Feb. 11--TAMPA -- The U.S. Department of Health and Human Services is investigating the possible misappropriation of federal grant money loaned to a now-defunct steel manufacturing firm by a local nonprofit housing and employment organization.

Department spokesman Kenneth Wolfe said federal investigators are trying to determine what happened to $700,000 given to the Corporation to Develop Communities of Tampa more than three years ago to create manufacturing jobs in East Tampa.

For now, he said, the department doesn't plan to force the nonprofit to repay the money, most of which was loaned to Renaissance Steel, which went belly up two years ago.

"There has been no determination that CDC of Tampa has violated the terms and conditions of its award," Wolfe said.

Toni Watts, CDC's chief executive officer, has declined to comment, citing possible litigation against Renaissance's former investors.

In September 2005, the CDC received the $700,000 grant after outlining a project that sought to create 100 jobs at Ybor City-based Renaissance. About $500,000 of the money was given to the company as a loan to expand its struggling operations; the remainder went toward administrative costs for the nonprofit's employment program.

Renaissance went out of business two years later, leaving behind a long list of unpaid creditors and a litany of unanswered questions about where the money went.

Under the terms of the loan agreement, which was approved by Health and Human Services, Renaissance was to repay it over 13 years at 6 percent interest. The interest was to be paid annually, with the loan principal due at the end of the 13-year period.

The total project cost was estimated at $3.1 million, including the $700,000 grant, about $280,000 in CDC money and $2.1 million in equity and loans from local investors.

The CDC is out more than $1 million from the public-private partnership, about one-third of the organization's average annual budget.

If a determination is made that the grant money was misspent, Wolfe said, CDC would be required to pay it back. But if the investigation finds the federal funds were simply lost on a failed business venture, CDC would not be required to refund the money.

"An unsuccessful project, where a grantee CDC of Tampa and its partners were not able to create sustainable economic development, does not warrant repayment of funds so long as the grantee put forth reasonable effort to execute the project," Wolfe said.

Born out of the failed Civitas redevelopment project in east Ybor City, Renaissance Steel opened in 2005. It started with an 85,000-square-foot facility at the former Anthony Distribution plant, and planned to produce low-cost steel wall panels.

Key investors included former Tampa developer William Bishop, who served as the chief executive officer, and Don Wallace, co-founder of Lazydays RV SuperCenter. Don Ball was listed on Renaissance's financial records as chief operating officer. His wife, Cecelia, was listed as vice president and senior finance and sales executive.

Renaissance was last managed by former Tampa mayoral candidate Frank Sanchez, who served on the CDC's board of directors when Renaissance's loan was approved.

Bishop has left Florida to attend business classes at the University of North Carolina's campus in Chapel Hill, according to his former colleagues. Sanchez is being considered for a high-level cabinet position in President Obama's administration.

Sanchez, Bishop, Wallace and the Balls have declined to comment.

Reporter Christian M. Wade can be reached at (813) 259-7679.

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