Ex-officials have no luck urging probe of D.C. lottery bid

Irregularities cited in 2010 letter to IG

Peter J. NicklesPeter J. Nickles
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Two former D.C. Cabinet officials are dismayed that their joint request for an investigation by the Inspector General’s Office of the D.C. Lottery contract has gone nowhere.

Former Chief Procurement Officer David P. Gragan and former Attorney General Peter J. Nickles said their July 2010 letter to Inspector General Charles J. Willoughby, calling for a review of Chief Financial Officer (CFO) Natwar M. Gandhi’s oversight of the lottery, was motivated by contract irregularities and questions on whether a 51 percent local partner to the $38 million contract was thoroughly vetted before being approved by the D.C. Council.

But more than two years after accusations of political meddling were first leveled at Mr. Gandhi and then-Council Chairman Vincent C. Gray, interviews with key witnesses and documents obtained by The Washington Times show that neither Mr. Gandhi nor Mr. Willoughby has fully probed a questionable deal that has drawn fresh scrutiny because of the lottery’s plan to launch the nation’s first online poker system.

Among the unexamined aspects of the lottery deal is previously unreported information provided to Mr. Gandhi’s internal investigators in 2008 that described a council member’s attempt to influence the contract - raising further questions about whether the District has sufficient independent oversight of a lottery now aiming to cash in with online poker.

Mr. Gragan, former procurement director for the states of Indiana and Texas, told The Times on Thursday he and Mr. Nickles saw “anomalies” in the lottery contract that he’s not seen in 18 years as a procurement officer - such as adding a majority partner to the lottery deal after the competitive bidding process was concluded - but he’s never been contacted by the Inspector General's Office (OIG).

Now an assistant director of procurement at the federal level, Mr. Gragan said the matter “warranted scrutiny” by the OIG.

“The only person who can say what happened next is the inspector general,” he said.

“This is shocking,” said Mr. Nickles, now a partner at Covington and Burling, adding that while still in office he provided leads to the OIG and was personally assured of an expedited and thorough investigation. “If the inspector general has not interviewed the people whose names I provided, then he ought to be fired.”

The OIG confirmed it was in receipt of the letter from Mr. Nickles and Mr. Gragan, but would not “confirm or deny the existence of any investigation,” said Roger Burke, chief of staff to Mr. Willoughby. He also declined to respond directly to Mr. Nickles‘ comments, but added: “We do not succumb to political pressure.”

In recent months, The Times has identified more than a half dozen sources intimately familiar with the controversial lottery contract who say they have never been contacted by the OIG.

Tom Lindenfeld, a political consultant who worked closely with two different companies that bid on the contract, including Intralot, said he doubts any investigation was ever conducted.

“I don’t know anyone who’s been contacted,” he said. “I have no indication that they are engaged in an investigation.”

Mr. Gandhi’s office did not dispel the notion that the OIG did not follow through on the request by Mr. Gragan and Mr. Nickles. In an interview with The Times earlier this year, David J. Umansky, a spokesman for Mr. Gandhi, scoffed at the prospect. “What investigation?” Mr. Umansky said. More recently, Mr. Umansky confirmed that no one from the CFO's office has been contacted by the OIG in over a year.

Mr. Umansky also insisted that the lottery contract is aboveboard, and said the council can change or waive procurement rules as it wishes.

No insight offered

Successors to Mr. Gragan and Mr. Nickles offered no insight on whether they have pursued the request by their predecessors. The Office of Contracts and Procurement, now directed by James Staton, did not return calls for comment. D.C. Attorney General Irvin Nathan’s office referred calls to the OIG.

The OIG’s handling of an official request for investigation has particular significance now that the D.C. Lottery is attempting to launch online poker.

Mr. Gandhi’s office was charged with lottery oversight as an independent agency responsible for all revenue generated by the city. But sources with knowledge of the political machinations surrounding the lottery contract worry that Mr. Gandhi went too far to accommodate council members who wanted to control the outcome of a competitive bidding process.

A prime example involves council member Jim Graham, a former member of the Committee on Finance and Revenue, who along with Mr. Gray thwarted the $38 million contract award to an ally of former Mayor Adrian M. Fenty, despite the award resulting from a competitive bidding process.

Emails obtained by The Times show that in 2008, Mr. Graham met with representatives of W2Tech, a company run by D.C. businessman Warren C. Williams Jr. and his wife, Alaka, after the company won the contract with Greek gaming giant Intralot. At that meeting, Mr. Graham offered to support W2Tech if Mr. Williams agreed to withdraw from a development project at a Metro station he had won with a company with ties to Mr. Fenty, according to the emails.

(In a subsequent letter to the Washington Metropolitan Area Transit Authority obtained by The Times, A. Scott Bolden, an attorney for Mr. and Mrs. Williams, said Mr. Graham also had “inappropriately offered a quid pro quo” to their Metro partner to replace them on that deal as well.)

‘Bid rigging’

A June 2, 2008, email from Intralot lobbyist Crystal Wright to Mrs. Williams describes a follow-up exchange about the lottery contract between Intralot lobbyist Jim Link and Mr. Graham: “Jim [Link] said that Graham emailed him back thanking him and also saying ‘Do you think they will do anything?’ It is pretty obvious he wants us to come back with something.”

In a widely distributed email obtained by The Times, Mr. Bolden, a former federal prosecutor, characterized Mr. Graham’s offer on the lottery deal as tantamount to “bid rigging.”

“I have made my thoughts on this nonsense very clear,” Mr. Bolden wrote to Mr. and Mrs. Williams and others on June 2, 2008. “This is complete bs and we are getting very close to corruption, bid rigging and other inappropriate conduct and I am not going to be a part of it. perhaps the us atty should make the call on this by speaking with Mr. Graham about his request.

“Am I clear on this. To even consider it is placing each of us at risk. Period,” he wrote.

At the time, complaints by the CFO’s chief procurement officer that Mr. Gandhi, Mr. Gray and others had attempted to influence the lottery led the CFO’s Office of Integrity and Oversight (OIO) to contact Mrs. Williams, her attorney said.

“She did cooperate, and in response to questions and document requests, investigators were made aware of the conversation [with Mr. Graham],” Mr. Bolden said of a July 16, 2008, interview with then-director of the OIO, Robert Andary. “But we were told that they would not be pursuing the matter.”

Mr. Andary could not be reached for comment.

Mr. Bolden added that Mr. and Mrs. Williams, who have declined to comment, have never been contacted by the OIG. “It is my sense that there is no investigation of the lottery contract,” he said.

Mr. Graham referred questions to the general counsel for the D.C. Council, who denied any improper influence by Mr. Graham.

Tortured history

The lottery contract has a tortured history.

In October 2009, a little less than a year after W2Tech was rejected, Intralot again won the contract through competitive bidding, but without a partner. D.C. Council members, including Marion Barry, told Intralot’s representatives they would need a local partner to secure council approval, and Maryland businessman Emmanuel Bailey was appended to the deal as a 51 percent partner in a joint venture set up as a subcontractor to Intralot.

In a series of articles in 2010, The Times found that Mr. Bailey’s company had boasted on its corporate website of general contracting experience from federal jobs it did not perform for government clients who had never heard of it, and that Mr. Bailey had a messy employment history and had been involved with troubled businesses and lawsuits.

The July 20, 2010, letter to Mr. Willoughby from Mr. Nickles and Mr. Gragan asked the inspector general to investigate whether the D.C. Council acted appropriately in approving a contract that included a partner who was added after the competitive bidding process, and whether Mr. Gandhi’s office should conduct further inquiry into Mr. Bailey’s company’s “capability to serve as the operations manager for the contract.”

Said Mr. Nickles: “I told Gandhi, ‘This isn’t right. You awarded a contract based on points in a competitive bid process, and now you’ve approved a contract with a presumption that isn’t true.’ He said his office could take care of it through his ability to control the actions of the prime contractor. But to me, that’s an evasion of their oversight role.”

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