Intralot has agreed to a US$5m settlement in Washington DC after it was found to have secured a gaming contract under “false pretences.”

Intralot

Subcontractor Veterans Services Corporation (VSC) was also fined $1.5m for its role in proceedings, taking the total settlement with the Office of the Attorney General (OAG) for the District of Columbia to $6.5m.

An OAG investigation found that Intralot and VSC deliberately misled city officials over the work required to secure the DC Council’s lucrative lottery and sports betting contract.

Intralot and VSC managed to secure the contract without a competitive bidding process by promising that VSC would perform 51 per cent of the work and would receive an “equivalent percentage” of the revenue.

Instead, Intralot and VSC “secretly agreed” that in exchange for return payments from VSC to Intralot, an Intralot subsidiary—not VSC—would provide most of the resources for the sole-source contract, the OAG said.

After obtaining the contract, Intralot and VSC obtained “millions of dollars from the District under false pretences, misrepresenting that VSC performed work that Intralot’s subsidiary actually did and that VSC received a majority of the compensation despite funnelling much of it back to Intralot,” the OAG added.

Attorney General Brian L. 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.”

Intralot said: “The settlement provides for a US$5m payment while Intralot denies any admission of fault, so that a long-term litigation and substantial legal expenses to be avoided.

“With the settlement agreed, the contracts and operations of the group are not affected.”

The OAG’s investigation found that Intralot and VSC “falsely inflated” the monies Intralot spent subcontracting with VSC, and Intralot paid VSC’s owner hundreds of thousands of dollars per year for his role.

Both companies also submitted “false and misleading” documentation to District agencies and the DC Council, the investigation found, including the subcontracting plan used to secure the contract.

Verification forms “inaccurately documented” the amount of work VSC performed, and quarterly reports “misrepresented” how much Intralot spent subcontracting with VSC and other certified business enterprises (CBEs).