- The Washington Times - Wednesday, February 1, 2012

A D.C. Council committee finally showed its cards in the tortured first-in-the-nation bid for online gambling through the city’s lottery system - and it’s game over.

The Committee on Finance and Revenue voted 3-2 in favor of a bill to repeal the program, known as iGaming, which created controversy from the moment it was passed as part of a budget bill in December 2010.

“I feel like this Ferrari hit a brick wall at 200 miles per hour,” D.C. resident Marie Drissel, the program’s most vocal critic, said after the vote.

For months, the lottery system had planned to offer four wagered games to pre-approved players on home computers or select public areas after a round of demonstration play.

Council member Tommy Wells, Ward 6 Democrat, spearheaded a repeal bill in response to complaints about the contracting process and the lack of public hearings on the program before it became law. He and several colleagues said they could not have known they were authorizing first-in-the-nation online gambling when they signed off on the city’s lottery contract with Greek vendor Intralot in December 2009.

After the award, The Washington Times, in a series of reports in 2010, outlined numerous irregularities in the process that handed out the $38 million lottery contract. Citing the news reports, former D.C. Attorney General Peter J. Nickles and former Chief Procurement Officer David P. Gragan asked the D.C. office of the inspector general to examine the approval process.

The inspector general, Charles Willoughby, said in a report that the office of the chief financial officer “materially changed” the contract after council approval to include an online gambling program. He said all bidders for the lottery contract should have competed for the contract with explicit proposals on wagered games over the Web.

The report in advance of Wednesday’s vote generated an outcry among council members - some of whom said they did not necessarily object to online gambling in principle but did object to the process by which it became law.

Committee Chairman Jack Evans, Ward 2 Democrat, and members David A. Catania, at-large independent, and Muriel Bowser, Ward 4 Democrat, voted to scrap iGaming, citing a lack of transparency in the process.

Mr. Catania said it would be a mistake to roll out online gambling in the “poisoned climate” that hovers above D.C. officials, citing the resignation of Harry Thomas Jr. from his Ward 5 council seat ahead of a guilty plea for stealing public funds.

“There is quite a lot of concern about this body and this government,” Mr. Catania said. “I’m eager to vote for the repeal of this.”

Support for the program came from its sponsor, council member Michael A. Brown, at-large independent, and Marion Barry, Ward 8 Democrat, who voted against the repeal on Wednesday.
The repeal bill is likely to pass when it goes before the full council, although Mr. Brown signaled he will try to gather the six votes needed to preserve the program.

Mayor Vincent C. Gray, who formerly indicated the program had received a proper vetting, said this week he supports the repeal. Council Chairman Kwame R. Brown has said he does not like gambling in any form.

If the repeal succeeds, Michael A. Brown said, he will offer a stand-alone bill to revive the program. He cited fears that casino interests will promote federal regulation of iGaming - leaving the District without local revenue - but offered no evidence to support his claim.

The iGaming program was subject to several community meetings last fall, in which D.C. Lottery officials tried to assure the public that gambling would not occur in libraries or schools and that no bricks-and-mortar betting parlors would be built in their neighborhoods.

“There is no excuse for any of the 12 of us not to be completely up to speed on iGaming,” Mr. Evans said at the outset of the committee markup.

A bill to revive online gambling will face the added challenge of a rebidding process on the iGaming portion of the lottery contract, not to mention political aversion to stand-alone gambling legislation, Mr. Evans said.

“Seventy-five percent of people are against gambling on the way to the casino,” he quipped. “See what I’m saying?”

D.C. Lottery Director Buddy Roogow said the lottery is a government agency that will do the council’s bidding, and Intralot must absorb the costs of iGaming’s false start. The ramifications of the inspector general’s findings, including whether or not iGaming operations can be rebid apart from the overall lottery contract, remain to be seen.

“I don’t think that we’ve conducted that postmortem,” he said.

The fate of the underlying lottery contract also appears to be unresolved. Mr. Evans suggested Wednesday that his work is not complete and that further oversight of the contract will be forthcoming.

In comments from the dais, Mr. Brown objected to accusations he “snuck” the iGaming law into a budget bill, and Mr. Barry told his colleagues they should have read the bill more carefully.

Despite his opposition to the repeal, Mr. Barry objected to the “illegal” way CFO Natwar M. Gandhi inserted the gambling provision into the lottery contract, as detailed in the inspector general’s report.

Mr. Gandhi has strongly objected to the findings. He said all bidders for the lottery contract had the chance to suggest additional games, even if the request for proposal did not specifically mention online gambling.

The U.S. Department of Justice opened the door to online gaming via state lottery systems, a reversal of its position, in a recent opinion that addressed whether Illinois and New York can use out-of-state transaction processors to sell lottery tickets to adults within their borders.

“Other states are now doing this,” Mr. Brown said. “And frankly they are laughing at our procedure now, moving backwards when we were out front on this.”

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