The attorney general's office says Nederlander indicated he intended to build hotels onthe property. Instead, the developer sold it to a friend, who then in turn sold it to the Detroit public schools for $11 million more than what it was originally purchased.

"In fact, your client indicated during negotiations that the property was not worth the $6.1 million ultimately agreed upon by the parties," says Matthew Rick, Assistant Attorney General in a letter to Nederlander's attorney, Leonard Hyman.

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 discovery.

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 says it would use 24 acres and sell the rest to Home Depot Inc. for $9.5 million for a new store.

Nederlander also has sued the state to allow him to buy the 36 acres, claiming the loss of the hotel deal was not his fault.