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D.C. attorney checks out lottery-contract partner

- The Washington Times - Wednesday, June 23, 2010

D.C. Attorney General Peter J. Nickles is looking into whether council members vetted a $38 million lottery contract to a Greek-based gaming company that joined with a local firm outside the bidding process.

Mr. Nickles told The Washington Times this week he was troubled by the apparent failure of the D.C. Council to scrutinize local firm Veterans Services Corp. (VSC), a 51 percent partner in a D.C. Lottery joint venture with international gaming giant Intralot.

He said the level of scrutiny was far less than was applied to Intralot's first local partner, whose award was scuttled by the council in 2008.

"Were they treated the same way? Obviously not," said Mr. Nickles. "In the first procurement, the chief financial officer put together a huge binder including the skills and background of Intralot's local partner. In the second procurement, no one has looked at the skills and capability of the second local partner, and they have a 51 percent interest in the lottery."

Mr. Nickles said the lottery is one of the largest contracts in the city, which only aggravated him further when council Chairman Vincent C. Gray delayed for nearly a year a required vote to approve the first award to Intralot and its then-partner, W2Tech.

W2Tech was rejected when its president, Warren C. Williams Jr., was criticized for questionable real estate and nightclub ventures and for his ties to Mayor Adrian M. Fenty.

The council ultimately tabled without discussion a resolution approving the award. That award was made by the District's independent chief financial officer (CFO), Natwar M. Gandhi, after a lengthy formal procurement process.

"Even as the award was being upheld by a contract appeals board, the council disapproved of it for no ostensible reason other than they objected to the local partner," Mr. Nickles said. "It's the only time in the city's history that I recall the council disapproving a contract that has been vetted through a formal process. It's unprecedented, and it damages the city's credibility in the business community."

Intralot officials said they added VSC after the council said they needed a local face. But little information about VSC is on file with the council, which voted to approve the CFO's award to Intralot, or the CFO, which approved a "subcontracting agreement" between Intralot and VSC, the local company formed last June by local businessman Emmanuel S. Bailey.

Gandhi spokesman David J. Umansky said that other than a criminal background check that turned up negative, "no other determinations were made" about VSC or its owner.

The D.C. Council voted 9-1 in December to approve the contract award to Intralot.

Some council members wanted to get a look at Intralot's prospective partner and, according to Mr. Umansky, Intralot said it was asked by the council to bring VSC to a November hearing. At the hearing, Intralot Vice President Lynn Becker said the company was "impressed with the credentials and industry experience of VSC."

Only one council member, Phil Mendelson, who voted against the lottery contract, responded to written questions concerning the contract's approval. He said a local partner was found "to make Intralot more attractive to at least one, or maybe several, council members."

He also said the local partner was irrelevant because that it was not part of the official deal being considered, "but, perhaps, Intralot would look better this second time around if it could say 'Hey, look, weve got someone local with us.'"

Mr. Nickles challenged the notion that VSC should be irrelevant to the council vote. He said if the council knew VSC was a 51 percent partner, "I would think the council would ask the same questions as the first procurement. Then the CFO would've been asked to inquire about the capability of the local partner."

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