The District of Columbia awarded a contract to a Greek company by the name of Intralot to bring legal sports betting to the nation's capital. Many in the D.C area have questioned the no-bid contract due to the fact that Intralot's local business partner, Veterans Services Corp. has no employees.
Intralot's Deal with Local Business Draws Suspicion
When Greek company Intralot was awarded the $215-million-dollar contract to bring legal sports betting to the District of Columbia, they needed a local business on board. District law states that companies with large public contracts must subcontract some of the work to small local businesses to create new jobs, expand the tax base and grow the local economy.
It appears at first glance that Intralot did comply by getting local firm Veterans Services Corp. A closer look reveals that the local business might have misrepresented themselves. Veterans Services is run by a man named Emmanuel Bailey. Even though Bailey lives and works in Maryland, the company qualifies as a local because it was registered to his mother's house in D.C. His 75-year-old mother is also the majority shareholder of Veterans Services.
Veterans Services Corp Compliant According to Paperwork
An investigation done by the Washington Post found that Veterans Services is actually a subsidiary that was set up by Intralot to look like an independent small business. This was done in order to comply with district law that seeks to support the local economy.
Kristi Whitfield is the district's Small and Local Business Director and she insists that the company appears compliant based on their paperwork. Councilmember Elissa Silverman is not buying that answer and called it "absurd". Silverman is also calling for Attorney General Karl Racine and District Financial Officer Jersey DeWitt to take a deeper look at Intralot's contract and investigate Veterans Services' legal compliance. Many in D.C feel like this entire situation may amount to fraud.
Veterans Services Corp and DC09
An already complicated story becomes even more difficult to fully grasp with the involvement of a company by the name of DC09. The company was formed ten years ago by Intralot and Veterans Services. At the time, Intralot was trying to acquire the contract to run the District lottery. According to Bailey, because Veteran Services owns 51% of DC09, as such it will be responsible for that much of DC09's work for Intralot according to him.
The problem with that statement is that Intralot funded the creation of DC09. In effect, they are the ones that control the company. Majority shareholder, Barbara Bailey's controlling stake over Veterans Services does not extend to DC09. That hardly seems to qualify DC09 as a small local business.
Over the past five years, the six-figure compensation that has been paid to Emmanuel Bailey on an annual basis has come from DC09 and not Veterans Services. All of this is documented in Intralot's financial records. Curiously, when Intralot submitted their subcontracting plan, they did not mention DC09.
The State of Maryland Was Not Buying Their Story
In 2016, Intralot submitted a proposal for the Maryland lottery contract. An evaluation committee commented at the time that Veteran Services "has no capital, very limited business or industry experience and was unable to provide a coherent and consistent explanation of the role it will play in the operation of the gaming system," according to reports.
The evaluation committee's conclusion was that Intralot's partnership with Veterans Services resulted in an entity that was "weaker than Intralot on its own."
That ruling by the state of Maryland makes the decision by DC to recently approve a plan to delegate up to $109 million in work to Veterans Services very suspicious to a lot of people in the nation's capital.
Councilmember Jack Evans Involvement Raises More Questions
In September of 2018, Councilmember Jack Evans and five other D.C Council members introduced the Sports Wagering Lottery Amendment Act of 2018. Back in 2016, Evans formed a consulting firm with lobbyist N. William Jarvis.
It just so happens that DC09 is a client of Jarvis'. The Committee on Finance and Revenue oversees who is awarded the lottery contract. Jack Evans is the chair of that committee. There is an obvious conflict of interest here considering the business relationship between Evans and Jarvis. As a lobbyist, it would technically be possible to hire a direct associate of the committee's chair (Jarvis) to lobby the committee chair himself (Evans). This gives DC09 an unfair advantage over any competition.
Anyone that thinks that is an exaggeration would only need to take a look at Jarvis' lobbyist activity report submitted to the Board of Ethics and Government Accountability (BEGA).
According to the reports, Jarvis has been lobbying the Council on behalf of DC09 since 2013. In 2014, he reported at least six contacts with Evans and his staff to discuss contracts for lottery services. He also reportedly contributed $2K to Evans' mayoral campaign.
Legal Sports Gambling in DC Still Has Hurdles
It was argued that having a bidding process for the legal sports betting contract would delay the launch by 18 to 24 months. It appears that the no-bid process is actually in jeopardy of creating a situation that could turn out to be even worse.
It's hard to see how any of this helps the community or local business which could derail the entire process. Officials had hoped that by awarding the contract to the already established Intralot, they might be able to launch early in 2020. With all of the details of how the contract was secured coming to light, that seems all but impossible at this point.
To make matters worse, D.C sports betting app developer, Dylan Carragher is suing the city government for awarding Intralot the no-bid contract. His legal team believes that the bid was granted illegally. Unfortunately for the gaming community in D.C, this affair looks like it's a long way from finding a resolution.