Intralot and VSC forced to pay $6.5m after defrauding Washington DC Council
An investigation was conducted by the OAG in Washington DC, revealing that the two companies conspired to win and profit from the District’s lottery and sports betting contract.
Key Points
- After securing the contract, Intralot and VSC were said to have teamed up under the covert agreement to obtain millions of dollars from the District under false pretenses
- Intralot and VSC secretly agreed that, in exchange for return payments from VSC to Intralot, an Intralot subsidiary would provide most of the resources for the sole-source contract
After an investigation was conducted by the Office of the Attorney General (OAG) in Washington DC, Intralot and Veterans Services Corporation (VSC) have been forced to pay $6.5m for deceiving District officials in order to obtain a lottery and sports betting contract.
In 2019, Intralot and VSC reportedly conspired to secure the DC Council’s approval of the contract on a sole-source basis, without requiring a competitive bidding process. The two companies promised that VSC would perform 51% of the work entirely with its own resources, and receive an equivalent percentage of the revenue while other small businesses would receive a minor additional share.
Intralot and VSC would go on to secretly agree that, in exchange for return payments from VSC to Intralot, an Intralot subsidiary would provide most of the resources for the sole-source contract according to the OAG.
After securing the contract, Intralot and VSC teamed up under this reported agreement to obtain millions of dollars from the District under false pretenses, as VSC was receiving a majority of the compensation despite funneling much of it back to Intralot.
“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,” Washington DC Attorney General Brian Schwalb said.
“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. 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.”
Good to know: The OLG named FanDuel as Intralot’s new sports wagering subcontractor in Washington DC on March 11, 2024
The DC Council formerly passed the Small, Local and Disadvantaged Business Enterprise Development and Assistance Act (SBE Act) to create new opportunities for the District’s small businesses. The SBE Act requires at least 35% of large government contracts to be subcontracted to small District-based businesses, called certified business enterprises (CBEs).
Intralot and VSC persuaded District agencies and the Council to administer the District’s lottery and sports betting platform on a sole-source basis by representing that work done and money paid under the contract would benefit VSC and other CBEs.
The companies then falsely inflated the amount of money Intralot spent subcontracting with VSC and other CBEs. Intralot also reportedly paid VSC’s owner, Emmanuel Bailey, hundreds of thousands of dollars per year for his participation.
Both companies submitted “false and misleading documentation” to District agencies and the DC Council, including the subcontracting plan originally used to obtain approval of the contract, verification forms that inaccurately documented the amount of work VSC performed and quarterly reports that misrepresented how much Intralot spent subcontracting with VSC and other CBEs.
When District regulators discovered the companies’ misconduct, the companies claimed it would cease operations. In 2021, Intralot restated its previous reports and disclosed approximately $4.3m in previously undisclosed payments that it received from VSC. On multiple occasions, however, Intralot’s subsidiary apparently continued to provide resources to VSC, and the company continued to return payments to Intralot.
Intralot and VSC would go on to submit over 100 fraudulent invoices that sought payment and falsely implied compliance with District law. Under the terms of the settlement, Intralot will pay the District $5m, while VSC is responsible for the remaining $1.5m.
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