Council Expresses Skepticism About Gaming Firm
Tuesday, April 8, 2008
Several D.C. Council members grilled city lottery and finance officials yesterday about a proposed $120 million contract the District wants to award to a start-up company, saying they want to know more about its experience in the gaming industry and whether it is a "bona fide" joint-venture firm.
At a hearing of the council's Committee on Finance and Revenue, members were skeptical about the company, W2I, a partnership between W2Tech, a nine-month-old local firm, and Intralot, an international lottery services provider. They wanted to know about the company's owners and partners and whether the process to select the firm was fair and transparent.
Council member Jim Graham (D-Ward 1) said the principals identified with W2Tech, Warren C. Williams Jr. and his father, Warren C. Williams Sr., raised a red flag with him because they had both been involved in controversies.
The pair owned Club U, a nightspot in the Frank D. Reeves Municipal Center that was closed after a man was fatally stabbed on the dance floor. And Williams Jr., a real estate developer, was recently accused by tenants of trying to force them out of their homes by not maintaining an apartment building he owns. Graham asked for a list of all officers of W2I.
"There are so many issues we need to look at here for real," Graham said. "Are there things they've done that would affect their ability to perform?"
Council member Jack Evans (D-Ward 2), the committee chairman, asked whether Sinclair Skinner, a friend of Mayor Adrian M. Fenty (D), was involved in the deal, but city officials said his name did not appear in the paperwork that W2I submitted.
Eric W. Payne, the contracting director for the finance office, defended the city's decision to abandon a 25-year contract with Lottery Technology Enterprises as a financial one, contending that W2I could do a better job for less money. W2I offered the "best technology solution and the lowest price," he said.
Payne said the new contract would reduce lottery costs from $11 million to $6 million a year, which he called a "win-win" for the city. He predicted that the savings would result from new games, more revenue and better technology.
But council members asked if the new firm actually could save that much money or if the contract was low-balled to win the award. Payne and Jeffrey "Jay" Young, the lottery's fiscal officer, said they would resign if the savings were not realized the first year.
The proposal presented to the council says that the contract would start at about $11 million a year for six years; after that, it could reach about $120 million if a five-year renewal option were exercised.
Payne said that Lottery Technology Enterprises, which has run the city's lottery for about 25 years, has an antiquated gaming system and that W2I would overhaul it. He said that Intralot, the junior partner of W2I, is providing similar lottery services in Idaho, Nebraska and Montana and has been awarded contracts in South Carolina and New Mexico.
Intralot also brings greater cash reserves to the table than do LTE and its partner, GTech, Payne said.