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Not Your Usual D.C. Corruption

The long and complicated standoff over the contract to operate the D.C. Lottery boils down to one simple fact: Even though one company would do the work more cheaply and the other company has done a lousy job of running the lottery up to now, the D.C. Council refuses to do the right thing, and they openly concede their refusal is based on just one factor: Politics.

This is the most brazen display of cynicism and shady dealings we've seen in the District in decades--and that is saying quite a lot. No, this isn't a corruption scheme of the sort we saw in the massive ripoff of $50 million from the Tax and Revenue department, or in the looting of $5 million from the city's teachers by their own Washington Teachers Union's top executives. But it's the real meat and potatoes, everyday sleaze that makes this city's government something special in the world of public affairs.

Lottery Technology Enterprises (LTE), the company that has held the $120 million contract to operate the District's lottery since the games were introduced nearly a quarter century ago, has been fined $1.4 million for security breaches involving fraudulent winners and stolen tickets. LTE gets lousy scores on the quality of its work. LTE proposes to charge the city about $5 million more than its competitor in the bidding for the city contract, W2I, a joint venture between the national gaming firm Intralot and the family of local businessman Warren Williams Jr.

But despite a fair bidding process and a clear superiority of the challenger's bid, the Council has spent months refusing to vote on the contract. Now, a memo from the city Lottery Board's chief officer, Jay Young, puts the situation plainly: If the council rejects W2I's winning bid, Young writes, "it will do so on grounds not related to the substance of the offers, the soundness of the proposed solution, or the administration of the procurement process, but legislative fiat."

And that fiat will result from what council members frankly say is raw political power. When I asked several council members why they couldn't bring themselves to approve the most economical deal for D.C. taxpayers, they were good enough to tell me that the obstacle is the political donations and power of the current contractor, LTE's Leonard Manning. (Manning has consistently failed to return calls from me and other reporters; his spokeswoman, Ann Walker Marchant, says the city is unfairly fining and otherwise punishing LTE even though it has done a good job.)

On WAMU's Politics Program, I asked the District's interim attorney general, Peter Nickles, about the council's intransigence and he said: "I am absolutely disbelieving. The city had an open process" and concluded that D.C. taxpayers could save between $5 million and $8 million by switching vendors. "But we cannot even get a Yes or No vote."

Strangely, although there is a near-total consensus that W2I's bid is superior, there are voices both on the council and in the press calling not for W2I to get the contract, but for the whole process to be restarted. That is in effect the same as giving the deal to LTE and its giant partner, Gtech, because W2I and, more important, its parent partner, Intralot, would not participate in a rebidding, and the only other major lottery operator on this particular planet, Scientific Gaming, has made it clear that they think the process in the District is too political and they're not playing.

The City Paper's Loose Lips columnist, Mike DeBonis, spells out the underlying problem--the District's overly rigid insistence on minority and local business participation in big contracts like this. Most state and local lotteries--not only in this country, but around the world--are operated by one of three giant international corporations; that may not be ideal, but it's how that world works. The District is a rare bird in requiring those companies to team with local, minority-controlled companies, mainly as a way to boost minority business development. DeBonis suggests simply dropping that requirement. Which is great to say--heck, I'll say it too: Drop the minority business requirement--but it simply isn't going to happen. The set-aside is a deeply ingrained piece of D.C. politics and it's certainly not changing over a contract as politically sensitive as this one.

In his memo opposing the idea of a re-bid, Young notes that "there is a high probability" that putting the contract out to bid again would produce exactly one bid--from the good old guys at LTE and Gtech. The reason no one else would submit a bid: "The perceived flaws in the political environment." And to make matters even worse, Young says, the new bid would likely come in at a "substantially higher" price than the existing bids.

Now--with the D.C. Lottery suffering what Young calls increased "service outages, software malfunctions and performance delays"--is the time to make the change. The alternative, he says, is "a major decline in financial results."

But do the D.C. Council members care about that? Try asking them at any of the remaining candidate forums between now and Election Day. Watch them wriggle.

By Marc Fisher |  October 17, 2008; 8:34 AM ET
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My God, I knew DC was run by a bunch of incompetent boobs, but this take the cake. You cannot re-bid just for convenience. That's opening up a giant lawsuit. And one has to wonder why DC will never reach statehood!

Posted by: Maryland | October 17, 2008 9:18 AM

Your comments are insensitive to Black people. I guess you would casually just get rid of the minority and local business participation set-aside. That way white people and elites could continue to enjoy the advantage they gained through slavery and locking minorities out of the process for decades after "Jim Crow". You don't want us to have anything.

Posted by: Defactor | October 17, 2008 3:48 PM

Yeah, Mark. How dare you speak the truth about set-asides and corruption when it comes to the lottery!

Even as the city has to scale back on some police and fire protection - and cut city staffing - because of the budget shortfall, we can't cut costs from the sacred cow of Lottery set-asides.

Council will continue to ignore this, while spending us into oblivion on local pork -- and cutting back on essential services.

How dare you speak the truth!!!

Posted by: Speak the truth | October 17, 2008 4:34 PM

Look, the contracts are subject to approval by the DC Council. If they reject it, the contract is void. The DC government has every right to re-do the process if it wants, particularly if it feels it is not in the best interest of the District.

I agree with Marc that it is unnecessary to have these shady "local partners," minority or otherwise. But this article also forgets to mention that Warren Williams is a reputed slum lord and he and his family has ZERO experience running lottery programs. While the W2I/Intralot combo might be a better deal, it still looks like graft to local, connected individuals that deserves greater scrutiny.

Posted by: e | October 20, 2008 3:21 PM

It's fairly stupid for DC to have 'minority' set-asides for blacks when the city is majority black and the government (traditionally the givers of contracts) is overwhelmingly black.

I'd be fine if set-asides were based on income, but they aren't. They are based on skin color. Specifically, they are for black people only.

In a majority black city, where the power structure is overwhelmingly black, that's simply wrong.

Posted by: Hillman | October 22, 2008 9:32 AM

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