By Yolanda Woodlee
Washington Post Staff Writer
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.
But some council members questioned how much money the majority partner, W2Tech, was investing and whether its principals had experience in operating lotteries. Payne said that Warren Williams Sr. was involved with the D.C. Lottery when it was first implemented and has more than 35 years of experience in the gaming industry. But when pressed by Graham to prove that the senior Williams had provided lottery services for the entire time, Payne said he would have to get back to the council.
Council member David A. Catania (I-At Large) asked for a copy of the firm's incorporation papers to make sure it is "a bona fide" joint venture.
Council member Kwame R. Brown (D-At Large) said it would be unusual for the city to allow the junior partner of a team to put up 51 percent of the capital.
"If this is what we're doing today, this is something different," Brown said. "Other business partners have been denied. I'm not saying you're doing something wrong, but . . . different."
LTE has accused the city of giving an unfair advantage to W2I by extending the dates to submit a proposal to allow the company to get certified as a joint venture. Ann Walker Marchant, a spokeswoman for the company, said LTE filed a formal protest, including a complaint that the contract submission date was moved from Sept. 13 to Sept. 2o to allow W2I to get its joint venture certified.
Leonard Manning, chief executive of LTE, said he got a telephone call Sept. 12 from the finance office notifying him of the date change.
"I thought it was a hoax to get us not to submit something on time," Manning said.
For the contract to take effect this summer, the council would have to approve it during its meeting next Tuesday. If a vote is not taken, the proposal will be disapproved.