Intralot and Veterans Services Corporation (VSC) have agreed to pay $6.5 million after an investigation revealed they misled Washington DC officials to secure a lottery and sports betting contract. The Office of the Attorney General (OAG) in Washington DC uncovered the scheme, which involved bypassing competitive bidding processes and submitting false documentation.
In 2019, the companies collaborated to convince the DC Council to award them a sole-source contract for managing the District’s lottery and sports betting platform. They claimed that VSC would handle 51% of the work independently, benefiting from an equivalent share of the revenue while involving other small businesses. However, the investigation revealed a different arrangement.
According to the OAG, Intralot and VSC secretly agreed that most of the work would be carried out by an Intralot subsidiary, with VSC funneling a large portion of its payments back to Intralot. This arrangement allowed the companies to profit from the contract under false pretenses.
Attorney General Brian Schwalb criticized the scheme, stating:
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.
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The Small, Local, and Disadvantaged Business Enterprise Development and Assistance Act (SBE Act) played a central role in this case. The act requires at least 35% of large government contracts to involve certified business enterprises (CBEs) based in the District. Intralot and VSC exploited this provision by falsely inflating their subcontracting with CBEs, misrepresenting their compliance to District agencies and the DC Council.
The investigation found that VSC’s owner, Emmanuel Bailey, received hundreds of thousands of dollars annually as part of the scheme. The companies also submitted over 100 fraudulent invoices and misleading reports to claim payments and imply adherence to contracting laws.
When regulators began uncovering the misconduct, the companies initially claimed they would cease operations. However, Intralot later disclosed $4.3 million in previously hidden payments from VSC, and their subsidiary continued providing resources to VSC while receiving return payments.
As part of the settlement, Intralot will pay $5 million, while VSC will pay $1.5 million. The case highlights the OAG’s commitment to enforcing contracting laws and protecting taxpayer dollars.
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