D.C.

D.C. lottery investigation: Lottery contract is subject of federal probe

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WASHINGTON (AP) - A federal grand jury is investigating the awarding of the $38 million contract to run the District of Columbia lottery, a process that raises further questions about corruption in a city government already beleaguered by criminal prosecutions.

Top 10 richest counties in U.S. - 7 in D.C. area

Top 10 richest counties in U.S. - 7 in D.C. area 10 Photos
Top 10 richest counties in U.S. - 7 in D.C. area

Although no one has yet been charged in the lottery probe, authorities are looking for evidence of crimes including bribery and illegal steering of contracts, and numerous officials are under scrutiny, according to several people familiar with the probe.

They spoke on condition of anonymity because they've been instructed not to impede the ongoing investigation.

Regardless of the outcome of the probe, the awarding of the lottery contract - which went to Greek gaming company Intralot in 2009 - illustrates systemic problems that open the door for elected officials to play politics with the contracting process and influence who wins.

The lottery investigation increases the scrutiny on a city government already reeling from unrelated prosecutions that targeted several of the district's elected officials and their aides.

Three aides to Mayor Vincent Gray's 2010 campaign have pleaded guilty to federal crimes, and the mayor's campaign remains under investigation. Meanwhile, two councilmembers have resigned in the past year after pleading guilty to felonies - one of which involved stealing city money earmarked for youth sports.

The lottery probe has the potential to be the most sweeping of them all because of the number of people being investigated.

The awarding of the contract was a bruising, years-long fight that left no one completely satisfied - including the winning bidders.

Key stumbling blocks with the district's contracting system include the include the ability of the D.C. Council to block contracts worth more than $1 million and the de facto requirement that major contractors have a local partner, even if that partner has no expertise in the service being provided.

"This is one of the worst processes, if not the worst, that I've seen in 45 years of government service, both federal and local," said Doug Patton, a lobbyist and former deputy mayor who was involved in a losing bid for the lottery. "The quicker they get to the bottom of this, the better."

The process began in 2007, when the district's Office of the Chief Financial Officer solicited bids for a new lottery operator.

By the end, significant questions were raised about why one seemingly surefire bid was rejected by the council, the qualifications of local partner eventually included in the contract and the unusual circumstances surrounding the authorization of online gambling.

These are among the issues federal authorities are investigating. Only a handful of large firms have the technology to operate state-level lottery systems.

But district contracting rules make it all but impossible to win a major contract without a local partner that's been certified as a disadvantaged local business.

The program grew out of minority set-asides implemented under former Mayor Marion Barry. Intralot partnered with real estate developer Warren Williams Jr. to submit the winning bid.

The CFO's office informed the council that the new partnership would provide better technology than the previous lottery vendor and save the city about $5 million a year.

Yet the council was cool to the prospect of approving the contract, in part because of Williams' political connections.

He was a friend and supporter of then-mayor Adrian Fenty.

For months, Gray - who would later run against Fenty and accuse the mayor of giving contracts to his cronies - refused to bring the contract up for a vote.

Behind the scenes, according to court papers filed in a civil lawsuit, Gray was pressuring Chief Financial Officer Natwar Gandhi to get rid of Williams.

The chief contracting officer for the CFO's office alleges in the lawsuit that he was pressured to rebid the contract, and when he refused - insisting it would be illegal - he was demoted and fired. Investigators have been asking about the motivation behind Gray's and Gandhi's actions during this period, according to people familiar with the probe.

Gray's attorney, Robert Bennett, declined to comment on the investigation. Gandhi declined to be interviewed. His spokesman, David Umansky, said Gandhi "never lobbied for or against any bidder."

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