City Backs Out of Deal With New Company
Thursday, April 10, 2008
At the D.C. chief financial officer's request, Mayor Adrian M. Fenty has withdrawn a proposal to award a lottery contract worth more than $120 million to a new company. D.C. Council members had questioned the background and gaming industry experience of the company's owners.
The revelation came yesterday as Chief Financial Officer Natwar M. Gandhi testified at a routine budget hearing before the council's Committee on Finance and Revenue.
"We are taking a second look," Gandhi said. Later, in an e-mail, he said the office needed more time to "review and respond to the questions raised by the committee."
Gandhi, however, defended the contract, saying it will save more than $6 million a year and is "the best technological solution for the District." He said the office might resubmit the contract after completing criminal and civil background reviews.
Gandhi and Fenty (D) recommended awarding the lottery contract to W2I, a joint venture between local company W2Tech, created nine months ago, and international gaming giant Intralot. Lottery Technology Enterprises and its partner, GTech, a national lottery services provider, have had the contract for almost 25 years and have filed a formal protest over the deal.
In a letter to the council, Fenty 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 state-of-the-art technology to help boost lottery sales and offer more games. LTE, which has been paid $80 million since 2000, has been plagued by an aging network. Its contract expires in November 2009, but the city wants to end it early to save costs.
W2Tech, the parent of the W2I partnership, was created by Warren C. Williams Jr., a real estate developer recently criticized by tenants for allowing his property to deteriorate. Williams has denied tenants' allegations that he was attempting to force them to move out so he could convert their apartments into condominiums. He and his father also owned Club U, which the District closed in 2005 after a patron was fatally stabbed there.
The council was skeptical of the contract, which could grow from $11 million a year for six years to $120 million if a five-year extension is granted.
Questions about the proposal were raised for the second time this week when D.C. Council member Jim Graham (D-Ward 1) asked Gandhi about the status of the lottery contract. During Monday's committee hearing, several council members expressed concerns about the background of W2I's owners and fairness and transparency in the bidding process.
Graham said yesterday that the city should "get our facts straight" before awarding the contract, which could have come before the council for a vote as early as Tuesday.
"I am asking you to withdraw this contract," Graham said yesterday.
Finance committee Chairman Jack Evans (D-Ward 2) told Graham the council and finance office, which oversees the lottery, had discussed dropping the proposal with Gandhi the previous day.
"Mr. Graham, we talked, remember," Evans said. "I actually made that request already."
Graham responded: "I was not aware a decision had been made."
In an interview after the meeting, Graham said he wanted to make sure the private discussion was stated publicly.
"I had known that the requests had been made," he said. "I wanted to hear it, on the public record, that this is in fact a withdrawn contract. If they come back with this, I want to see scrutiny."
The questions raised by some council members this week focused on the ownership of W2Tech and whether its partnership with Intralot, which is owned by a Greek conglomerate, constituted a bona fide joint venture. It appeared that Intralot was investing more money in the joint venture than its local partner, W2Tech.
Eric W. Payne, the contracting officer for the finance office, testified Monday that Janisha Richardson, a Ward 1 advisory neighborhood commissioner, was W2Tech's controller. City records indicate that Richardson is the company's principal owner.
Payne also said he did not know whether Alaka Williams, who was listed as the company's contact and with whom he was communicating, was related to Warren Williams Jr. She is his wife. Payne also said that Warren Williams Sr. had 35 years of gaming experience, including with the D.C. lottery when it started in 1982. He could not say whether the elder Williams had remained active in lottery services.
"Having those facts wrong robs you of the feeling of confidence of what they know and don't know," Graham said.
Council members also wanted to know whether Club U had paid $100,000 in back rent. The club was in the Frank D. Reeves Municipal Center at 14th and U streets NW. Bill Rice, spokesman for the D.C. Office of Property Management, said the back rent was paid, as scheduled, by January 2007.
Staff writer Nikita Stewart contributed to this report.