The District’s lottery vendor was directed this week to pay D.C. more than $1.4 million in damages stemming from a 2006 incident in which contract employees manipulated the gaming system to invent thousands of fake tickets.
The order against Lottery Technology Enterprises and its partner GTECH was issued Wednesday, a day after Mayor Adrian Fenty resubmitted to the D.C. Council a proposed $120 million, long-term deal with rival lottery firm W2I.
The deal with W2I, a partnership of D.C.-based W2Tech and Greek firm Intralot, was tabled once and withdrawn twice before the council adjourned for summer recess.
Fenty had promised to offer it again upon the council’s return, continuing a nearly yearlong political fight.
LTE violated its contract by supplying the government “with an online lottery gaming system and communication system that were vulnerable to fraud and theft, hired subcontractors who exploited that vulnerability and failed to heed warnings that the systems had been compromised,”
Contracting Officer Eric Payne wrote to LTE Chief Executive Officer Leonard Manning.
Specifically, subcontract workers with LTE used a weakness in the lottery’s radio communication system “to print tickets that were charged to the accounts of legitimate agents,” Payne wrote.
The perpetrators printed $86,166 in tickets and collected more than $72,000 in winnings between December 2005 and June 2006.
Payne fined LTE and GTECH $1.44 million, which includes the tickets, the investigation, legal fees, staff time and $979,557 “for damage to the Lottery’s reputation, loss of public trust, and loss of goodwill” with retailers.
Payne’s damages order was his third this year: LTE was assessed $351,482 in liquid damages in July for performance breakdowns in 2007 and 2008.
“This is an unprecedented historical breach in the lottery system,” said Crystal Wright, spokeswoman for W2I. “Maybe this will turn the tide. I just don’t know how much more you need.”
Ann Walker Marchant, spokeswoman for LTE, said the $1.4 million fine is a “very thinly veiled attempt” to damage LTE’s reputation just as the council is slated to reconsider the lottery contract.
But the council, she said, “will see through it.” LTE’s attorneys, Marchant said, “are reviewing our options” with regard to the damages.
Council members, who maintain close ties to Manning, have expressed little interest in replacing the city’s 26-year lottery administrator no matter the system’s troubles.
The Fenty administration, meanwhile, has close ties to W2I’s managers, including real estate developers Warren C. Williams Sr. and Jr. W2I’s backers have said the firm, which won a competitive bidding process, will modernize the lottery system while saving the city about $5 million a year.
