By Gregory Korte
The Cincinnati Enquirer

DOWNTOWN - Cincinnati City Manager Valerie Lemmie has ordered a police investigation of the Department of Community Development and Planning, after yet another collapse of an Over-the-Rhine development project.

Police are investigating a housing development project at Findlay Market, in which husband-and-wife architecture team Scheer & Scheer Development Ltd. received $338,859 from the city.

Brenda Case Scheer, formerly an architecture professor at the University of Cincinnati, is now dean of the University of Utah School of Architecture. David Ross Scheer is a visiting professor there. Neither has returned several phone calls to home or office since Monday.

That's when the city moved to foreclose on the eight buildings Scheer & Scheer was supposed to rehabilitate under a $1.1 million contract with the city in 2002.

"As we moved through the week, it made more and more sense that we look at the entire picture," said Deborah C. Holston, the assistant city manager for development. "This is probably the fifth or sixth project that we've had problems with. We need to make sure we investigate everything."

A federal grand jury is ramping up its investigation into the Empire Theater scandal. The city gave $184,172 to a developer who is now wanted on an FBI warrant for wire fraud.

Other recent problems in the department include the Vine Street faÁade program in Over-the-Rhine, the use of Rental Rehabilitation money at the Glengate Apartments in Pleasant Ridge, and the collapse of the Huntington Meadows apartment complex in Bond Hill.

City officials said they would not release records related to the Findlay Market project because they are now part of a police investigation. Detectives spent Wednesday afternoon looking through the documents, after which Police Chief Thomas H. Streicher Jr. spoke to Mayor Charlie Luken.

"There was enough there that he said, 'I want to pursue this,' " Luken said Streicher told him.

Luken said it's unclear what happened in the Findlay Market project.

"The city advanced them some money. They promised to do some work. They haven't completed all of it," he said. "I know these people have walked away. Whether they have walked away after spending taxpayer money on legitimate purposes, or put taxpayer money in their pocket, I don't know."

A recent report by Holston said only that the city, the developer and a subcontractor "are in disagreement about the value of the work that has been completed."

The city acquired the buildings through eminent domain in 1997, forcing the owners to sell for a total of $111,500. Scheer & Scheer won the city contract in 2001, beating out competing proposals from Over-the-Rhine developer Bill Baum's Urban Sites Properties and Rev. Damon Lynch III's New Prospect Development Co.

The city sold Scheer & Scheer the buildings for $1, and City Council approved a $1.1 million contract for Scheer & Scheer to stabilize the buildings and sell them to other developers, who would turn them into condominiums. The city's contract was structured as a forgivable loan, meaning Scheer & Scheer would have to repay the money only if they didn't complete the project. Scheer & Scheer was expected to find $1.7 million in private financing.

At the time, Community Development director Peg Moertl reported to City Council: "This is a high but sound public investment since it will provide homeownership opportunities in a neighborhood with only a 4 percent homeownership rate."

Moertl has since resigned. Her last day is Dec. 4.

The first sign of trouble was in July, when city officials noticed the project was falling behind schedule. The city issued a notice of default in September.

Luken said he stands behind the city manager and urged City Council members not to interfere with the police investigation.

"I think the manager was left to make a decision that required her to err on the side of being very careful, and I support that decision fully," he said.

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E-mail gkorte@enquirer.com