- The Washington Times - Tuesday, July 20, 2010

D.C. Attorney General Peter J. Nickles called Tuesday for a formal investigation into how a firm with questionable credentials and limited experience took a majority share in the city’s $38 million lottery contract.

Citing recent reports in The Washington Times, Mr. Nickles pointed to contracting irregularities, including the addition of local firm Veterans Services Corp. (VSC) to the lottery pact after the city awarded it to Greek gambling giant Intralot.

“Most troubling is that, since May of this year, articles have appeared in The Washington Times about the lottery contract, and one of the latest of them raises questions about the background and capability of VSC to operate the contract,” Mr. Nickles wrote to D.C. Inspector General Charles J. Willoughby. The letter was co-signed by D.C. Chief Procurement Officer David P. Gragan.

In the three-page letter, Mr. Nickles did not name city officials responsible for awarding, vetting or approving the contract as intended targets of the probe but encouraged Mr. Willoughby to assign the case a high priority and to pursue any “additional questions that merit investigation.”

Mr. Nickles indirectly attacked D.C. Council Chairman Vincent C. Gray, saying that the council “failed to hold a hearing on any of the proposal packages” submitted by Mayor Adrian M. Fenty after a previous contract award to Intralot. Mr. Gray and others thought a local firm that partnered with Intralot was too close to Mr. Fenty. VSC, Intralot’s eventual local partner, is headed by a man with ties to several council members, including Mr. Gray.

Mr. Fenty during a debate last week with Mr. Gray invoked the council chairman’s involvement in the lottery pact while deflecting charges of cronyism leveled at him by Mr. Gray, a mayoral candidate.

On Tuesday, the mayor was measured in his remarks about the investigation:

“According to the attorney general, there are serious concerns regarding the substitute of contractors while the lottery contract award was at the Council. A.G. Nickles has asked the inspector general to investigate any possible impropriety,” he said.

Chief Financial Officer (CFO) Natwar M. Gandhi awarded the $38 million dollar contract to Intralot on Oct. 5, after a year of jockeying among would-be vendors as a result of Mr. Gray’s refusal to schedule a vote on the first Intralot award.

Mr. Fenty approved that award on Oct. 19, but council members signaled to Intralot that it needed a local partner to gain their approval.

On Nov. 23, VSC and Intralot formed a joint venture to operate the D.C. Lottery.

In December, shortly before the D.C. Council voted 9-1 to approve the award, Mr. Gray told his colleagues he was “mightily impressed, especially by the folks who represented VSC” at a Nov. 24 hearing that previewed the Intralot-VSC partnership.

Mr. Nickles‘ letter indicates he was less impressed with the partnership.

One of his main concerns, he wrote, was that less than a month after the chief financial officer awarded the contract to Intralot — “literally on the eve of the Council hearing” — Intralot formed a joint venture with VSC called DC09 LLC.

And then after the council approved Intralot, he added, Intralot subcontracted the lottery operation to the joint venture.

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