The District is suing a nonprofit for allegedly diverting more than $300,000 in city grants intended to fund a job-training center for people with HIV/AIDS to instead renovate what became the Stadium Club, a popular nightspot that boasts “five-star dining” and nude dancers.

The office of the D.C. attorney general filed suit Tuesday against Cornell Jones, a former drug kingpin who founded a nonprofit organization called Miracle Hands three years after he served nine years on a 27-year sentence for drug distribution.

According to the suit, Miracle Hands submitted false invoices to “wrongfully obtain” $329,653 in grant funds in its agreement to renovate a 14,000-square-foot warehouse at 2127 Queens Chapel Road NE into a job training facility. “The building was in fact converted to and is now operated as a nightclub,” reads the suit, which seeks more than $1 million in reimbursements, penalties and damages.

The lawsuit comes nearly two years after a Washington Post investigative series, “Wasting Away,” which documented the questionable use of the city’s HIV/AIDS funds. The series also exposed the unopened job training site and the conflict of interest between Jones and Debra Rowe, interim housing chief of the city’s HIV/AIDS program from 2004 through 2008. Three of Rowe’s relatives worked at D.C. Tunnel, a nightclub operated at that time by Jones.

The lawsuit describes Rowe as a “close friend of Jones” and says she intervened when an agency grant monitor recommended in 2006 that funds be discontinued to Miracle Hands. In 2007, Miracle Hands informed the agency that it had stopped work on 2127 Queens Chapel Road NE and would open the job training facility at nearby 2145 Queens Chapel Road NE, later promising completion by April 2008.

That never happened. The lawsuit says a company controlled by Jones had its nightclub liquor license transferred to the 2127 address “though use of the building as a nightclub would not have been consistent with conversion of the building to a Job Training Facility.”

The Stadium Club appears to be thriving and on its Web site is currently advertising an October event to be thrown by mogul Sean “Diddy” Combs. Club manager Michael Johnson did not return a call for comment. Jones and Rowe could not be reached for comment.

Ariel Levinson-Waldman, senior counsel to the attorney general, said the lawsuit followed a six-month investigation by the office.

Council member David A. Catania (I-At Large), chairman of the Committee on Health, had requested in February that Attorney General Irvin B. Nathan investigate Miracle Hands in light of the Washington Post series and more recent reporting by The Washington Times.

Catania said on Tuesday that he welcomed the filing of the lawsuit. “I am pleased that the Attorney General has decided to take action regarding this egregious impropriety,” he said in a statement.

In a news release, Nathan said his agency “will continue to be relentless in our efforts to recover government funds from those who have unjustly enriched themselves at the expense of the District of Columbia.”