D.C. Department of Human Services officials said yesterday they were unaware that a local businessman tentatively chosen for a $1.3 million family-services contract has a criminal record. Some of his convictions were related to gambling activities at two of his business operations.

Two weeks ago, DHS announced that Cornelius C. Pitts would be given the contract to provide temporary shelter to hundreds of evicted and otherwise homeless families in the Pitts Motor Hotel, which he owns and operates at 1451 Belmont St. NW.

Pitts pleaded guilty in 1981 to possession of illegal numbers slips and was fined $100, following a D.C. police raid on a variety store he owns at 1902 14th St. NW, according to court records.

In 1976, Pitts was convicted on federal charges of operating a lottery at another property he owns, the Ninth Street Market at 1408 Ninth St. NW, and fined $500, court records indicate. A year earlier, he was convicted of carrying a pistol without a license and fined $50, the records show.

Pitts was first convicted in 1958 for maintaining gambling premises, and sentenced to 7 to 21 months at the D.C. Jail, court records indicate. In 1970, he was twice fined $100, according to court records.

The 1976 charge is a felony, the others are misdemeanors.

"We did not know Pitts has a criminal record, and since we did not know it we would have to look into that ourselves and take it his criminal record into advisement and make a decision," said Joan Reeves, a DHS spokesperson.

"We've never had any complaints about Pitts," she said. "He's always provided the services that have been stipulated in our contract."

Department officials plan to request legal advice from the D.C. Corporation Counsel concerning Pitts, she said.

The federal code states that a government agency is not "necessarily" required by law to deny a contract to someone with a criminal record. According to the code, the final decision "shall be made within the discretion of the executive agency and shall be rendered in the best interests of the government."

Pitts, who during the past 10 years has intermittently been under contract to the city to provide food and shelter for homeless families, could not be reached for comment yesterday.

The city is currently using the Parkside Hotel at 1336 I St. NW as its primary center for temporary shelter. But the hotel is scheduled to close for renovations at the end of this month. City officials have said they are hard-pressed to find shelter for the 40 families there. Each year, about 400 families seek temporary shelter through DHS.

D.C. police said that the Pitts hotel, right off the 14th Street NW corridor, is crime-ridden and infested with drug dealers and that 17 arrests have been made there since April of last year.

Under terms of the city contract, which would become effective July 1 if DHS does not change its mind, the Pitts hotel would be used exclusively for homeless families.

Pitts won the year-long contract over two competitors that submitted bids to DHS late last year--the House of Ruth at 651 10th St. NE, and the 10th Street Baptist Church, 1000 R St. NW.

DHS officials have said that Pitts was not the lowest bidder on the contract, but they have declined to say why he was chosen. Pitts said after the agreement was announced, "The contract was an absolute must for me. I just don't know how I would be able to make it without it."