D.C.

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

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Meanwhile, councilman Jim Graham inserted himself into the process. During a meeting with Williams and his partners, Graham made an offer:

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

He would support Williams' lottery bid if Williams withdrew from a development deal around a Metro subway station, according to emails between participants in the meeting.

Graham also served on the Metro board at the time, and Williams and his attorney refused, describing it as potentially illegal meddling in the contracting process.

The FBI and U.S. Attorney's Office have been asking about Graham's actions, according to people with knowledge of the probe.

An investigation conducted by a law firm for Metro determined that Graham acted improperly but was not motivated by any financial interest. Graham does not deny making the offer but insists he has committed no crimes. Councilwoman Yvette Alexander has also been tied to a questionable offer to Williams, according to people familiar with the investigation.

Two staffers for Alexander asked Williams for money to prove his loyalty to the councilmember, with one putting the price tag at $20,000, according to people familiar with the probe. Investigators are aware of the request and have asked about it, according to a person they have interviewed.

Alexander told AP she made no such offer and that she doesn't take the allegations seriously. In December 2008, the council voted 8-5 to reject the Williams-Intralot partnership.

The CFO's office solicited new bids, and Intralot won again, this time without a local partner.

But its representatives and lobbyists became convinced they could not gain the council's support without one. Enter local businessman Emmanuel Bailey.

A friend of Intralot lobbyist and former councilmember Kevin Chavous - who had introduced him to Gray during the first round of bidding - Bailey was brought on as a subcontractor with a 51 percent stake.

Because he entered the contract after the procurement process, he didn't get the same level of scrutiny from the CFO's office before the council voted to approve the contract.

Bailey's company operated out of his mother's home. When city inspectors visited it, they found two desks, two computers and a printer in a family room.

They found no company letterhead or business cards. Inspectors wrote in their report that the company should find a suitable office space before being considered for certification as a legitimate local business. Two days later, Bailey's company was certified, an action the city's inspector general later found was improper.

A local firm involved in a competing bid was denied certification - and the inspector general said that move was improper as well. The inspector general's report gave ammunition to critics of the lottery deal, but the office has no enforcement authority.

The contract awarded to Intralot and Bailey included a potentially lucrative option to operate an online gambling system if online gambling were legalized in the district.

Councilmember Michael A. Brown worked to make that happen - but not by introducing a standalone bill. Instead, he inserted language into a budget bill that was initially circulated at 2:17 a.m.

Several of Brown's colleagues have said they did not realize they were voting to authorize online gambling - which Brown disputes. But the council ultimately voted to repeal it amid criticism about lack of transparency.

The effort took its toll on Brown, who lost his bid for re-election. Federal investigators are examining his actions and his employment with a lobbying firm that has a gaming practice, according to the people familiar with the probe.

Brown no longer works for the firm and says there was no conflict of interest. Brown says he has not been contacted by investigators and has no reason to believe he is a target of the probe. He is also friends with Bailey, who has made campaign contributions to the outgoing councilmember.

The defeat of online gambling was a financial blow to Intralot and Bailey, but they continue to hold the lottery contract, and the CFO's office has not reported any problems with their performance.

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