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Is The Fix In On D.C. Lottery Choice?

Just for fun, I asked a bunch of D.C. Council members why it has been so hard to decide between the company that has run the D.C. Lottery for the past 25 years and an upstart challenger that, according to independent consultants, is offering to do a better job at a lower cost.

Could it be that the incumbent contractor, Lottery Technology Enterprises (LTE), is a generous donor to council members' campaigns and backed the wrong horse in the last mayoral race, providing big bucks to loser Linda Cropp and only a perfunctory gift to Adrian Fenty?

Oh, no, says council member Jim Graham, the Ward 1 Democrat: "If we were to make political donations a problem in getting a contract with government, we wouldn't have any contractors doing business with government."

Why might council members be reluctant to get rid of LTE even though the company uses decades-old technology and suffered the worst security breach in U.S. lottery history?

"Politics," Graham says.

Council member Marion Barry of Ward 8, not exactly the abstemious kind, abstained the last time the lottery contract came up for a vote. "How are you going to leave politics aside on this?" he asks. "All the people involved in this are politically connected. This thing is as red hot as a baked potato." Then Barry uncharacteristically clammed up: "I don't want to discuss this anymore."

The lottery deal is a multilevel mess. It's a face-off between two of the world's biggest lottery companies, GTech (LTE's partner) and Intralot. It's a battle between two powerful Washington families that are the big companies' local partners: Leonard Manning, who's with LTE, and Warren Williams, a longtime landlord and nightclub operator whose relations created W2I, the challenger for the contract.

And it's a standoff between the council, which doesn't want to anger Manning, and Mayor Fenty, who is eager to push out companies that have long-standing sweet deals with the city.

LTE argues that W2I, run by Williams's daughter-in-law, Alaka Williams, is inexperienced and that the family has a checkered background, including housing code violations at an apartment building owned by her husband, Warren Williams Jr., and a fatal stabbing at a U Street club the family owned.

W2I, in turn, contends that LTE has a long and unimpressive record, failing to adopt new games that are big draws in other states and using what Intralot official Byron Boothe calls "primitive radio-operated communications" to connect with ticket retailers. Alaka Williams points to Manning's 1973 arrest on a charge of operating an illegal lottery. That charge was dismissed, and Manning, who did not return my calls, has always denied involvement in illegal gambling. Manning's father, Peyton Manning Sr., known as "Killer," was described in D.C. police reports as one of the city's top illegal numbers operators. Police estimated in the late 1970s that his numbers business took in $12 million a year.

Buried beneath the politics are the merits of the situation, which weigh in favor of the challenger. The District's chief financial officer concluded that switching lottery contractors would save about $5 million a year. The office says LTE uses the oldest lottery technology in North America and proposes to charge the District much higher fees than W2I would -- taking 3.2 percent of sales receipts, as opposed to W2I's 2.3 percent.

LTE spokeswoman Ann Walker Marchant says the lottery operator was denied a chance to meet W2I's offer and would have installed new equipment but didn't because the city preferred to spend that money to add a keno game.

"In the last four years, the council has never rejected a contract that was independently assessed as the best value," says a senior D.C. administrator who spoke on condition of anonymity because he was not authorized to speak about the dispute. "We don't want vendors with performance challenges to be retained because of relationships."

At stake here is the District's credibility as a business partner. When a company bids for government business, it has a right to expect that if it meets standards and offers the lowest price, it will win. But Intralot government affairs chief Boothe says council members seem to think they get to choose based on politics and personal relationships.

"Twice, we walked into council members' offices, and the response was, 'I'd rather have the devil I know than the devil I don't know,' " he recalls. "As if they can choose. There's politics everywhere we do business, but not to this degree and not this baldly."

Since the council's 11 to 1 vote in May to take the lottery decision off its agenda -- Fenty plans to resubmit the winning bid in September -- the parties have been busy. LTE is appealing the bid process. Both sides say attorneys for their adversaries have approached them about switching corporate partners. Both sides are working the council hard.

The council's job is to approve the top bid unless there's evidence that the process was corrupted. But what if it's the council that's standing in the way of fair play? When politicians admit they are basing decisions not on merit but on connections, that may sound like refreshing honesty, but it's really depressing cynicism.

By Marc Fisher |  July 27, 2008; 9:36 AM ET
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Comments

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This is why we may need to consider term limits for our council members. When Barry is even stepping away you know something is really really dirty.

Posted by: Ward 8 Needs Change | July 28, 2008 12:29 PM

Everyone is missing the point here. No other US lottery goes through some connected local businessman to procure the services of Scientific Games, Intralot or GTech to run their computer systems. They all contract with them directly. The question isn't WHICH DC insider to make rich, its why make ANY of them rich when the tax payers don't have to. There is no need to deal with an LTE or W2I, either would just be passing through 3rd party services for a markup.

Posted by: I'm in the business, I know... | July 28, 2008 11:51 PM

DC Lottery/LTE/GTECH had a massive security breach in DC in 2006 where someone was printing tickets and charging them to the accounts of valid store owners. $70,000+. Guess if LTE and GTECH could find who did it? Nope. Will it happen again? You bet your ass. Not that W2I would be any better.

Oh, and the beautiful liquidated damages? WaPO should file a FOIA request to find out how much LTE actually pays. There is $370,000 worth of damages owed from LTE to the citizens of DC. They will pay pennies on the dollar.

Hold LTE and the councilmen that enables them responsible, and make sure W2I can not do the same thing.

Posted by: kennyR | July 29, 2008 8:10 PM

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