Shaky businesses, suits trail D.C. Lottery partner

D.C. Lottery partner Emmanuel S. Bailey’s business profile boasts of having deep political contacts at the federal and state levels, multiple businesses and “successful executive careers in finance and banking.”

So it seemed a natural fit when the well-connected former Fannie Mae executive signed with Intralot, the Greek-based international gambling company that won the District’s $38 million lottery contract and needed a local face to gain D.C. Council approval.

Known for being well-spoken, well-mannered and well-dressed, Mr. Bailey was once described by The Washington Post as a self-made businessman who thrived on risk and opportunity. One outward sign of his success: the $150,000 Bentley he parks outside the Verizon Center during Washington Wizards games.

But in Mr. Bailey, Intralot also gained a partner with a messy employment history who has left behind a trail of troubled businesses and lawsuits.

And, after emerging from the D.C. Lottery procurement saga as a 51 percent partner, Mr. Bailey may have bought himself a pig in a poke, gambling analysts say. Historically perceived as a license to print money, even the two companies who vied for the D.C. contract are lukewarm about its prospects.

Intralot Vice President Byron E. Boothe Jr. said D.C. Lottery revenues dropped from $275 million to $240 million this past year, and are expected to dip below $200 million in the coming years. The reason? The District’s lottery revenues are draining into Maryland, which has approved slot machines, and - along with Virginia - has begun selling both Powerball and Mega Millions tickets.

“We didn’t believe slots would pass in Maryland,” he told The Washington Times. “And we didn’t think Maryland and Virginia would both start to cross-sell Powerball and Mega Millions.”

Mr. Boothe said Intralot pursued the contract because in the eyes of the firm’s European customers, “there’s cache” in running the lottery contract in the U.S. capital.

Robert Vincent, a spokesman for lottery company GTech, which along with a different local partner has run the D.C. Lottery for 25 years, said the D.C. Lottery is “one of our least profitable contracts.”

“No one is asking about the value of the D.C. Lottery,” he said. “They are buying it as a commodity, but it is small, and D.C. is a tough place to make a buck.”

The D.C. Council voted 9-1 in December to approve a new five-year lottery deal despite questions from many about the procurement process.

Council Chairman Vincent C. Gray abstained on the lottery vote but afterward said an appearance by Mr. Bailey and Intralot before the council raised his confidence in the contract award.

In also abstaining, at-large D.C. Council member Kwame R. Brown put his finger on perhaps the most unusual aspect of the contract: Mr. Bailey’s company, Veterans Services Corp. (VSC), was appended to the deal after it had been awarded to Intralot, circumventing the vetting process for VSC.

“I suggested the request for proposals require local businesses to be part of the procurement process,” said Mr. Brown, chairman of the council’s Committee on Economic Development. “When you go back and select a partner after an award, they have not been fully evaluated. It’s a backwards way of doing things.”

While Mr. Brown did not question Mr. Bailey’s credentials, there is little to suggest that council members, or even Intralot, closely examined his professional history.

Mr. Bailey has portrayed himself as a banker, but his 15-year career at Fannie Mae ended with him as a vice president of human resources, where he was responsible, among other things, for strengthening the company’s diversity activities. Prior to that, he served the agency as a human resources director and a business analyst.

A key aspect of his government service, according to court records, is that while at Fannie Mae, Mr. Bailey frequently complained of wrongdoing by others. When his career path was stunted, he claimed to be a victim of racial and gender discrimination and complained of a hostile work environment. His allegations resulted in a five-year battle in and out of federal courts that neither he nor the agency will discuss.

Mr. Bailey declined to respond to numerous questions for this articlesubmitted in writing to his attorney, Edsel Guydon.

At a time he said he was averaging a 50-hour workweek at Fannie Mae, according to a Post profile, Mr. Bailey also was moonlighting to book jazz and R&B vocal acts into a Silver Spring, Md., nightclub, which he and a partner acquired in 1995 and renamed Bailey’s Cafe and Grill.

But Mr. Bailey’s stint as a nightclub owner was short-lived. He forfeited his liquor license in 1999, according to Montgomery County Department of Liquor Control records. And when the business folded that same year, he left behind more than $90,000 in claims, judgments and tax liens - some of which remained in litigation until last year, Maryland court records show.

When Mr. Bailey left Fannie Mae in 2007, he wasted little time in coming to the rescue of a struggling facilities management company, according to a Post profile.

Wilson Technologies was managing a sole-source contract to clean floors at Walter Reed Army Medical Center when Mr. Bailey came along. Mr. Bailey told a Post reporter he saved the company by investing $138,000 and obtaining a $250,000 line of credit.

But a 2007 lawsuit filed by a former subcontractor paints a less righteous picture. The lawsuit said that after Mr. Bailey joined the company, a contracting officer at Walter Reed imposed higher performance standards for the company to adhere to or lose the contract.

According to the lawsuit, Mr. Bailey told Wilson Technologies’ subcontractor that he could “get rid of” the contracting officer, adding that he “had made a living getting rid of people” like the officer.

The lawsuit said Walter Reed officials concluded that Wilson Technologies was understaffed, had inadequate quality controls and had “no experience with providing cleaning services.” It also said the company overcharged the Army for cleaning services, hoarded profits and engaged in a “scheme” to defame and drive out the subcontractor that did the actual work, Fresh Air Duct Cleaning.

An attorney for Fresh Air Duct Cleaning confirmed that the case settled out of court, but declined to elaborate.

“It’s not in my interest or my client’s interest to comment,” said the lawyer, Nicholas Hantzes, of Centreville, Va. Walter Reed officials did not return calls for comment.

Another Bailey partner, Emmanuel O. Irono, president of Motir Services, which formed a joint venture in June with Wilson Technologies on a cleaning contract at Ronald Reagan Washington National Airport, said he ended the partnership after less than a year because Wilson Technologies “could not fulfill its financial obligation.”

Mr. Irono said the airport deal required “a higher line of credit than Wilson Technologies had,” adding that a split was necessary to preserve his company’s reputation in the event of a default by Wilson Technologies.

After winning the lottery contract, Mr. Boothe, the Intralot vice president, said the firm still needed a local partner to get council approval. It was then that former D.C. Council member Kevin P. Chavous, an Intralot lobbyist, recommended Mr. Bailey, despite his business scrapes and lawsuits.

By then, Mr. Bailey had formed VSC and was waiting in the wings. And, according to Mr. Boothe, with an Intralot loan to help cover his share of $10 million to $15 million in startup costs, Mr. Bailey and Intralot are scheduled to take over the D.C. Lottery in November.

But, according to Mr. Vincent, a spokesman for outgoing lottery operator GTech, ventures that join international gambling companies and local businessmen often prove more trouble than they are worth.

“It doesn’t add value,” he said. “It’s a cost of business and we manage it.”

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