Officials for D.C. Mayor Fenty seek probe of lottery contract

By Mike DeBonis
Washington Post Staff Writer
Wednesday, July 21, 2010

Top officials for Mayor Adrian M. Fenty asked the District's inspector general Tuesday to investigate the award of the city's $38 million lottery contract, raising new questions about a politically fraught three-year process and opening a new front in a heated mayoral race.

In December, the D.C. Council voted to approve the five-year contract, one of the District's most lucrative, awarded by city finance officials to Greek company Intralot. But in a letter Tuesday, Attorney General Peter Nickles and contracting chief David P. Gragan asked for an investigation of the council's involvement in the deal -- in particular, that lawmakers approved a partnership with a local contractor that did not undergo a full vetting.

The letter to Inspector General Charles J. Willoughby does not name Council Chairman Vincent C. Gray, who is challenging Fenty in the Sept. 14 Democratic primary, but Nickles raised questions about his influence in an interview Tuesday.

"This to me is a failing of the system," said Nickles, who has played a role in the lottery battle dating to 2008, when concerns first arose about the qualifications and connections of local partners.

Only a handful of companies worldwide, none of them based in the District, are qualified to equip lottery systems. But city procurement laws offer preferential treatment to bids that include local, small and minority-owned businesses.

Intralot initially won a 2008 bid with local partners tied to Fenty, and Gray repeatedly declined to schedule a council approval vote after some members objected. After months of wrangling, officials rebid the contract, and Intralot again won, this time bidding alone. But ahead of an approval vote, several council members expressed concern that Intralot's bid did not include a local partner.

By the time the contract came to a final council vote, Intralot had entered into an operating agreement with Veterans Services, a little-known company operated by businessman Emmanuel Bailey. Nickles suggested Tuesday a connection between Gray and Bailey's mother, Barbara Bailey, who was employed by the Department of Human Services when Gray ran the agency in the early 1990s.

Nickles said in an interview Tuesday that his interest was rekindled after discovering that Veterans Services held 51 percent of the equity in the joint venture running day-to-day lottery operations.

A recent series of articles in the Washington Times has raised questions about the company's qualifications to do the job.

Bailey said Tuesday that Gray "did not one thing to help me on this contract."

Nickles's request for an investigation comes amid an increasingly heated campaign atmosphere. Gray has relentlessly criticized Fenty in campaign appearances, accusing the mayor of mismanagement and "cronyism" -- particularly as it related to more than $80 million in parks and recreation contracts awarded to firms owned by Fenty allies.

The council canceled the contracts, and after Nickles settled with the contractors this month for $550,000, Gray called for Nickles's resignation.

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