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Questions surround D.C. lottery and gambling contract, but high-level D.C. staffer says it's fine

Sep 18, 2019, 9:54 am

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Several D.C. Council members are asking whether the $215 million lottery and sports gambling contract the council approved this summer fulfills local business subcontracting requirements. This week, they got an answer from a high-level District staffer: Everything's fine.

"Yes, the contract is compliant" with D.C. law requiring companies with large public contracts to subcontract some of the work to local businesses, Kristi Whitfield, director of the department responsible for monitoring compliance with the law, wrote in a letter Monday to D.C. Council Member Elissa Silverman (I-At Large).

But an investigation last month found that the contractor, the Greek company Intralot, is subcontracting work to its own subsidiary, rather than to the small business it lists on District forms to show compliance with the law.

The investigation found that the business Intralot has listed as its main subcontractor, Veterans Services Corp., had no employees, and that its website touted executives who didn't work there. The small firm's chief executive is an employee of Intralot's subsidiary, DC09, and lives in Maryland.

Silverman has also asked Attorney General Karl A. Racine whether the contract can be nullified.

Council member Mary M. Cheh (D-Ward 3) also reached out to Racine, asking by email whether Intralot and Veterans Services "have engaged in fraudulent activity."

A spokeswoman for Racine said Tuesday that the office was "looking into the matter."

Silverman, who voted against the no-bid contract to Intralot, called Whitfield's response this week "absurd."

"I read the response to say they're in compliance if on paper it shows that at least 35 percent of the money is going to this company, and we really aren't concerned whether it's a real company, or there are employees, or whether local businesses and District residents actually benefit," Silverman said. "Our residents are growing more cynical about how our government operates, and this is a perfect example that their cynicism is valid."

Whitfield did not respond to an email seeking comment.

Council member Robert C. White Jr. (D-At Large), who was initially opposed to the contract but then provided a key vote in favor, said Tuesday he also still wants answers.

"I'm trying to figure out what's going on," White said of the subcontract to Veterans Services. "I'm trying to figure out is this a shell company, or is this legitimate?"

In her response to Silverman, Whitfield said Intralot and Veterans Services Corp. appeared to be in compliance with the law based on paperwork filed periodically with the city.

"According to the representations of VSC and Intralot via vendor verification forms and quarterly reports, Intralot is meeting the goals of the CBE [certified business enterprise] law, and all CBEs associated with this contract are currently in good standing," Whitfield wrote.

The verification forms, which subcontractors must submit every three months, are intended to confirm they've been paid by prime contractors. Subcontractors affirm they have received payment and "provided 100% of all services and/or products provided for the Entire Subcontract using its own organization and resources."

It is common for contractors to skirt subcontracting laws by creating arrangements under which subcontractors must buy goods or services from them. That way, payments pass through the subcontractor and go back to the prime contractor. Some jurisdictions have systems to ensure this doesn't happen, but the District doesn't appear to be one of them.

On a vendor verification form from Veterans Services obtained by local media, the firm included a footnote saying a portion of the payments from Intralot included credit toward reducing its obligations on a loan. The footnote did not mention that the loan was provided by Intralot.

Asked last month about the footnote, a spokesman for Whitfield said that the department did not understand it. "Its purpose is not clear, and DSLBD is not in a position to speculate as to its meaning," James Partlow said in an email, referring to the D.C. Department of Small and Local Business Development.

The verification form also included a footnote saying the value of Veterans Services' subcontract was 51 percent of the contract "by virtue of" the company's joint ownership with Intralot of DC09, which is performing the contract work. The footnote does not mention that DC09 is controlled by and is a subsidiary of Intralot.

Whitfield, in her response to Silverman, said her department does not monitor DC09 because it is not a certified local business. She did not say how DC09's performance of the contract work satisfies the local business participation law.

"We wholeheartedly share your desire that District businesses benefit from its CBE laws," Whitfield wrote. She said her department "will continue to diligently safeguard the CBE law."

Meanwhile, a lawyer representing Dylan Carragher, the founder of a sports betting technology business, said Tuesday that he filed a lawsuit in D.C. Superior Court contesting the Intralot contract because it was awarded without competitive bidding. Citing the investigative report, the lawsuit said that the no-bid contract was "detrimental to the intent behind" the city's local business participation law.

Washington Post

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7 comments. Last comment 10 months ago by Murgatroyd.
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Kentucky
United States
Member #32651
February 14, 2006
8928 Posts
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Posted: September 18, 2019, 4:19 pm - IP Logged

Council member Robert C. White Jr. (D-At Large), who was initially opposed to the contract but then provided a key vote in favor, said Tuesday he also still wants answers.

Interesting strategy; vote for anything and then find out later what you voted for.

"Yes, the contract is compliant"

I guess Silverman and White didn't get the answer they wanted.

Most state legislators hire their lottery people to oversee where the outsourced games go, but apparently some of the D.C. council members either believe they know more than the people running their lottery and/or are trying to rescind the bid award that was found compliant. 

Lurking

    Avatar
    Maryland
    United States
    Member #162429
    January 2, 2015
    2201 Posts
    Offline
    Posted: September 18, 2019, 6:17 pm - IP Logged

    The ONLY way you get someone to say

    "Yes, the contract is compliant"

    based on the first story and this one - is if the staffer is getting paid to cover for them.

    Any sane person or person with a conscious,  would see what is really going on.

    Oh and dont get me started on how this company even won the vote - back in 2013 & 15 the local DC companylisted NO employees!!  So why would you not have it verified that they exist at the time of the vote?

      Artist77's avatar - batman14

      United States
      Member #121741
      January 16, 2012
      7574 Posts
      Offline
      Posted: September 18, 2019, 8:54 pm - IP Logged

      I am sure we will hear much more.

      But not really hearing much on this story now locally. I think someone is trying to quash it in hopes it will go away.

      Je vous salue, Marie, pleine de grace.  We will rebuild!

        L J1's avatar - chi jpeg.jpg
        Michigan
        United States
        Member #54179
        August 8, 2007
        140 Posts
        Offline
        Posted: September 18, 2019, 9:30 pm - IP Logged

        But High LEVEL staffer says it's FINE???

         

        I WONDER,.... WHAT THAT MEANS.

         

        HMMMMM....

        Balance is Key

          Avatar
          Simpsonville
          United States
          Member #163184
          January 22, 2015
          2223 Posts
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          Posted: September 19, 2019, 11:48 am - IP Logged

          I smell a rat.   Maybe related to Marion Barry....LOL.

           

          The feds will no doubt investigate this alleged corruption IMHO.

            Avatar
            casper wyoming
            United States
            Member #136341
            December 9, 2012
            101 Posts
            Offline
            Posted: October 16, 2019, 10:55 pm - IP Logged

            This is what you get when the ''republicans'' are in power.

              Avatar
              Arizona
              United States
              Member #165067
              March 24, 2015
              281 Posts
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              Posted: October 17, 2019, 8:45 pm - IP Logged

              This is what you get when the ''republicans'' are in power.

              The DC council currently consists of 12 Democrats and 2 independents.