Opinion: Is there fire where there's smoke in DC?
Legal Sports Report

The DC Sports Betting Contract Fiasco Is Nothing New For The District Council

DC sports betting

This past week, the Washington, D.C., Council voted to approve a sole-source, no-bid D.C. sports betting contract with Greek gaming company Intralot.

The deal finally received approval more than six months after the D.C. Council passed a sports betting law and decided Intralot would be the only provider.

The award of the contract to Intralot appears to have been given a kick forward by a report from market research company Spectrum Gaming Group.

The Spectrum report suggests that if Washington, D.C., were to launch sports betting in 2019 as opposed to 2022, in three years the district would generate:

  • Roughly twice as many jobs.
  • Almost twice as much business revenue.
  • Just under half of the estimated net new economic activity projected over the next 10-year period.

Hold the phone

The crushing impetus for D.C. to move forward with such urgency stems from a purported first-mover advantage. West Virginia launched sports betting, and Maryland and Virginia discussed it, but never advanced bills to a point where it was likely to pass.

Umm, what?

The urgency to pass the bill and not going through the normal Request For Proposal (RFP) process was two-fold, according to the Spectrum report.

  1. The lottery provider “cannot be expected to make a substantial investment,” if they are limited to the duration of the existing contract.
  2. The RFP process can take up to three years.

Based at least partially on these suggestions, the D.C. Council moved forward without allowing competitors IGT and Scientific Games to bid.

As what happened in D.C. settled in, and there was time to digest the absurdity of a no-bid contract being awarded in a hypercompetitive market, the situation gained more attention.

DC sports betting contract becomes national news

Back in June, the Washington Post ran a story with the headline:

“Most of the District’s $215 million sports gambling contract to benefit companies with ties to city hall”

In fact, the report revealed that the beneficiaries included:

  • A former D.C. State Board of Education official.
  • A former worker and her associate on Mayor Muriel Bowser‘s political campaigns.
  • Councilmember Brandon Todd.
  • An executive who allegedly previously falsified documents related to bidding on a contract.

Councilmember David Grosso said, “You don’t give a contract to your friends.”

Chairman Phil Mendelson argued that the awarding of subcontracts to politically connected groups was just the nature of D.C. business. It is a result of a requirement that a certain amount of contracted work was to be performed by local entities.

Flashback to earlier years

This is not the first time that D.C. Council’s awarding of a contract with Intralot has come under fire. Indeed, an even bigger contract (without adjusting for inflation) caught the attention of federal authorities less than a decade ago.

The original D.C.-Intralot deal came about after a contractor with another provider was rejected as a result of connected parties being too close to the then-mayor. After the initial deal was rejected, the contract was sent out for the second round of bids, this time with Intralot as the sole bidder.

The 2009 Intralot contract generated significant federal law enforcement attention, including FBI investigation, a possible grand jury investigation, and the commissioning of a report by the D.C. Office of the Inspector General.

The inspector general report

The D.C. Office of the Inspector General released its report of an investigation into the “Chief Financial Officer’s Lottery Contract Award” on Jan. 20, 2012.

The request for the inspector general to investigate the awarded contract originated from the D.C. Attorney General and the district’s then-chief procurement officer.

What was the IG looking into?

The inspector general’s office was looking into four related issues:

  1. Should the lottery contract have been returned to the contracting officer after the D.C. Council became aware that Intralot was “adding major players to the team?”
  2. Whether there was a sufficient “responsibility assessment of Intralot,” and their subcontractor partners, Emmanuel Bailey’s Veterans Service Corporation (VSC), and DC09, LLC.
  3. Whether allegations of misrepresentations by VSC, reported in the Washington Times, relating to their business status and references are supported by evidence.
  4. Whether councilmembers acted properly in reviewing and considering the awarding of “lottery contracts or drafting and enacting online gambling.”

The IG’s findings

In regard to the first question for inquiry, the inspector general found that when major players were added to the team, that “changed the contract requirements in a material fashion.” This should have caused the issuing of an amended RFP and “allowed the three bidders to resubmit a best and final offer.” These should have then been resent to the council for review.

The second route of inquiry was regarding a sufficient review of a “responsibility assessment” by the contracting officer. The inspector general found that the conduct was within the requirements of the D.C. Code.

In respect to the allegations mentioned in the article, the office of the inspector general determined:

“even though the purported misrepresentations largely were substantiated, there was insufficient evidence that [the Chief Financial Officer] was aware of the misrepresentations let alone considered them.”

The big question

Did D.C. councilmembers act improperly in the eyes of the office of the inspector general? No, or at least there was insufficient evidence that the councilmembers had:

“violated standards of conduct in the Council’s review and consideration of either awarding of the lottery contracts or drafting and enacting of online gambling.”

The song remains the same

The 2012 report, which concluded that councilmembers had not acted improperly, ruffled some feathers but ultimately resulted in the Intralot deal remaining in place.

The circumstances are different this time around for D.C. sports betting. No longer are we talking lottery contract and iGaming. Now we are looking at sports betting, although many of the same characters are involved in another questionable contract.

That includes Intralot and Bailey. There is one cast member that has not been confirmed for the D.C. sports betting sequel: the office of the inspector general.

Whether the inspector general will take a look at this contract —let alone reach a different conclusion than the one reached in 2012 — is unknown. There certainly appears to be a lot of smoke generated any time the D.C. Council and Intralot get together, even if there is not an obvious fire.

Editor’s note: A previous version of this article linked to the incorrect Spectrum report.

John Holden
- John Holden J.D. / Ph.D. is an academic. His research focuses on policy issues surrounding sports corruption.

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