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Correction to This Article
An earlier version of this article included an incorrect list of states where Intralot, an international provider of gambling services, has contracts. The company runs lotteries in Idaho, Montana, Nebraska, New Mexico and South Carolina.
Contract Controversy Reveals Lottery's Tangled Roots

By Nikita Stewart
Washington Post Staff Writer
Sunday, May 18, 2008; C06

Jerry Cooper, the man who helped bring legalized gambling and the lottery to the District nearly 30 years ago, called local businessman Warren C. Williams Sr. with a suggestion last year.

The District's contract with Lottery Technology Enterprises, the firm that has run the city's online gaming for about 25 years, was going to expire by 2009. Would Williams be interested in bidding against LTE for the lucrative contract?

No, but maybe his son and daughter-in-law would.

So Alaka Williams, the daughter-in-law, decided to take on LTE. And therein are the roots of what has been a nasty and aggressive battle over a city contract, a contest complete with accusations of bias and incompetence.

Alaka Williams tells her story from a plush, white chair in the Eastern Market headquarters of W2I Ventures, the joint enterprise that her 10-month-old company, W2Tech, formed with Intralot, the world's second-largest gaming services provider. W2I Ventures has gone head-to-head against LTE, a joint venture between locally owned New Tech Games and the world's top lottery powerhouse, GTech.

The spoils: a contract, if extended over 10 years, worth more than $120 million. The lottery has more than $250 million in annual sales, city officials say, and generates $68 million to $72 million a year in revenue for the District. W2I won the bid -- or so it thought.

The coup has stirred up controversy, pitting Alaka Williams's company and her friends against LTE and its friends. There are fathers and their children, husbands and wives, fraternity brothers and former co-workers, and plain old good buddies mixed up in what has become an operatic scene of charges and countercharges. LTE has filed a complaint with the Contract Appeals Board, which is to review the grievance tomorrow.

The lottery, it turns out, is a messy, incestuous business.

Intralot, GTech and a third firm, Scientific Games, are the only competitors for contracts in 41 states and the District. They trade employees like the plastic pieces on a Monopoly board. "It's a very small industry. When somebody hires somebody or lets someone go, they give their résumé to the other company," said Tom Little, president and chief executive of Atlanta-based Intralot USA and a former employee of Scientific Games.

"Sometimes, it gets a little too focused on who knows who," said Robert K. Vincent, a senior vice president of Providence, R.I.-based GTech.

The industry might be small, but it has little on the District's intimate business and political circles, where everyone knows everyone and the degrees of separation can be razor thin.

Last week, the D.C. Council, with several members who thought the contract was radioactive, voted 11 to 1 to table it, a move that would have essentially killed the deal and left LTE in place by default. Except that Mayor Adrian M. Fenty (D) immediately resubmitted it, supporting the recommendation of Chief Financial Officer Natwar M. Gandhi.

Gandhi and his staff have said W2I had the best offer -- a taxpayer savings of $5 million a year -- and newer technology. They also noted that LTE has run into problems, including the printing of $70,000 in phony tickets after a security breach in 2006 and being assessed $336,124 in fines for operational glitches last year.

But LTE said Gandhi's office just wanted to make room for a new local company with no experience to take over.

LTE says the city moved the submission date for contract proposals from Sept. 13 to Sept. 20 to give W2I more time to get its joint venture certified, which occurred Sept. 17. "Are we supposed to believe that was just a coincidence?" asked LTE spokeswoman Ann Walker Marchant, daughter of George Walker of LTE.

Yes, said Eric Payne, Gandhi's director of contracting. The date was moved because, Payne said, some language on local minority businesses had to be clarified. (Both local companies bidding for the contract are minority owned.)

That explanation and answers to other questions raised by council members about W2I and the history of its owners were in a package given to council members.

Warren C. Williams Jr. has been under fire, suspected of trying to force tenants out of an apartment building. Also, he and the senior Williams were the owners of Club U, a former nightspot in the Frank D. Reeves Municipal Center where a patron was fatally stabbed.

Some council members say the documents provided by Gandhi's office leave unanswered questions.

But acting Attorney General Peter Nickles said he has looked into allegations of bias in the selection process and found none.

For him, and the city, the answer is clear. "Don't know a single individual," he said. "Do see a significant savings."

A look at the District circles on either side of the fight offer some understanding.

Alaka Williams has enlisted the help of lawyer A. Scott Bolden, former president of the D.C. Chamber of Commerce and former chairman of the D.C. Democratic Party. Former council member Kevin P. Chavous, Fenty's mentor and his first government boss when the mayor was a council aide, represented Intralot in its joint venture agreement with W2Tech. Sinclair Skinner, a campaign coordinator in Fenty's mayoral bid, did community outreach work for Banneker Ventures, a development firm in which Williams Jr. is a principal.

Fenty, Chavous, Bolden, Skinner, Payne and Jeffrey "Jay" Young, current chief operating officer of the D.C. Lottery, are members of Kappa Alpha Psi fraternity. For some, such connections are a lifelong commitment and a networking tool.

On the other side, LTE -- with longtime businessmen P. Leonard Manning and George Walker in charge -- have lawyer Frederick D. Cooke Jr., who has represented council member Marion Barry (D-Ward 8). They also have Brett Greene, campaign finance chairman for Council Chairman Vincent C. Gray (D). And Marc Barnes, a family friend and owner of popular D.C. nightclubs, has served as an unpaid supporter.

Claudia Booker, former contracting director for Gandhi, is a consultant on LTE's pending contract. She said she was asked to recuse herself when she was working for the city because of an allegation over a conflict involving her stepmother's relatives. "You may as well ask me who my dog's cat's best friend's brother is," an incensed Booker said.

What is getting lost in the battle is which company can do the best job, said Alaka Williams, a 36-year-old former human resources director. W2Tech and its joint enterprise are the first businesses in which she has participated.

"This is my company, and I'm running it," said Williams, who added that she has spent the past year traveling to jurisdictions with Intralot contracts and wants local lottery retailers to get an idea of what the District might be missing.

Intralot, which has been in the United States since 2001, is trying to offer jurisdictions a lottery product cheaper and less likely to break down than GTech's, she said.

But Vincent said he is tired of hearing about LTE's outdated equipment, particularly since the company would update its machines as part of a new contract. "I think that's a phony argument," he said.

Of Intralot, he said, "We often don't run into them [when competing], because they are not qualified to run the larger systems." GTech has contracts in 25 states and the District, he said.

Intralot has contracts with South Dakota, Louisiana, Maine, New Hampshire and Vermont. It recently beat out GTech in Ohio. GTech has demanded to review the bid scores.

Years ago, when LTE won its first contract, Manning filed a lawsuit claiming that aides of Barry, then mayor, had tried to interfere with the deal. Back then, LTE was not as politically connected as other minority-owned firms trying to get into the industry. LTE has had years to successfully change that.

The D.C. Council has a little less than 45 days to vote again. Some have said the city should just start over.

Gandhi's office would not disclose the members of the panel that picked W2I because LTE's appeal is pending. Nickles said that "there are commercial secrets" in the process. (Young has said he was the chief panelist.)

"There is a consistent theme," Marchant said, "which is, one, a lack of transparency; two, the betrayal of the facts."

One résumé in W2I's list of potential employees is for its chief operating officer. Julie Chase, spokeswoman for the company, would not reveal the identity. The credentials and accomplishments point to one person: Anthony Cooper.

He is the chief operating officer of the Education Lottery in South Carolina, where Intralot recently won the state gaming contract.

He is former executive director of the D.C. Lottery.

And he is Jerry Cooper's son.

Staff writer David Nakamura contributed to this report.

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