Oct. 19, the U.S. Department of Housing and Urban Development awarded the District another $34.9 million to again partner with Mid-City for redevelopment of the Arthur Capper/Carrollsburg public housing complexes adjacent to the Navy Yard (see story, page 3).

Mid-City Urban and partners A&R Development Corp. and Graimark/Walker currently are bidding to build a combined residential and commercial development on land owned by Metro adjacent to the Rhode Island Avenue Metro station in Northeast Washington. The proposed development would include 270 rental apartments in two four-story buildings, a seven-story parking deck and a commercial strip with such possible tenants as an Appleby’s restaurant, a Footlocker athletic shoes store and a Blockbuster video rental outlet.

The developers are seeking $32.7 million in tax-exempt bond financing from the D.C. government and formation of a tax-increment financing district to support repayment of a loan in order to build the project.

Nordheimer did not return repeated phone calls to his office last week.

Vicki Davis, managing partner of Mid-City Urban, declined during a phone call last week to discuss the firm’s proposed Rhode Island Avenue development. "We haven’t been awarded the contract yet, and I don’t feel comfortable talking to you about it," she said.

When a reporter attempted to ask Davis about Nordheimer’s position with Mid-City Urban and her firm’s apparent failure to disclose his criminal past to Metro, Davis interrupted the reporter in mid-sentence. "I don’t have any comment for you," she said and then hung up.

D.C. Councilman Vincent Orange, D-Ward 5, has been an outspoken advocate of the Mid-City partnership’s Rhode Island Avenue proposal. Orange, who participated in a recent community meeting on the project at which Nordheimer and Davis also spoke to Ward 5 residents, said Davis recently assured him that Nordheimer was not a central figure in Mid-City Urban.

"He is not a member of the development team; he is an employee of a member of the development team," Orange said Davis told him.

"I don’t know how the development team is defined, but they’ve assured me he’s an employee, not a member," said Orange. "I’m satisfied with the way they’ve defined it."

Most residents who spoke at the recent community meeting were skeptical. Several expressed concern that rents for the new apartments would be too high, and that the kind of retail stores being planned would drive up area home prices beyond the means of current residents.

"If I want to go to Georgetown, I’ll go to Georgetown," said one resident. "I want a community where I feel comfortable."

After another speaker criticized the proposed development at length, Nordheimer, an enthusiastic man with a trim gray beard, rose to reply.

"We have submitted a proposal – A&R, Graimark/Walker and Mid-City," he said. "We are community developers. It was a dream, it was a vision, so we went to Councilman Orange," he said.

"You’re very lucky," he said. "You’ve got a visionary as a councilperson."

Orange told The Common Denominator that Davis assured him that Metro was aware of Nordheimer’s conviction on fraud charges.

"That information has been fully disclosed," Orange said. "(Mid-City has) had conversations with Metro and the city."

Orange said Davis told him that when Mid-City submitted its proposal last year to develop property adjacent to the Silver Spring Metro station, the company disclosed Nordheimer’s criminal history to WMATA. That project – to include residential, commercial and office space, as well as a hotel – was approved by the WMATA board in June.

"WMATA is definitely aware," said Orange.

But WMATA Board Chairman Trotter said he had no knowledge of Nordheimer’s fraud conviction when a reporter called him last week. "I don’t have any knowledge of problems involving Mid-City or Mr. Nordheimer," he said. "We didn’t know anything" when the board approved the Silver Spring development, he said.

Trotter said neither Mid-City nor Metro’s staff, which examines proposals before they are submitted to Metro’s board, informed the WMATA board of Nordheimer’s criminal past.

D.C. Councilman David Catania, R-At Large, a non-voting member of the Metro board, said "to the best of my knowledge" the board had not known of Nordheimer’s conviction before approving the Silver Spring project.

On learning of Nordheimer’s conviction, Catania said he thinks "that would weigh heavily against [Mid-City]" in Metro’s evaluation of the Rhode Island Avenue proposal.

D.C. Councilman Jim Graham, D-Ward 1, a voting member of the WMATA board, also said neither Mid-City nor WMATA’s staff informed the board of Nordheimer’s conviction before the vote to approve Mid-City’s involvement in the Silver Spring Metro project.

"The (Metro) staff ought to bring to our attention anything that’s material," Graham said. "I appreciate having this information. I would want to bring this to the attention of Metro staff."

Metro spokeswoman Cheryl Johnson told The Common Denominator that Metro staff were aware of Nordheimer’s conviction before board members voted, but they did not provide that information to the board.

"We were indeed aware of Scott Nordheimer’s conviction," she said last week.

But she said Mid-City did not disclose Nordheimer’s criminal conviction in its submission to Metro on the Silver Spring project. She said Metro staff learned of Nordheimer’s criminal record while reviewing the proposal, though she did not know how Metro staff learned the fact.

She said that Metro staff then queried Mid-City officials.

"They said they did not reveal [Nordheimer’s conviction] because Nordheimer was not an officer, principal or owner of the company," Johnson said. "So based upon their representation to us that Mr. Nordheimer was a mere employee, we moved forward with the contract."

Asked if Metro staff had attempted to confirm independently Nordheimer’s actual position with the company, Johnson said, "We accepted their answer at face value."

Johnson said she did not know why Metro staff failed to disclose Nordheimer’s conviction to WMATA board members. Johnson also said she did not know the source of her cited standard that only an "officer, principal or owner" of a company needed to disclose a past felony conviction, nor why that standard differed from Maginnis’s citation that the "developer or any other member of the development team" must disclose a past conviction.

In the Rhode Island Avenue proposal submitted to Metro in June, Nordheimer is listed first on the list of "key personnel" for Mid-City’s development team. He is described as the general manager of Mid-City Legacy, the parent company of Mid-City Urban and three other affiliated companies: Mid City Advisors, Edgewood Urban Management and the Noah Group.

In the list of "key personnel," Nordheimer is listed ahead of William Harvey, Mid-City Legacy’s chief executive officer.

According to the proposal submitted to Metro, Mid-City Advisors would handle the Rhode Island Avenue project’s financing. Another Mid-City affiliate, Edgewood Management Corp. – apparently closely related to Edgewood Urban Management – would manage the residential rental properties included in the project.

The proposal says Nordheimer joined Mid-City Urban as a managing director in 1994, apparently just after his release from prison. As managing director, the proposal says, Nordheimer "was responsible for the creation and implementation of new business ventures."

One area where Nordheimer took a leadership role was in the Mid-City companies’ entry into the multimillion-dollar arena of HOPE VI-financed development deals in Washington and other cities, according to those who have worked with him on these projects. HOPE VI is a controversial federal program that funds the rehabilitation and replacement of public housing complexes. Critics maintain, however, that the program, intended to better the living conditions of public housing residents, often permanently displaces them to make way for housing designed for higher-income residents.

John Wesolowski, who heads the homeowners association at Towns of the Terrace in Baltimore – part of a larger HOPE VI-financed project called New Lexington Terrace, said Nordheimer attended a community meeting there last week and was described in the meeting’s agenda as "President, Mid-City Urban/Edgewood Development."

The meeting was called, Wesolowski said, because of widespread dissatisfaction with Edgewood and its partners in the development, Struever Bros./Eccles and Rouse.

Copyright 2001, The Common Denominator