Eric Payne Credit: Darrow Montgomery

Ten years after he first stood up to old-school D.C. corruption in the Office of the Chief Financial Officer regarding a D.C. lottery contract and alleged bid-rigging attempts by key Council members, and more than six months after he won a unanimous verdict in federal court, former contract director Eric Payne and the Office of the Attorney General agreed to a $3.53 million settlement this week.

On Thursday, Attorney General Karl Racine informed City Paper that he had inked the agreement and sent it to Mayor Muriel Bowser for approval. Bowser’s office confirmed approving the deal, which for Payne, a contracting director who was fired in 2009 after questioning a series of transactions leading up to the lottery contract award, will not be truly consummated until the OCFO cuts him a check, which that office has said could take up to two more months.

Closure for Payne is long overdue, and he has reason to harbor continuing anxiety. After getting whipped in federal court in November, Racine’s office filed motions to set aside the verdict or hold a new trial, forcing Payne to incur more legal fees. To what end, Loose Lips is not sure. “I think it’s a fair resolution for Mr. Payne, and I think it’s a fair resolution for the District,” says Racine. “I wish him luck.”

The case marks a shameful era in D.C. politics, one that left a stain not just on the OCFO, but on Racine’s friend and political mentor Vince Gray, Ward 2 Councilmember Jack Evans, and former Ward 1 Councilmember Jim Graham. And it exemplifies both the vulgarity of the city’s pay-to-play culture and a classic D.C. approach to resolving legal matters, particularly in whistleblower cases: Fight like hell until you lose. Then fight some more.

The $38 million lottery contract came under public scrutiny after Payne accused Chief Financial Officer Natwar Gandhi of firing him in 2009 in retaliation for complaining about the contract award process, among other troubling irregularities. An ally of then-Mayor Adrian Fenty had been part of a joint venture that won the lottery contract, but Gray, Graham and Evans did not want him to have it. Maneuverings between Fenty and Gray went on in the months leading up to Payne’s firing. In the end, Gray, then the council’s chairman, was able to scuttle the award and eventually see that it was given to the son of a former colleague of his.

Payne became collateral damage and has suffered ever since.

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In April 2008, Payne, Gandhi, and members of Gandhi’s staff met with Jack Evans, perennial chair of the Finance and Revenue Committee, to discuss Evans’ concerns about the award of the lottery contract to a joint venture that included Fenty ally Warren Williams Jr., a local businessman. According to The Washington Times, which reported extensively on the matter, Evans had a simple request for the group: Could they “get rid of [Williams] and replace him.”

Payne told The Times that in early May 2008, he and his fellow staffers also attended a meeting with  Gandhi and Gray, who refused to move the contract award to a council vote. According to Payne, Gandhi then met in private with Gray and emerged from the meeting with a blunt directive: “When the CFO came out, he told me to ‘figure out a way to get rid of Williams and replace him … or rebid the contract.’”

That same month, according to allegations that eventually emerged in a report by the D.C. Inspector General, Jim Graham similarly made his play to get Williams out of the way, telling representatives of Williams’ joint venture partners that he would drop his opposition to the award if Williams would drop out of an unrelated land deal involving D.C. Metro. (Graham has repeatedly denied making such an offer.)

Gray nevertheless brought the contract award before the council in December 2008, and it was rejected. Jockeying among lawyers, lobbyists, and local business interests with shifting and overlapping ties to Fenty and Gray went on for months. The contract was re-bid, and Williams fell out of the joint venture with a Kentucky-based firm called Intralot.

After winning a second round of bidding, Intralot put in place area businessman Emmanuel Bailey, the son of a friend of Gray’s, who was supported by influential powerbrokers with ties to Gray, including David “The King” Wilmot. Bailey and Intralot went on to win approval for the contract, and Bailey has been a reliable campaign fundraiser for Gray’s allies, and Fenty’s, including Mayor Muriel Bowser, ever since.

“Having the D.C. Council review and approve contracts is a recipe for disaster,” Payne said at the time. “They are awarded on the basis of relationships. That has an effect on vendors, which hurts competition, and eventually the city.”

His decade-long journey since voicing concerns over such machinations, getting fired, seeing his life fall apart, and eventually prevailing in federal court as a whistleblower, were documented last fall in City Paper.  

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After he was fired, Payne tried to resolve claims of wrongful termination out of court, offering to walk away for less than $1 million, according to sources familiar with the matter. When the District rejected that offer, Payne filed suit in federal court under The Whistleblower Protection Act in 2010. A year later, when Payne offered to settle the case for $1.5 million, the city again refused to settle. Overtures by a federal magistrate who attempted to expedite the matter by trying the case in her courtroom went nowhere, and Payne’s lost wages continued to accumulate.  

Years of litigation went by, as the District, through OAG under Racine and his predecessor, Irvin Nathan, dug in its heels and stalled. By the time a federal court judge cleared the way for a wrongful termination claim to move toward trial, Payne’s lost wages alone had exceeded $1 million, sources say. When the judge warned the District that the case posed political and public relations risks for the city and its elected and appointed officials, OAG attempted to settle the case for nuisance value.

The trial began on Nov. 7 and lasted just over two weeks. On Nov. 22, a unanimous jury upheld 11 violations the Act and directed the District to pay Payne  $1.7 million for his trouble, in addition to back pay and lawyer’s fees.

But rather than resolve the matter, the District chose to duke it out some more, despite no real legal leverage. Six more months of torture later, the city finally caved to a settlement with Payne—though the OCFO still has the ability to make him wait some more, as if he had not waited long enough.

“After a nine-year plus battle, I’m elated that this struggle for justice has nearly ended,” Payne tells City Paper. “While I’m disappointed that a number of District officials turned a blind eye to corruption and improper conduct, I’m grateful that the rule of law prevailed, albeit almost a decade later.”

Payne is careful not to discuss legal aspects of his ordeal, but his lawyer, Brian McDaniel, has this to say: “While [these years] have been difficult for Mr. Payne, his commitment and steadfast pursuit of justice on behalf of himself, his family, and indeed the citizens of the District have resulted in a victorious statement. A statement that all those who are committed to combating waste, fraud, and abuse can hold onto. The jury’s verdict in his case and the District’s agreement to settle the other damage concerns are both attempts to address the wrong done to Mr. Payne and to put him in the same position he would have been in had he not been terminated. But the reality is that the events over the past decade will continue to exact some emotional strain on Mr. Payne for years to come. While the parties have agreed in principle to bring this matter to some amicable resolution, it is our persistent hope that the District will not unnecessarily protract the final payment process.”