$120 Million Contract
$120 Million Lottery Deal Tabled by D.C. Council
Wednesday, May 14, 2008
The D.C. Council has effectively killed a proposed $120 million contract for a start-up firm to take over the operations of the District's lottery games from a company that has worked with the city for nearly 25 years.
In an 11 to 1 vote yesterday, the council tabled the proposed contract with W2I -- a partnership between international gaming services provider Intralot and W2Tech, a firm established less than a year ago by real estate developer Warren C. Williams Jr. and his wife, Alaka Williams.
Legislative rules required the council to approve the proposal by May 15 for it to go into effect by this summer as planned. The indefinite postponement will force the city to extend the contract with longtime vendor Lottery Technology Enterprises. LTE is a joint venture involving international lottery firm GTech and New Tech Games, headed by P. Leonard Manning.
The city also could, as many council members want, start over.
"It might have been best to just rebid it," council member Kwame R. Brown (D-At Large) said. "It's a lot of money. You're turning over the whole lottery system. You want to get it right."
The council appeared caught in a tug of war between two companies with strong political ties and respective troubles. Council member David A. Catania (I-At Large), who dissented, did not respond to a request for comment.
Council member Marion Barry (D-Ward 8) said his longtime relationships with all parties made it impossible for him to vote yesterday. He abstained.
"As it is, I have friends lobbying on both sides. I was genuinely torn," Barry said in an interview. "This was a tough one."
Mayor Adrian M. Fenty(D) submitted the contract last month after Chief Financial Officer Natwar M. Gandhi told him that the city was losing up to $5 million a year under LTE's management, Attorney General Peter Nickles said. "It's disappointing we didn't have any action," Nickles said. "I'm very concerned about the loss of millions of dollars under the continuation of the old contract."
A. Scott Bolden, attorney for W2I, said, "Every day is costing the city thousands of dollars by not having this firm in place."
Council members, however, said they did not have enough information about W2I to make an adequate assessment about whether it could do the job.
"I don't know what additional information they need. In reviewing the record, all the information has been provided," Nickles said.
Bolden attested to volumes of information provided to the council. "We have submitted notebooks of answers," he said. "They have them. We can't guarantee they've read them."
But the Williamses' past troubles also disturbed some council members. Tenants of a building Warren Williams owns say he has tried to force them out. He and his father, Warren C. Williams Sr., also owned Club U, a nightspot shut down after a man was fatally stabbed there. Some council members also questioned the financial interest of Sinclair Skinner in the deal. Skinner is a friend and fraternity brother of Fenty's.
W2I denied that Skinner had any financial interest or role in the company, Gandhi said in an April 30 letter to council member Jack Evans (D-Ward 2), chairman of the Committee on Finance and Revenue.
Yesterday, Gandhi said in a statement: "I believe that the proposed contract with W2I is the best economic value and technological solution for the District of Columbia. We are now exploring all of the options on how to proceed given the Council's action today."
LTE was apparently persuasive in its feverish lobbying. The company, criticized by Gandhi's office for having an outdated gaming system, has spent the past month defending its performance. In 2006, $70,000 in fake winning tickets were printed after a security breach. The company has said it remains proud of its 25-year record.
The vote to table "says that the council is going to act responsibly to really look at the merits," said Lydia Sermons Ward, a spokeswoman for the company. "We're pleased with the action that they are not rushing."
Manning attended the meeting with an entourage, including businessman Marc Barnes, who owns Love and the Park at 14th nightclubs.
The tension between the contract competitors has been intense -- so intense, Barnes said yesterday, that the younger Williams had confronted him at the Park at 14th recently. "He said, 'Some people want to come by your house and straighten you out,' " Barnes recalled. "I said, 'Are you threatening me?' He said he was talking about the Wizards game, but we were talking about the contract."
Williams, reached on his cellphone, declined to comment. Bolden said on behalf of his client: "I agree that there is a substantial amount of tension surrounding this proposed contract. That being said, a lot of things have been said about my client. . . . He denies having that conversation about the contract."
Staff writer David Nakamura contributed to this report.