The former deputy director of the D.C. Office of Property Management is under investigation for trying to execute a contract for the city to buy an impound lot in Prince George's County that would have cost millions of dollars more than the property is worth, city officials said yesterday.

Michael Lorusso, who was fired last month, was the city's key negotiator with developer Douglas Jemal in two deals, the city's sale of a historic firehouse for $350,000 and the purchase of the 37-acre impoundment lot for $12.5 million.

D.C. Auditor Deborah K. Nichols said her agency is auditing the proposals and expects to release its findings in a few weeks. Nichols would not elaborate on Lorusso's role in the deals other than to say, "It's under review."

D.C. Council member Jim Graham (D-Ward 1), who chairs the committee that oversees the property management office, said yesterday that Lorusso is the subject of the investigation. Graham said that Lorusso gave inaccurate information to an appraiser, then signed off on a deal in which the city would have paid $12.5 million for property that Jemal purchased for $1.5 million four years ago. The city is currently leasing the property.

"Why would a government official use an appraisal that he knew was inaccurate to enrich a private developer?" Graham said in an interview. "Why would he do it? I think this is an extremely serious matter, and we're going to pursue this until we get to the bottom of it."

Graham said he wants the city's inspector general, Charles C. Maddox, to investigate the deal for any criminal wrongdoing. Lorusso could not be reached for comment.

Although Mayor Anthony A. Williams (D) withdrew the impound lot and firehouse proposals in October -- a month after he asked the council for emergency approval and a half-hour before a joint council committee hearing to scrutinize them -- questions about the deals surfaced again this week.

Council member Carol Schwartz (R-At Large), along with Graham, first raised concerns at the October hearing. At the time, Schwartz, who heads the council's Committee on Public Works and the Environment, said she had become suspicious of the deals because they included the sale of the historic firehouse.

In a letter to Nichols in October, Schwartz requested an audit of the proposals for the two properties. "I found this deal to be replete with troubling facts, which make me question the ethics of this deal," Schwartz wrote.

During a hearing Tuesday, Graham questioned Timothy F. Dimond, the director of property management, about Lorusso's role in negotiating contracts on the agency's behalf. Graham said he was curious about whether Dimond had approved the deals with Jemal and whether he could explain why Lorusso was abruptly removed last month.

Dimond said he was informed of the mayor's decision to remove Lorusso from his appointment "the day of the action."

Dimond said he and Lorusso, who was hired in November 2000 and was paid $108,861 a year, had attended real estate classes together and known each other a "tremendous amount of time."

Dimond explained that, as his deputy director, Lorusso was authorized to execute leases on behalf of the agency. Dimond said that he had not monitored the proposals. On the firehouse proposal, Lorusso signed Dimond's name; on the impoundment lot deal, Lorusso signed his name as the deputy director.

Graham presented a copy of the appraisal of the impound lot, at 4800 Addison Rd. In a letter to Lorusso, appraiser Cushman & Wakefield said the estimated value was based on information provided by Lorusso. The letter also cited "extraordinary assumptions " that contributed to the increased value, including being told that the city's three-year lease, which costs $1 million a year, had been extended for nine years. City officials say there is no such extended lease.

The appraisal states that the "rental rate is significantly above what 'typical' landlords and tenants would agree to in the normal course of business." The appraisal also stressed that without the nine-year extended lease, the lot would be worth about $8 million, with renovations.

Council member Carol Schwartz (R-At Large) said she became suspicious of the deals because they included the sale of a historic firehouse. The mayor withdrew the proposals to buy the lot and sell the firehouse. D.C. Council member Jim Graham (D-Ward 1) said a former city official gave inaccurate information to an appraiser, then signed off on a deal in which the city would have paid millions more than the property was worth.