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Federal investigators are looking into a deal that used $2 million in federal funds to help build a road to the state's Olympic sports park through a pricey housing development, the Deseret News has confirmed.

Investigators are questioning whether deliberately running the road through the private housing development is fraudulent use of federal funds.The state built the road through the housing development near Park City - with money earmarked for mining towns - in exchange for more than 300 acres of land donated by its developers for the Utah Winter Sports Park.

State officials are now looking to build a more direct route to the park, one that would essentially replace the current road. They are negotiating with another developer over that road.

The sports park is the largest of the Olympic facilities being built to attract a Winter Games to Salt Lake City. The ski jumps are already open at the $30 million facility, and construction is starting on a bobsled and luge run.

Although state and local officials connected to the road project say they have not been contacted yet by the U.S. Department of Transportation inspector general's office, several knew of the inves-ti-ga-tion.

They learned through media reports in late April that the inspector general's office was looking into the Utah Sports Authority, the state agency that oversees Olympic facilities.

At that time, John Deans, a federal investigator who had just been acquitted of illegal wiretapping charges, told reporters he believed the wiretapping charges had been trumped up to divert attention from a potentially embarrassing investigation of the Utah Sports Authority.

Deans and two state employees were charged in connection with their investigation of Syncrete, an experimental road surface that failed, costing taxpayers more than $3 million.

However, U.S. District Judge Bruce Jenkins said the case against the trio was so weak he refused to send it to the jury. Instead, Jenkins dismissed all charges.

After seeing the April media reports, Randy Montgomery, executive director of the Sports Authority, telephoned Deans. According to a memo Montgomery wrote to his boss, Deans told him, "there had been some serious allegations regarding the funding of the road to the Utah Winter Sports Park and the associated real estate development that needed inves-tigation.

Montgomery's boss, Sports Authority Chairman Randy Dryer, was out of the country and unavailable for comment.

The inspector general's office has authority to investigate any program that receives more than $10,000 in federal money an-nual-ly.

When contacted by the Deseret News Friday, Deans declined to comment.

Money for the road came from the state's Permanent Community Impact Fund, which distributes federal mineral lease revenues. The fund is to be used for `the alleviation of social, economic and public finance impacts resulting from the development of natural resources in this state," according to Utah law.

In this case, it was Summit County that received the $2 million from the state's Permanent Community Impact Fund Board in October 1990. Terms of the deal apparently surfaced in a lawsuit filed shortly after the grant was made.

The owners of a Summit County ranch located next to the sports park went to court to stop the money from being spent on the road, after they were unable to negotiate selling their property to the state for the sports park.

A 3rd District Court judge dismissed the case, ruling the owners of Hi-Ute Ranch had no standing to sue because it was unclear how they would be affected by the sports park, then still in the planning stages.

The owners have since donated land to Zions Securities Corp., the developer now working with the Sports Authority to provide a shorter and more direct route to the sports park.

Participants in the road deal told conflicting stories Friday.

Neal Stowe, director of the state Division of Facilities and Construction Management, said the state had to build the road in order to get the land. But he said the $2 million grant was not sought specifically for the road.

"The money was to assist in developing the park," Stowe said. That the road ended up costing the government $2 million is "somewhat coincidental," he said.

Linda Clifford, a project manager for the California-based company developing the Sun Peaks housing project, told a different story. Clifford said the road was not built as a requirement for the land donation. The developers would have donated the land anyway, she said.

The county has approved five subdivisions in the Sun Peaks development, which will eventually have approximately 500 homes. Few have been built so far. The developers are currently selling lots for as much as $250,000.