D.C. Superior Court Judge Eugene N. Hamilton yesterday temporarily blocked the District's Lottery Board from signing a lucrative contract to operate the city's first legalized daily numbers game.
He said there is a "substantial likelihood" that the agency did not adequately consider the minority participation levels proposed by the three competing bidders.
The judge, echoing the same complaint as a city contract review committee last week, voiced concern that the board may not have had enough information about the companies' offers to include minorities in their ventures and could actually be awarding the contract to a "minority shell or front."
The review panel said the board did not request sufficient information from the companies to ensure that they would meet the District's legal requirement that at least 25 percent of the anticipated revenue from the game would go to minority-controlled firms.
Hamilton's order will delay the District's daily numbers game well beyond the planned July 18 starting date because the lottery board has told the three companies it would give the winning firm 120 days to put the game into operation after signing the contract. That would most likely push the opening date back to around Labor Day at the earliest.
Chagrined lottery officials said little as they walked briskly from Hamilton's courtroom after hearing his decision.
"It's cost us money and it's going to continue to cost us money," said board chairman Brant Coopersmith.
Lottery officials have previously said that it is costing the cash-strapped city government about $100,000 each day the start-up is delayed, based on an anticipated annual wagering of $100 million.
Hamilton, acting at the request of the two losing bidders, issued a 10-day temporary restraining order that prohibits the board from signing the contract with Lottery Technology Enterprises. He signed the order less than two hours before the agency would have been free to ratify the selection it made last month.
The judge scheduled a hearing April 28 on the request by the losing bidders, D.C. Data Co. and Columbia Gaming Services Inc., for preliminary and permanent injunctions against the board's selection of Lottery Technology.
In the meantime, lawyers for D.C. Data and Columbia Gaming plan to take testimony from the board's five members and others who are knowledgeable about the complex selection process to try to determine exactly how Lottery Technology was selected.
"Based on the review committee's report," Hamilton said, "there's a substantial likelihood of the losing bidders prevailing on the merits" of their claims.
During a two-hour hearing, Jeanette Michael, the lottery board's general counsel, tried to convince Hamilton that contrary to the three-member review panel's opinion, the board did not deviate from its published guidelines in awarding the contract to Lottery Technology.
She said at least four of the five board members had properly used a mathematical formula to rate the three bidders on their minority participation levels.
The contentious fight for the contract, which may be worth $4 million or more annually to the winning firm, centers on how much money will actually wind up in the pockets of minority partners of white-controlled computer firms seeking to run the D.C. game.
The board said it would give equal consideration on a 100-point scale to the bidders' proposed price to operate the game and to the degree that they had included minority partners in their ventures.
Lottery Technology, a joint venture of a Rhode Island-based computer firm and four minority-controlled D.C. firms, and D.C. Data both said they would give 60 percent share of any profits to their minority partners, while Columbia Gaming said it would give 85 percent.
But the contract review committee questioned whether 25 percent or more of the total amount wagered in the game would go to the minority firms, as opposed to a division of any profits.
In deciding the relative merits of the three bidders on this issue, the board awarded all three the maximum 20 points in that category.
Hamilton sharply questioned Michael on how this could be done since Columbia Gaming's proposed minority share was higher than the other two bidders'. She said that all three were presumed to be 60 percent minority-controlled, a contention disputed by Columbia Gaming. Michael did not address the question of cash flow to the minority partners.