The Chair’s Costly Gamble

Red Flags Mean Go

In 2019, the DC Council approved a five-year, no-bid $215 million contract for Greek gaming company Intralot to operate DC’s new sports betting app — GambetDC. Intralot’s no-bid contract raised immediate red flags.

DC law generally requires “full and open competition” for goods and services the DC government purchases. The law embodies best practices by making it more likely the District gets the highest quality goods and services at the best cost from the most qualified businesses. Those principles — seeking the best deal for taxpayers by encouraging businesses to compete — were thrown out the window for sports betting. The contract was sole source — that means no bidding and no competition. The current Council Chair introduced a law to specifically carve out sports betting from DC’s procurement requirements, supposedly because any delay would cost DC money and lost opportunity.

In addition, the rush to give away a no-bid sports betting contract meant the Council failed to complete the necessary due diligence on Intralot. As a basic matter, a determination of a company’s financial resources to provide the contracted services is essential. Yet, Intralot had “weak liquidity and declining cash flow,” subcontracted the work to another problematic entity with no employees that was described as “weaker than Intralot on its own,” and most of the contract’s benefits were designed to go to well-connected political insiders.

Adding to the red flags, the sports betting contract made its way through the DC Council with former Ward 2 Councilmember Jack Evans as its champion, all while his ethics scandals unfolded. Those scandals would eventually cost Evans his Council seat when he resigned in shame, but not the allegiance of the current Council Chair who was his partner in sports betting. Among other potential conflicts, Evans had a private business relationship with William Jarvis, a lobbyist associated with Intralot. Despite calls from a handful of Councilmembers for Evans to recuse from the vote on the contract, the Council Chair only meekly suggested Evans may have to recuse himself, and Evans voted in favor of the contract.

Council Chair Phil Mendelson and now-disgraced former Councilmember Jack Evans work together on Mendelson’s first day as Council Chair in 2012 (left). Jack Evans endorses and raises money for the Mendelson’s campaign in February 2022 (right). Photos from Georgetown Patch and Jack Evans.

Perhaps most alarmingly, the current Council Chair took the lead in circumventing standard procurement protocols and created the appearance that he was offering Council Committee privileges for “yes” votes. Several DC Councilmembers shared concerns over the sports betting contract and the looming conflicts of interest when the Council voted on whether to approve the contract. As stated by At-Large Councilmember Elissa Silverman:

“This stinks…. Given all the ethics clouds over this building and this contract, we need to hit pause. We need to restore the public’s trust, but with the approval of this contract, we will continue to erode it.”

But, the current Council Chair had his way — succeeding by what appeared to be trades of “yes” votes for scraps of Evans’ dismantled Committee on Finance and Revenue — and the deeply problematic contract moved forward on a 7-to-5 vote.

Long Odds Fail to Pay Off

Unsurprisingly, DC’s no-bid sports betting contract has failed to deliver on any of its promises. While DC’s Chief Financial Officer initially said the app would net more than $22 million in revenue for DC in fiscal year 2021, we recently learned that sports betting not only failed to raise promised revenues in 2021, but actually cost the city $4 million dollars. Sports betting is projected to bring in less than $1.5 million in revenue in 2022, significantly less than the $20 million city officials previously estimated, and that’s if the projections are accurate (which they have not been to date).

Promises that revenue from the contract would go toward violence prevention and early childhood education proved false and were apparently just bargaining chips. As noted by Fenit Nirappil, “Lawmakers defended the arrangement at the time as the best opportunity to get ahead of neighboring Virginia and Maryland and raise money for important city program such as violence prevention and early-childhood care. But the budget they recently approved forecasts no sports betting revenue for those initiatives over the next several years.”

Furthermore, the sports betting contract failed to deliver benefits for small local businesses entering the gaming industry — as promised. DC law requires that recipients of large city contracts spend at least 35% of what DC pays them on subcontracting to DC-owned and -operated businesses as a measure to expand local job opportunities and the city’s tax base. Despite these requirements, the DC Auditor found that Intralot directed less than 1% of its $215 million contract to small local businesses in its first year.

The DC Auditor also compared DC’s sports betting program with five states — Colorado, Illinois, Montana, New Hampshire, and Rhode Island — and found that DC took in the least amount of money in bets. The Auditor’s report noted that DC would be wise to renegotiate the terms of its contract with Intralot to reduce its payments to Intralot for marketing and bonuses to attract gamblers, which resulted in net losses to the city in 2021.

Some of these failures are the result of a desire for immediate approval of the sports betting contract without the necessary interest in ensuring the program worked well once the lobbyists and donors had their cut. The issues with DC’s sports gambling operations continue to be well-documented. Poor odds and bad technology have sent bettors fleeing to other venues. Rather than addressing the root causes, the current Council Chair points fingers at a “poor economy” for gambling that mysteriously isn’t affecting neighboring states (like Maryland and Virginia) or private sports books in DC. Then, when the District’s official sports betting app crashed on the largest betting day of the year, the current Council Chair was the only official left defending an indefensible performance, urging everyone not to be too hard on the contractor and insisting we “give it a little bit of time and then assess” before performing oversight.

The DC Council should be proactive — and not just reactive — in implementing safeguards to shield against ethical misconduct and to root out such misconduct when it occurs. It’s clear from DC’s sports betting saga that there’s a lot of work to be done. I’m not just ready to get to work, I have the professional experience for a better, more ethical, and more accountable Council and a plan to do it.

Stronger Leadership and More Accountability

Our current Council Chair led this disastrous, costly debacle — pushing through a law to exclude sports betting from the normal competitive bidding requirements, taking the lead on the contract for his friend and corrupt then-Councilmember Jack Evans (all while Evans’ ethics scandals unfolded), appearing to use the power of the Council Chair position to obtain “yes” votes in exchange for privileges, and doubling down on his positions despite myriad red flags and failures. This is a prime example of poor leadership that resulted in terrible outcomes.

I saw this coming. Back in 2019, I was leading a citywide coalition of elected leaders trying to force the current Council Chair to take the Jack Evans’ ethics scandals seriously. It was clear even then that the sports betting bill was a murky ethical disaster, and I spoke out against the Chair’s vote trading and bullying to get his way.

Failures of leadership like these are why I’ve created a detailed DC Council Accountability Plan. It lays out a number of tangible steps I would take as Council Chairwoman to improve the functioning of the DC Council, including:

  • Neutralizing the Council Committee assignment process to avoid the horse trading the current Council Chair appears to have used to push through a bill many knew was bad;
  • Expanding the Office of the DC Auditor and acting on the Auditor’s reports and using them as tools for oversight and legislation, rather than making excuses for failures; and
  • Prohibiting outside employment and consulting “gigs” like Jack Evans held to ensure Councilmembers are not swayed by conflicts of interest and focus on serving the people of DC.

We should focus on what my DC Council Accountability Plan would deliver: consistent, evidence- and best practices-based legislation and oversight on the issues that matter to DC communities.

The DC Council should be proactive — and not just reactive — in implementing safeguards to shield against ethical misconduct and to root out such misconduct when it occurs. It’s clear from DC’s sports betting saga that there’s a lot of work to be done. I’m not just ready to get to work, I have the professional experience for a better, more ethical, and more accountable Council and a plan to do it.




Candidate for DC Council Chairwoman

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Erin Palmer

Erin Palmer

Candidate for DC Council Chairwoman

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