The D.C. Lottery Board yesterday for the second time awarded a highly lucrative contract to operate a new daily numbers game to Lottery Technology Enterprises (LTE)--the firm that previously won the contract, only to see the initial selection rescinded because of intense legal and political pressure. However, board members expressed serious reservations about allowing La Mancha Inc., the firm currently handling advertising for the District's instant lottery game, to also promote the new numbers game, as LTE proposed in its bid.
The D.C. Inspector General's Office is investigating allegations that surfaced this week that La Mancha may have mishandled $2.2 million in lottery revenues that were earmarked for advertising the instant game. Company officials have denied those allegations. "In the event the Inspector General's report reveals improprieties or illegal activity on the part of La Mancha, the board will take action to sever that portion of the (LTE) contract," said Board Chairman Brant Coopersmith.
Also, bowing to pressure from council member Nadine P. Winter (D-Ward 6), a critic of the lottery operations, the board agreed to study the feasibility of eventually assuming operational control of the daily lottery, instead of contracting out the work, to save money.
In selecting LTE to operate the daily numbers game yesterday, the lottery board capped months of legal and political wrangling over the three-year contract that is expected to generate $100 million in sales in the first full year of operation.
The board first awarded the contract to LTE in March, and losing bidders immediately challenged the decision in court. With that case still pending and threatening to indefinitely delay the beginning of the new game, Mayor Marion Barry persuaded the board May 1 to cancel its initial award and to reopen the bidding.
Only two companies bid for the contract the second time: LTE and IBS Digit Corp., a firm largely controlled by Marion (Duke) Green, the company president, and William B. Fitzgerald, president of Independence Federal Savings and Loan Association.
Yesterday, the board voted 3 to 0, with two members absent, to award the contract to LTE, a group that includes Gaming Systems Corp., a Providence, R.I., computer firm, and four minority-controlled firms from the District.
Under terms of the new contract, which was signed by lottery officials yesterday afternoon, LTE would receive 3.39 percent of the first $2 million in weekly lottery revenues, 2.55 percent of the next $2 million in revenues and 1.7 percent of any revenues that exceed $4 million.
The four minority firms, New Tech Games Inc., Network Technical Services Inc., Opportunity Systems Inc., and Prism Corp., are assured of receiving practically all of LTE's revenues in the first year of the contract, according to board officials.
The contract also allocates 2.25 percent of gross revenues for advertising and promotion. However, details of that provision won't be worked out until the inspector general's office completes its review of La Mancha.
La Mancha, which provides advertising services to Games Production Inc., the operator of the city's current daily lottery, was accused of mishandling lottery revenues in a letter written June 13 by John R. Koza, chairman of Scientific Games Inc. Koza's firm, which also has part of the lottery contract, had a falling out with officials of Games Production and La Mancha.
Carolyn B. Lewis, one of the two lottery board members who were not present at yesterday's meeting, said in a letter to Chairman Coopersmith that she would have opposed awarding the contract to LTE at this time.
"If La Mancha may not have lived up to the terms of its contract, and, if there are many questions that have not been answered, how can we, as representatives of the citizenry, select between two companies, one of which proposes to subcontract its advertising responsibilities to La Mancha?" she wrote.
Also yesterday, the board voted voted 3 to 0 to issue a request for contract bids to provide tickets and other services for a possible sixth instant lottery game that is under consideration.