- The Washington Times - Monday, November 22, 2010

D.C. Lottery fans will have to wait until 11 a.m. Tuesday to buy lottery tickets, an unprecedented five-hour delay in service that signals, along with other factors, that the conversion from a decades-old gaming system to a new one run by Greek-based Intralot and its D.C. partner has not gone well.

The lottery contract was awarded last year after a prolonged and contentious procurement process marked by accusations of contract steering. The approval process currently is under investigation by the D.C. Office of the Inspector General.

Having emerged from the process with a multiyear contract, Intralot and its majority partner, Veterans Services Corp. (VSC) run by Maryland businessman Emmanuel S. Bailey, are poised to take over this week from a joint venture between Lottery Technology Enterprises and Rhode Island-based gaming company GTech, whose contract expired Monday at midnight.

But not right away.

Ordinarily, lottery tickets are sold until 1 a.m., depending on the retail seller’s hours, and Monday night is no different. But while ticket sales have begun each day at 6 a.m. for the past 27 years, Tuesday sales will be delayed until shortly before noon, according to the D.C. Lottery website.

Payouts also will be delayed for almost three hours until the new system is up and running, according to D.C. officials.

“We are moving to a new gaming system to better serve you,” the site reads. “Thanks for your patience during our transition. We apologize for the inconvenience.”

Though a lottery spokesperson said such delays are “standard lottery industry protocol,” Robert K. Vincent, GTech vice president of corporate affairs, said the delays are highly unusual. “Lotteries in major markets manage this conversion and never stop selling,” he said. “It’s supposed to happen like clockwork.”

The rocky start for the new lottery operators could leave the District short on revenue, prestige and benefit to the community.

Since its inception in 1983, the D.C. Lottery and Charitable Games Commission in Anacostia has housed the computer server that communicates with some 565 lottery terminals in retail outlets throughout the city. But starting Tuesday, that server will be located in Ohio and, according to a D.C. official who spoke on the condition of anonymity because they were not authorized to speak publicly on the matter, the new system will open with approximately 468 terminals.

D.C. lottery officials on Monday said they were “converting” all current retailers, but did not provide the specific number of terminals that will be open.

And while Intralot’s proposal called for an Internet-based communication system, D.C. officials said the company has delivered a less sophisticated system based on cable and wireless service. Sources familiar with the new system say it is already experiencing difficulty in the downtown D.C. area, which is dense with cellular traffic and restrictions related to secure government agencies.

Intralot is not very experienced in communications to begin with and its not at all surprising that they misjudged this one,” Mr. Vincent said last week.

Intralot spokesman Byron Boothe and Mr. Bailey, president of VSC, did not return calls for comment.

Perhaps the biggest hurdle the new D.C. Lottery operators face is flagging revenue, due to Powerball competition from Virginia and Maryland, and the advent of slots in Maryland. The result has been a $17 million loss in lottery revenue since 2007, from $257 million to $240 million. Funds to be deposited with the city have decreased by more than $3 million since 2008, from $70 million to $66.7 million.

Those losses are expected to get worse, according to lottery experts, prompting the lottery’s new operators to explore options to expand gaming. A D.C. official familiar with the matter said Mr. Bailey, the majority shareholder of DC09, the joint venture with Intralot, has been working with D.C. Council member Michael A. Brown to spearhead that effort, which could require a change in the law.

Mr. Bailey became Intralot’s majority partner in 2009 after the company won the contract by bidding alone, only to be told by council member Marion Barry and others their vote required the inclusion of a local partner.

In June, The Washington Times reported that Mr. Bailey’s company website boasted of projects on which it did not work.

And Intralot is the subject of persistent international intrigue in the gaming business. Just last week, Gatehouse News Service in Illinois reported on an investigation by international risk consulting company Kroll and Associates, which found “numerous criminal indictments brought against” Intralot officials in Greece for “alleged money-laundering, fraud, embezzlement, bribery, misleading investors and espionage.”

The report concluded that Intralot’s “questionable background of certain key executives” would leave the company “hard pressed” to pass background checks required by Illinois officials.

In addition, this summer the U.S. Securities and Exchange Commission suspended Intralot General Counsel Jay Lapine from practicing before it. Mr. Lapine, the SEC said, falsified documents and circumvented internal accounting controls while serving as the general counsel of another company. Mr. Lapine was acquitted by a federal jury on related charges in November 2009.

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