In addition to Intralot, subcontractor Veterans Services Corporation (VSC) was also fined $1.5 million, bringing the total to $6.5 million. The fines were announced by the DC office of the attorney general (OAG).
The OAG said that when Intralot sought to secure the controversial contract in 2019, it did so with the premise that “VSC would perform 51% of the work – all with its own resources – and receive an equivalent percentage of the revenue”. DC law requires that 35% of large government contracts be subcontracted to local small businesses. The benefits to VSC and other local businesses was said to be among the primary reasons that the contract was awarded.
But that premise turned out to be false, investigators said. Instead, the two parties secretly agreed that “an Intralot subsidiary – not VSC – would provide most of the resources” for the contract. VSC then funnelled back “much of the contract money Intralot had promised to spend subcontracting with VSC”.
According to the OAG, VSC owner Emmanuel Bailey was paid hundreds of thousands per year for his participation in the scheme. Both sides reportedly falsely inflated the amount of money spent, submitted false documentation and verification forms and misrepresented quarterly reports.
AG calls Intralot contract “a sham from the start”
On top of the fines, additional terms of the settlements were also announced. They stipulate that both companies must “accurately report contract and subcontract information” in any future contracts, plans or bids in the district.
There is also a mandate for Intralot not to provide resources to a subcontractor and for VSC not to use undisclosed resources from another entity.
“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,” attorney general Brian Schwalb said in a statement. “My office will continue to enforce the False Claims Act to root out contracting fraud, hold accountable anyone who tries to get over on the District and its taxpayers and level the playing field for law-abiding companies seeking to do business with District government.”
Scheme was uncovered in 2021
The alleged scheme was discovered as early as 2021. At that time, the two companies “said they reformed their arrangement” and “claimed they would cease” the misconduct. Intralot then revealed some $4.3 million in previously undisclosed payments from VSC.
“By the time they said they reformed their arrangement in 2021, Intralot and VSC had submitted over 100 fraudulent invoices – invoices that sought payment under a contract induced by deception and that falsely implied compliance with District law,” the OAG said.
In their settlement agreements, both Intralot and VSC denied any prior wrongdoing.
Latest chapter in a tumultuous story
Overall, the fines are just the latest scandal in the disaster that has been the DC sports betting rollout. The controversy of Intralot’s no-bid contract was subsequently compounded by years of underperformance from its platform GambetDC.
In March, after the frustration reached a boiling point, FanDuel was approved to take over as the district’s sole platform. It held a monopoly for three months and, during that time, its outperformance of GambetDC was stark.
The council then voted in late June to scrap the sole-source model altogether in favour of an open market. Since then, all major bookmakers have entered the market. This includes FanDuel, DraftKings, BetMGM, Caesars, Fanatics and, most recently, ESPN Bet. The latter just announced its new market access deal on 13 January.
