Continued from page 1

Intralot spokesman Byron E. Boothe did not return a call for comment, and Intralot’s general counsel Jay M. Lapine did not respond to questions sent by e-mail.

It remains unclear how such technical problems reflect on DC09’s ability to deliver a functional online poker system.

According to a Jan. 25 memo from D.C. attorney Teisha C. Johnson to Mr. Lapine and Intralot lobbyist Kevin P. Chavous, Intralot has been eyeing online poker and fantasy sports games for at least a year as a means to boost the D.C. Lottery’s flagging revenues. Figures released by the city show that lottery revenues have declined by more than $36 million since 2006.

The memo said Intralot’s proposed games would not require equipment that would constitute “gambling devices” under the Johnson Act, which prohibits the manufacture, possession, use, sale or transportation of such devices in the District.

But a recent budget amendment slipped into a larger bill by D.C. at-large council member Michael A. Brown to bring online poker to the District met with swift opposition from House Republicans, who would have to approve such a measure and have resisted a similar proposal by Senate Majority Leader Harry Reid, Nevada Democrat.

Mr. Brown, who has tried for months to generate support for his proposal but only recently disclosed it during a marathon budget hearing, has said the chief financial officer’s office estimates a potential $13 million increase in revenue through 2014 if the District adopts online poker through the lottery - if the proposal receives approval in Congress.

That’s a big “if” that CFO Natwar M. Gandhi appears to recognize.

In a Nov. 22 memo to Mr. Brown, Mr. Gandhi wrote that “no consensus exists on whether the proposal is permissible under federal laws.” Mr. Gandhi also said should a legal determination be made by the Justice Department that computer servers come under the definition of a gambling device for purposes of the Johnson Act, then a change in federal law would be required to make Mr. Brown’s proposal legally permissible.

Mr. Gandhi added that because the Lottery Board and Intralot had not presented a technical implementation plan, he could not yet say whether the District could offer online poker and limit participation to within city limits, as the law would require. His memo said that determining a person’s physical location through an Internet Protocol (IP) address “might prove to be a difficult challenge in the District,” and that such technology “is not always reliable at the city and state level.”

Of Intralot’s plans to require static IP addresses for online poker players, Mr. Gandhi said that would require customers to have access to business-level services, “which are considerably more expensive than residential services.” Under Mr. Brown’s proposal, players 18 or older could access online poker games from home or “approved hubs” such as hotels, bars and restaurants.

That might be news to hospitality industry representatives.

“We have not been involved directly in discussions between our members and lottery officials on the prospect for online poker,” said Candice Siegel, a spokeswoman for the Restaurant Association of Metropolitan Washington.

“I understand the city is in financial crisis but I haven’t spoken to Councilman Brown or Mr. Gandhi about this,” said Solomon Keene, acting president of the Hotel Association of Washington, adding that he didn’t know about Mr. Brown’s proposal until it came up at a recent budget hearing and was first reported in The Times. Asked whether there is any precedent for lottery games being offered in the District’s hotels, Mr. Keene replied, “I have never seen lottery inside of a hotel.”

The D.C. Lottery procurement overseen by the Mr. Gandhi’s office, which did not call for bids on online poker, went through multiple phases and was marred by accusations and counteraccusations of cronyism and contract steering. The approval process, which involved Intralot winning the contract as a solo bidder then partnering with VSC after being told by council member Marion Barry, among others, that it needed a local partner to gain approval, came under investigation by the D.C. office of inspector general.

D.C. Attorney General Peter J. Nickles, who asked for the investigation, said the inspector general’s office interviewed him four weeks ago. He said he was under the impression that the investigation is “serious and ongoing.”

Story Continues →