Lottery Contract Eyed for New Firm
Monday, April 7, 2008
Chief Financial Officer Natwar M. Gandhi and Mayor Adrian M. Fenty want to award a contract worth more than $120 million to a nine-month-old company to run the District's lottery games.
But some D.C. Council members say they have questions about the proposal and the firm's principals, including an owner of a building with housing code violations and a Ward 1 advisory neighborhood commissioner.
A committee hearing on the contract, which would end the city's longtime relationship with another lottery company, is set for today. The council has to approve the proposal by May if it is to take effect in the summer.
Council member Jack Evans (D-Ward 2), chairman of the Committee on Finance and Revenue, said the hearing will explore how city officials selected the company, W2I Venture. The company is a partnership between W2Tech, a local firm, and Intralot, an international gaming technology supplier and lottery operator owned by a Greek conglomerate.
"It's a huge deal," Evans said Saturday. "It has the potential to be over $100 million over the course of the 11-year contract. I'm glad we're having a hearing, given the potential controversy that appears to be growing around this contract. It's important that we do our due diligence on this."
The contract starts at about $11 million a year, then increases to reach an estimated $74 million over six years. The amount could be higher if sales increase. The contract would grow to more than $120 million if a five-year renewal option is exercised.
Lottery Technology Enterprises has had the gaming contract for about 25 years and is partnered with GTech, a national provider of lottery services. But the aging network stringing together the District's lottery terminals has been plagued by poor performance over the years. The network was supposed to be upgraded under a contract extension given to LTE in 1999, but 2005 contract records show that the upgrade was not completed and that complaints about service continued.
In 2006, government consultant Battelle Memorial Institute discovered that a security breach in the outdated terminal network had apparently allowed employees of the joint venture to print phony lottery tickets worth $70,000 in prizes over seven months. Employees were fired, but no charges were filed.
Ann Walker Marchant, a spokeswoman for LTE, said the D.C. lottery board made the decision not to upgrade the system. "LTE is proud of the service that it has provided to the District of Columbia for nearly 25 years," she said. "The company has the experience, knows the business and has contributed to the community."
She said that her company has filed a complaint with the Contract Appeals Board about the situation and that she plans to speak at today's hearing.
One reason some council members are questioning the proposed contract is that the founder of W2Tech, Warren C. Williams Jr., has been involved in two high-profile news events.
An article last month in The Washington Post focused on housing code violations at an apartment building at 804 Taylor St. NW that he owns. Residents told The Post that Williams had cut off repairs, maintenance and cleaning while encouraging tenants to move out so the building could be converted to condominiums. Williams denied trying to force tenants out by stopping maintenance. A lawsuit the city filed against 23 property owners Friday does not name him.
Williams and his father, Warren Williams Sr., owned Club U, a nightspot in the Frank D. Reeves Municipal Center, which the city closed in 2005 after a patron was fatally stabbed. At the time, Club U had just reached an agreement to pay the city $100,000 in back rent.
D.C. Council member Jim Graham (D-Ward 1) said he was aware of Williams's involvement with Club U but added: "We have to inquire closely into the qualifications and background of the proposed contractor."
Some members of the Committee on Finance and Revenue said they were unaware of the contract until they were approached Friday by Leonard Manning, chief executive of LTE.
Council member Kwame R. Brown (D-At Large) said he plans to ask city officials why they are giving the contract to a company that has "no track record." He also said he is bothered by complaints about Williams as a landlord.
"That's problematic," Brown said. "It's time for those who made the decision to answer some questions. We have to figure out why it smells a little funny."
The contract was solicited by the chief financial officer's office, which oversees the lottery, and submitted to the council, as is standard practice, by Fenty (D). In the letter to the council, the mayor said the D.C. Lottery and Charitable Games Control Board would save about $5 million a year by awarding the contract to a company that could provide a state-of-the-art network to help increase lottery sales and offer more games.
Aides to Fenty and Gandhi had requested that the contract move through the council as emergency legislation, but council staff members urged Evans to take a close look at the large contract, said a council aide who spoke on condition of anonymity because he is not authorized to speak publicly on the matter.
Carrie Brooks, a spokeswoman for the mayor, said that the contract came from Gandhi's office and that Fenty was not directly involved.
W2Tech was incorporated in July and certified as a small, disadvantaged business in the city. The company listed a post office box as its address. Janisha Richardson, a Ward 1 advisory neighborhood commissioner, is listed as the principal owner, and Alaka Williams is listed as a contact. Richardson, Alaka Williams and Warren Williams did not return calls over the weekend seeking comment.
Eric C. Payne, director of contracting for Gandhi's office, said he has dealt with Alaka Williams in handling the contract. Payne said he did not know whether Alaka Williams is related to Warren Williams. W2I was not the only bidder, Payne said, but he declined to identify the others. He said the proposals were evaluated by a technical committee and Battelle, which advises governments on lottery operations.
The proposal called W2Tech "a new and dynamic premier technology company" that specializes in consulting and professional services related to the online gaming industry. It said the company has long-standing business relationships with other technology firms working to "modernize and revolutionize" online gaming. It further notes that W2Tech is the successor of Games Enterprises LLC, which was started by Williams's father in the early 1980s and provided gaming expertise to the District.