Members of the D.C. Lottery and Charitable Games Control Board, under fire for their handling of the city's first gambling franchise award, say they chose the winning company because it offered more experience and greater ticket security than two competing firms.
The criteria for the lucrative award have become a matter of dispute since Scientific Games Development Corp. of Atlanta won the contract last Monday. The two losing companies, Glendinning Companies Inc. of Westport, Conn., and Raven Systems and Research Inc. of Washington, have formally protested the award, charging that the gambling board failed to follow its own procedures in making the decision.
The five-member board has refused to discuss its action publicly, saying that its lawyers have advised keeping its deliberations private until a final contract is signed.
"What seems logical is not necessarily lawful," said Brant Coopersmith, chairman of the lottery board. "There's nothing we'd like better to do than to release all of the information." But, he said, "Our hands are tied. We were closely advised on this by both the corporation counsel and the department of general services."
A majority of the board members said privately, however, that Scientific's experience and the security of its tickets were the factors that tipped the balance in its favor. One member said that in independent testing only two of nine tickets submitted by Scientific could be read by a vendor without being opened, while tickets from the other firms were less secure against tampering.
Scientific operates games in 10 of the 15 states that sanction instant lotteries. The firm will run the first Washington instant lottery in a joint venture with Games Production, Inc., a local minority-run firm.
Scientific Games vice president Daniel W. Bower said his firm sought a minority partner because of provisions in the franchise contract that require minority participation. He said the local firm will initially handle advertising and marketing, but its workers will eventually be trained to run the franchise, with Scientific providing the tickets.
Bowers said his company approached several groups of Washington businessmen before settling on Games Production Inc. "Most of the people we talked to were only interested in investing," he said. "This group was actually interested in running the company. They seemed to know more about advertising and marketing than the other people we talked to."
Bowers said Games Production Inc. will receive 65 percent of the contractors' share of the game's proceeds, and Scientific will receive the rest.
The contract calls for the companies to run up to five separate instant lotteries during a 14-month period. The first game is expected to generate about $10 million in sales. Of that amount, half will be returned to players in prizes, 30 percent will go into the city's general fund, and the remainder will go to the contractors to pay operating costs. The sales generated in later games will depend on the number of tickets the city orders.
Neither Bowers nor the board would reveal specific figures on the value of the contract. The board has declined to say whether Scientific's bid promised more money for the city than did the losing firms.
Games Production Inc., was organized in October 1981. It is headed by former Black Enterprise magazine advertising executive Robert S. Bain, liquor store owner Warren Williams and Joseph Suter, who operates the Bloomingdales Community Center check-cashing and food stamp outlets in Washington and Maryland.
One of the original incorporators of the group was Washington lawyer William A. Borders Jr., who was convicted March 29 of conspiring with a U.S. District judge in Miami to take a $150,000 bribe. However, Borders resigned as both an acting board member and registered agent of Games Production Inc. on Nov. 4, 1981, according to documents on file with the D.C. Recorder of Deeds.
In an eight-page statement distributed from Games Production Inc.'s offices on 1832 First St. NW, company vice president Bain said the firm's principals "are life-long residents and respected businessmen in the District of Columbia." He said the firm has "a significant lottery-experienced staff with Ms. Gloria Decker as general manager."
Decker, a Democrat, was appointed executive director of the New Jersey State Lottery Commission in July 1977 and served in that post until last month when she was removed by a Republican governor.
Officials of the losing companies have privately criticized her for authorizing Scientific to reprint in a trade magazine a letter she wrote about that company's lottery operation in New Jersey. The letter, characterized by one competitor as "a gushing endorsement" of Scientific, was written while she was still executive director of New Jersey's lottery commission. It appeared in a full-page advertisement in the January 1982 issue of a lottery trade magazine called "Public Gaming."
"I really don't understand what the problem is if you write a letter that is absolutely factual," Decker said of the letter, which complimented Scientific for furnishing "attractive tickets" and credited the firm with boosting lottery ticket sales in the state by 274 percent. She said she was not paid for the use of the letter as an advertisement.
Last week's award came just three weeks after the board received proposals to operate the city-sanctioned instant games scheduled to begin this fall.
Douglass W. Gordon, who became executive director of the lottery board last August after working for several years for the D.C. Department of Human Services, quickly assembled a six-member evaluation team of city officials to conduct an analysis of the bids.
Members of the evaluation team, including Gordon's old boss--former D.C. Department of Human Services director Joseph P. Yeldell, now an aide to the city administrator--met with John Quinn, New York state lottery director, and Ralph Batch, director of the Delaware Lottery, to get advice during an organizational meeting, then reviewed the proposals individually during the next few days.
The evaluators sent their comments to Gordon, who said he summarized the reviews and sent them to board members on May 17. The board met several times after that to review Gordon's summary. They individually rated the bids in five categories set out in the bid proposals--cost, experience, quality of product, security and employment practices and minority business participation--discussed their scores and announced their decision last Monday.