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Mr. Gray has been at the center of the lottery saga from the beginning. When he was chairman of the D.C. Council and he didn’t approve of a local vendor who along with international gaming firm Intralot won the lottery contract, Mr. Gray delayed a vote for months and then led the council in striking the deal.

When Intralot won the second lottery award and appended Mr. Bailey to the deal after the procurement, Mr. Gray, having brought the matter to the council for a vote and declared himself “mightily impressed” with Veterans Services Corp., tried to distance himself by abstaining and criticizing the procurement process as “reprehensible.”

Pedro Ribeiro, a spokesman for Mr. Gray, recently provided The Times with a written statement that similarly misstates Mr. Gray as recusing himself from the second lottery vote. Although he cited Mr. Gray’s concerns about the procurement process, Mr. Ribeiro also contradicted his boss by telling The Times that Mr. Gray “recused” himself because of a personal relationship with Ms. Green and another close personal friend who played a “minor role” in the second lottery procurement.

Now, city officials are left to consider whether and how to unravel the convoluted lottery deal, which has turned out to be less rosy than when politicians, lobbyists and business interests once fought fiercely to gain control of it. Without online gambling, sources close to the lottery say the contract is an albatross. They cite a $22 million capital investment by Intralot, competition from neighboring states and flagging revenue as reasons why the arrangement is fragile.

Looming also is a wrongful termination lawsuit by a disgruntled former procurement officer who accused Mr. Gray and others of improperly meddling in the first contract award. If proved, those accusations could expose the city to liability from other directions related to the contract itself and the District’s handling of it.

Former Attorney General Peter J. Nickles, who called for the inspector general’s report, does not like the city’s chances in court if the lottery as a contract matter is exposed to judicial scrutiny.

“They did an exhaustive background check on the first lottery award and it sustained legal challenge, leaving no outstanding issues but political ones,” said Mr. Nickles, now a senior counsel at the Washington law firm of Covington & Burling. “Then they bypassed the legitimate contract [approval] process in the second round.

“If the process is tainted, you vote against it,” he said, referring to Mr. Gray’s most recent attempt to distance himself from the outcome. “Why have competitive bidding if you can subvert the process?”