When British gaming, lottery, and sports betting company International Game Technology (IGT) donated $150,000 to the Democratic Governors Association (DGA), the leading campaign arm that supports Democratic governors and candidates for governor in the United States, it was reasonable to ask what it might expect to get in return.
Then, last month, Rhode Island Democratic Governor Gina Raimondo, who is also the Chairwoman of the DGA, announced that her administration and IGT reached a $1 billion agreement on a 20-year extension to operate the Rhode Island Lottery and control up to 85 percent of the video gaming machines at the state’s two commercial casinos.
The relationship between IGT and Governor Raimondo is deserving of a closer examination to say the least. For starters, the Treasurer of the DGA, which Raimondo leads, is an individual named Donald Sweitzer. Mr. Sweitzer is a long-time close political ally of Governor Raimondo. Mr. Sweitzer is the former chairman of IGT, and in addition to his role as Treasurer of the DGA, his old company (IGT) currently pays him $7,500-a-month to lobby the Rhode Island State House.
Mr. Sweitzer admitted once in an interview with the Providence Journal, “I don’t do policy. I do politics.” This makes his role in negotiating massive state contracts that much more unusual. One would assume that those involved in spending taxpayer dollars at that level would approach negotiations from a principled policy perspective, not from a paid political one. Within a long career full of various Democratic political operative jobs, Mr. Sweitzer notably served as the political director of the Democratic National Committee during Bill Clinton’s presidency.
Governor Raimondo’s deal with IGT comes at a time when the online gaming industry in the US is just beginning to take form. In 2018, the Supreme Court voted 6-3 to strike down a federal law that banned commercial sports betting, paving the way for states to legalize it. Many already have, seizing on the opportunity to bring in new streams of revenue. But while online sports betting promises fortunes to cash-strapped states, it also comes with potential baggage: many online gaming companies, particularly those that operate in black markets or in countries where the legal gaming industry is rife with corruption, may be engaged in activity that would raise serious concerns for American taxpayers.
Case in point is the public uproar around a controversial gaming operator winning an exclusive contract for online sports betting in Oregon. The company, SBTech, which is based near Malta, was awarded the contract despite the fact that it is reported to be operating in Turkey and Iran, where sports betting is illegal. A background check of SBTech, conducted by the Oregon State Police, has been kept under lock and key, leaving taxpayers in the dark about any possible red flags or glaring omissions.
Emboldened by Oregon’s apparent out-of-sight, out-of-mind approach, SBTech now has its eye on Pennsylvania, where the local industry is just getting up and running. If SBTech gains a foothold there, without so much as having to pass a smell test, it could be yet another troubling sign of things to come.
In Rhode Island, IGT’s contract extension was agreed upon under a “non-competitive” arrangement. Meaning that competitors of IGT were unable to submit competing offers for the contract, even if they were a better deal for Rhode Island taxpayers. A competitive bidding process would have likely driven the price up, as other companies almost certainly would have offered to outbid IGT if given the opportunity to do so.
A no-bid contract negotiation is a highly suspect practice considering the length and price tag of the agreement. The purpose behind a competitive bid for government contracts is to reward the proposals with the lowest cost to taxpayers. In fact, in 2017, Ms. Raimondo vetoed an indefinite contract extension for firefighters and teachers, arguing that it, “hurt the public’s position in contract negotiations, and placed taxpayers at a risk of being forever locked into contractual obligations they can no longer afford.”
Andrew Cline of the Josiah Bartlett Center for Public Policy, a free-market think tank, said that a 20-year government contract presents a major problem for taxpayers: “The idea of any 20-year contract with the government is a problem, particularly for taxpayers. It takes the pressure off the vendor to compete and improve. Give them a five-year contract and they know that they’re going to have to find ways to lower costs and improve quality if they’re going to compete.”
This decision also raises legal concerns, as state law typically requires a competitive bidding process for all government contracts.
To make matters more complicated, as part of the billion-dollar agreement, it was agreed upon that IGT would spend $25 million to replace the Rhode Island lottery’s central online computer system. Interestingly, this replacement was already supposed to have happened, as this investment was part of the current contract which IGT is operating under today, until it was recently discovered that Governor Raimondo quietly forgave this $25 million obligation as part of another deal involving sports betting.
On August 20, the Rhode Island Ethics Commission voted 6-1 to investigate Governor Raimondo’s dealings with IGT. That investigation is currently underway.
In an official statement, the Rhode Island GOP said, “The Rhode Island GOP is pleased that the Ethics Commission will investigate Governor Gina Raimondo for the special treatment her administration has shown IGT while Raimondo and Donald Sweitzer, a lobbyist for IGT, have been associates in the Democratic Governors Association.”
The consummation of the agreement is subject to a vote in the Rhode Island State Legislature. The Rhode Island GOP has urged the legislature to delay a vote until the Ethics Commission investigation is complete.
