Emails show fight for D.C. Lottery contract

The day after Christmas 2008, as then-D.C. Council Chairman Vincent C. Gray was blocking approval of a contract award to run the D.C. Lottery, a Maryland businessman delivered bad news to the man who, along with international gambling giant Intralot, had won the pact through competitive bidding.

“There is a strong push to re-bid,” wrote Emmanuel S. Bailey, foreshadowing a bruising fight over the $38 million lottery contract and what few at the time could have known would be its first-in-the-nation effort to legalize an online gambling program that would be worth millions of dollars, if successful.

“A lot of damage done by pushing for a vote,” Mr. Bailey wrote, in widely distributed but previously unreported emails obtained by The Washington Times. He was referring to the yearlong effort to get Mr. Gray to submit to a council vote a lottery award containing Intralot’s partner at the time, Warren C. Williams Jr., an ally of then-Mayor Adrian M. Fenty and a nemesis of Mr. Gray. “Forces don’t want you guys in the lead decision making role.”

“We will get this done,” Mr. Bailey said in a follow-up email. “Failure is NOT an option.”

Mr. Bailey was not, at the time, a party to the lottery negotiations. Neither a contract bidder nor a representative of Mr. Williams or the city, he nevertheless self-assuredly advised the man whose company actually had won the contract with Intralot.

A year later, however, a company formed by Mr. Bailey and initially registered at his mother’s house in Southeast D.C. would usurp Mr. Williams and emerge with the lucrative lottery contract.

It remains unclear what “forces” Mr. Bailey referred to in his December 2008 note to Mr. Williams. But two months before the emails were sent, on Oct. 29, 2008, Mr. Bailey met behind closed doors with Mr. Gray and Intralot’s lobbyist, former D.C. Council member Kevin P. Chavous.

All parties acknowledged the meeting took place, but none would disclose to The Times what was discussed.

Mr. Bailey declined to discuss the emails, but he said in an email he did not discuss the lottery procurement with Mr. Gray.

Mr. Gray’s office did not respond to written requests for comment.

By the end of 2008, with Mr. Gray and the council refusing to vote on the lottery award, it was clear Mr. Williams’ place on the Intralot team was in jeopardy. But, according to the emails, Mr. Bailey was outlining a plan that purported to preserve the contract for Mr. Williams by enlisting Mr. Fenty’s support to cut Mr. Bailey in on the lottery deal.

“From a business strategy standpoint, I suggest you do this,” Mr. Bailey wrote on Jan. 5, 2009.

“Our Nupe could be the one that is viewed by the public as bringing ’smart’ resolution to this problem,” he added, referring to Mr. Fenty by the nickname for members of the Kappa Alpha Psi fraternity, of which Mr. Fenty and Mr. Bailey are members.

“The beauty here is that you (Warren) and our Nupe can say that you both turned to LONG-TIME friends and business colleagues to bring in additional expertise. You could also state that you approached me a year or two years ago.”

Mr. Bailey assured Mr. Williams that it would not be illegal for him to sell an equity stake in the contract to Mr. Bailey, and suggested that “Our Nupe” have his legal team “research this point.”

In alluding to the friction between Mr. Fenty and Mr. Gray, Mr. Bailey concluded: “The smarter play, especially for you, is to get this done now. I don’t think there has to be any precedent setting. [Our Nupe] can make it clear to the older guy that it is not. Rather than a compromise, our Nupe can play this as Barack would — put the best interest of the residents first; work with rivals; get this done.”

The deal would not get done. Mr. Williams declined to comment on the lottery or Mr. Bailey’s emails to him.

Instead, the lottery contract was rebid by the city’s independent chief financial officer, Natwar M. Ghandi. After Intralot won the rebid, the Greek gambling company, under pressure from Mr. Gray’s allies, including council member Marion Barry, appended a company controlled by Mr. Bailey to the deal. The council approved the union with little scrutiny and an endorsement by Mr. Gray, although The Times would later report in July 2010 that Mr. Bailey’s newly formed company had boasted of work it had not performed for clients who had never heard of it.

In November, less than a month after Mr. Bailey’s company assumed a 51 percent share of the lottery contract, D.C. Council member Michael A. Brown, at-large independent, quietly slipped a provision into a massive budget bill legalizing online gambling in the city under an intranet computer system run by the lottery.

The deal, which the city’s chief financial officer said would net more than $13 million through 2014, had the potential to revitalize a lottery that had been flagging as Maryland expanded its gambling options by legalizing slot machines in 2009, and as Virginia began cross-marketing lottery games also found in the District.

But after Congress declined to intervene and the program moved closer to implementation, Mr. Brown and his proposal faced increasing scrutiny, including a report by The Times. In denying that the proposal was impulsive, Mr. Brown said he was actively developing the idea of online gambling long before The Times reported on the buried gambling provision.

Mr. Brown does not deny that he is friends with Mr. Bailey, but insists he had no early involvement in the lottery contract. Asked whether he had any meetings with parties interested in the lottery contract in the winter of 2008, Mr. Brown replied, “Why would I? I hadn’t been sworn into the council yet.”

Yet he has spoken little about Mr. Bailey, whose company and relatives contributed $4,000 on the same day to Mr. Brown in March.

Reports that Mr. Brown failed to disclose a business relationship with a law firm that works in the gambling industry have prompted some news organizations to call for a “full airing” of his quietly inserted poker plan, and for a review “by the appropriate officials” of his role in crafting the plan.