Sports betting in D.C. has the stink on it
By Jeffrey Anderson Photo by Andy Del Giudice
Superior Court Judge John Campbell’s recent ruling handed the District of Columbia a temporary victory in a legal challenge to the controversial no-bid, $215 million D.C. Lottery contract that includes sports betting.
On behalf of a local businessman who wanted to bid on the contract, attorney Donald Temple argued that the Office of the Chief Financial Officer (“OCFO”) improperly awarded the sports betting contract to incumbent lottery vendor Intralot based on an invalid attempt to exempt it from D.C. procurement law.
Campbell ruled from the bench that the D.C. Council had legislative authority to pass the Sports Wagering Procurement Practices Reform Exemption Act of 2019 (“Exemption Act”), agreeing with the D.C. Attorney General’s premise that the city hadn’t exempted the award from competitive bidding, but rather amended procurement law to exempt it from competitive bidding. (Emphasis provided.)
Campbell reversed a temporary restraining order and denied a preliminary injunction with no legal analysis and little discussion, and signaled that he does not see any likelihood of success on the merits for Temple’s client, Northwest D.C. resident Dylan Carragher.
The ruling, however, contradicted Judge Joan Zeldon, who recently found it likely that Temple would prevail at trial on his legal argument that the Exemption Act cannot exempt OCFO contracts from procurement law without amending the federal Home Rule Act.
The Home Rule Act created the OCFO, and requires it to follow laws such as the Procurement Practices Reform Act of 2010 (“PPRA”). The D.C. Council can amend the PPRA easily enough if there are enough votes. It can amend the Home Rule Act too, but not without a voter referendum.
Temple doesn’t believe the Council intended to amend the PPRA. There is no discussion in the legislative record or anywhere else to support that notion. He says the Attorney General has been forced to adopt “an ex post facto narrative to force feed its newly created legal argument.”
The opposing court rulings pose a dilemma for the District in its urgency to launch sports betting, Temple says. “We have two Superior Court judges with conflicting decisions that will have to be decided at the Court of Appeals,” he tells District Dig.
Protracted litigation will open up the OCFO and the Council to legal discovery, Temple explains, and that threatens to shed light on the machinations behind the heavily lobbied effort to launch sports betting. The possibility of the appeals court ruling the contract to be illegal also presents financial risks for the District, he says, as it might not be able to recoup public funds spent on launching sports betting.
“It’s a potential quagmire. The D.C. Council needs to be careful to act within the law or wait until these opposing rulings are reconciled.”
Maryland attorney and procurement law specialist Scott Livingston has seen such scenarios go sideways: “In other jurisdictions, when the executive spends taxpayer dollars under an unlawful contract, the courts ordinarily compel the executive to retrieve those dollars from the contractor who provided services under the illegal contract.”
All of this comes as controversy swirls around Ward 2 Councilmember Jack Evans, the subject of an investigative report by O’Melveny & Myers about to drop this week, and the target of a federal grand jury probe.
While the scope of those investigations is unclear, one thing isn’t: Whatever the adverse findings, the stink on Evans is bound to waft over and stick to the sports betting contract.
Unfortunately for the OCFO and the members of the Council who supported the Exemption Act and the ensuing contract, Evans is the leading proponent of sports betting. At the same time, he has maintained a business relationship with Bill Jarvis, the lobbyist for DC09 LLC, a joint venture between Intralot and a local firm that helps satisfy minority contracting requirements.
The relationship between Jarvis and Evans presents at the very least the appearance of a conflict of interest. That relationship, and others, have caused Evans to limit his public advocacy for sports betting. Yet even as he stayed quiet, while the Council debated the Exemption Act, he remained a large presence on the dais.
Other potential conflicts exist. Before the OCFO came up with the Exemption Act, government insider Thorn Pozen, a lobbyist for Intralot’s partner on sports betting, wrote a memo that Intralot used to try and persuade the OCFO to append sports betting to an automatic lottery contract renewal.
The OCFO’s lawyers and the Attorney General’s office shot down that proposition, but Pozen remains very much in the picture: Shortly after the bill passed and the contract was awarded, The Washington Post reported that Pozen’s law firm would receive up to $300,000 for “legal services.”
Should the O’Melveny report—or Temple’s lawsuit—produce evidence of inside dealing related to sports betting among Evans or any of his business associates, friends or clients, it could strike a damaging blow to a dubious contract.
Likewise, adverse discovery much less a decision by an appellate panel that invalidates the Exemption Act would leave a stain on the credibility of Chief Financial Officer Jeffrey DeWitt, who expended an unusual amount of political capital in lobbying for it.
In his complaint, Temple describes the Exemption Act as a “knowing and collaborative, if not collusive, circumvention of applicable District procurement laws” that violates D.C. citizens’ rights to receive fair and competitive prices for government contracts.
This allegation points to DeWitt and a number of Council members who voted for the no-bid sports betting contract, some of whom might have gained from it.
A prime example is Council Chairman Phil Mendelson. Mendelson is a case study in the risks associated with being seen as an enabler of a toxic colleague. He has been careful to contain the simmering outrage among his more progressive colleagues, for a time under the auspices of protecting the credibility of the body itself.
But Mendelson went a step further: When it became clear that Evans was too damaged to introduce the Exemption Act, he took it upon himself to do it. He then used his power and expert skills to maneuver the bill into law, all while pushing back on calls for stiff Council discipline and expulsion of Evans from key committee assignments.
Mendelson’s decision to allow Evans to vote on matters related to his own discipline and committee standing infuriated observers of the unfolding scandal.
Even in finally answering the call to remove Evans as finance chair, and in calling for the O’Melveny report, Mendelson has alienated activists and officials who are demanding more accountability from District leaders.
“Jack Evans abused his elected position,” says Ward 6 ANC Commissioner Denise Krepp, a former U.S. Coast Guard officer who has served as Chief Counsel for the U.S. Maritime Administration, Senior Counsel with the House Committee on Homeland Security and Attorney-Advisor for the TSA. “But instead of immediately holding Evans accountable for corruption, Chairman Mendelson slow rolled an opaque investigation that has cost D.C. taxpayers over $250,000.
“Additionally, Chairman Mendelson permitted Councilmember Evans to vote on issues related to his corrupt activities. [His] actions are designed for one purpose: Protecting Councilmember Evans.”
Added Ward 4 ANC Commissioner Erin Palmer: “The Chair seems to have backed into any efforts to hold Councilmember Evans accountable, including via its investigation. It was only after extensive reporting, calls from several [ANCs] and public outcry that the Chair said he would form the investigatory committee.”
Just as Evans has rubbed off on Mendelson, Mendelson has rubbed off on At-Large Councilmember Robert White and Ward 5 Member Kenyan McDuffie, both of whom originally opposed the shortcut to sports betting but then delivered key votes to approve the contract on the very day they emerged from Mendelson’s office with prized committee assignments. Some of their colleagues labeled it back-room dealmaking.
Palmer, a government ethics lawyer, finds the optics troubling. “Whatever the motivation, we did see votes change on the sports betting matter, and we saw those same members receive Committee chair positions. It’s hard to view that as anything other than vote trading, whether express or not.”
McDuffie seemed to make out well. As Chairman Pro Tem and chair of the Business and Economic Committee, he took over matters formerly under the purview of Evans’s defunct Committee on Finance and Revenue and is now the second most powerful member of the Council.
Yet he seemed oblivious to the scrutiny that comes with his rising stature when, on the eve of voting to approve the sports contracting contract, and to spare Evans from expulsion from the finance committee, he joined a celebratory gathering at Del Frisco’s Double Eagle Steakhouse for the biggest winner in the sports betting contract award: Emmanuel Bailey, president of the local company that is the majority owner of the joint venture with Intralot.
There, McDuffie was joined by his cousin Keith McDuffie, who, before the ink on the contract was dry, was linked in media reports to a lottery subcontractor who organized a fundraiser for him.
Also in attendance at Del Frisco’s was Beverly Perry, senior adviser to Mayor Muriel Bowser.
Intralot controls and finances the joint venture, according to news reports in The Washington Post, but Bailey is the 51 percent owner. Temple’s lawsuit has the potential to make those associated with him and others who lined up behind Evans and Mendelson nervous.
Ward 7 Councilmember Vince Gray and Brandon Todd, of Ward 4, both of whom face challenges from energetic newcomers in the 2020 primary, are prime examples. Supporting an illegal contract forged by an invalid piece of legislation would cost them at the polls. (For some unexplained reason, Gray missed a committee vote that could have killed the bill, but Mendelson as chairman stepped in and voted for him.)
Gray in particular has a fraught relationship with the D.C. Lottery. His post-award intervention in the 2009 contract with Intralot and Bailey’s company, Veterans Services Corporation (“VSC”), scandalized the OCFO and a number of members of the Council, including himself and Evans, and resulted in multiple government investigations.
Gray ushered Bailey into the Intralot deal as the local minority business owner over a decade ago. Having been a reliable vote for Evans and Mendelson on sports betting, he won’t benefit from that association: Bailey’s mother is a friend of Gray’s; her son has been the subject of numerous exposes, most recently by The Dig and the Post, that have documented through public records concerns about his business representations and capabilities.
Win or lose, the legal challenge by Temple has cast a dark shadow over the Exemption Act, a full year after the Council moved to legalize sports betting, and a good 10 months after the Exemption Act passed. A lot of dirt has been turned over since then, and the likelihood is high that government investigators are not finished digging.
With so much riding on sports betting, one might expect the Council and the OCFO to have their story straight about what the Exemption Act was intended to do, and how it was conceived of in the first place.
But as The Dig found out, that’s not necessarily the case.
*This is Part 1 of a two-part series.
