Intralot and a subcontractor, Veterans Services Corporation (VSC), have agreed to pay a total of $6.5m to the District of Columbia following an investigation by the Office of the Attorney General (OAG).
District regulators uncovered misconduct in Intralot and VSC after scrutinising the companies’ operations and financial arrangements.
Although Intralot and VSC claimed to have reformed their practices in 2021, the investigation revealed ongoing violations, including the submission of over 100 fraudulent invoices.
These invoices falsely implied compliance with District laws and the terms of the original contract, according to an Office of the Attorney General for the District of Columbia statement.
Attorney General Brian L. Schwalb said in the statement: “This is a warning to any company that tries to manipulate and exploit District contracting laws, especially laws intended to build the capacity of the local businesses vital to our economy.
“Intralot and VSC’s sports betting deal was a sham from the start — an elaborate scheme to secure a lucrative, high-profile opportunity on a sole-source basis while circumventing the District’s small business contracting laws.”
As part of the settlement, Intralot will pay $5m, while VSC will contribute $1.5m. Both companies have agreed to implement measures to ensure transparency in future contracts.
This includes accurate reporting of subcontracting details and restrictions on the use of undisclosed resources provided by third-party entities.
A sham from the start
The probe revealed the companies misled city officials to secure and profit from a multimillion-dollar, multiyear contract to manage the District’s lottery and GamBetDC sports betting operations.
The contract, awarded in 2019, was controversially approved on a sole-source basis by the DC Council, bypassing the standard competitive bidding process.
Greece-based Intralot and VSC presented the agreement as one that would benefit small businesses in compliance with the Small, Local, and Disadvantaged Business Enterprise Development and Assistance Act (SBE Act).
The legislation mandates that at least 35% of large government contracts be subcontracted to local certified business enterprises (CBEs).
Intralot, which has lottery and/or sports betting contracts with 11 US states and DC, and VSC falsely claimed that VSC would perform 51% of the work under the contract, using its own resources, and would receive a proportional share of the revenue.
In reality, an Intralot subsidiary provided most of the resources required for the project, and VSC funnelled significant portions of its payments back to Intralot.
This covert arrangement allowed Intralot and VSC to present a facade of compliance with the SBE Act while securing millions of dollars in payments under false pretences.
Documentation submitted to District agencies and the DC Council, including subcontracting plans, verification forms, and quarterly reports, were falsified to support this scheme.
These documents misrepresented the extent of work performed by VSC and other CBEs, as well as the financial compensation allocated to these entities.
From clumsy beginnings to complete failure
The original contract was mired in controversy even before the revelation of fraudulent practices. Approved by a narrow 7-to-5 vote in the DC Council, the $215m, five-year agreement faced criticism for its lack of competitive bidding and potential conflicts of interest.
The deal disproportionately benefited subcontractors with political ties, some of whom had limited experience in the sports gambling industry. However, the contract was championed by council member Jack Evans, whose involvement raised ethical concerns.
Evans faced intense scrutiny for ethical lapses during his tenure on the DC Council, particularly regarding conflicts of interest.
He was accused of leveraging his position to benefit private clients through consulting work, raising serious concerns about overlapping interests and the potential misuse of his public office for personal gain.
In 2019, the DC Council launched an investigation into Evans’ conduct, uncovering evidence that he had violated ethics rules by promoting private business interests while serving as a public official.
The findings of the investigation, coupled with mounting public and political pressure, ultimately led to his resignation from the Council in January 2020.
Industry leaders, including executives from FanDuel and DraftKings, argued against the District’s monopoly model for sports betting, advocating instead for an open, competitive market.
They asserted that such a system would generate more revenue for the city and offer superior services to consumers. The subsequent underperformance of the GamBetDC platform has validated these predictions.
FanDuel assumed control of sports betting operations in Washington DC in May last year and quickly outperformed its predecessor, GamBetDC.
During its first full month in the district, FanDuel reported a total of $29.7m in wagers for May, representing a 450% increase compared to the $5.4m in bets placed during the same month under Intralot’s management the prior year.