Did the Rhode Island governor’s chief of staff openly threaten a company the state regulates? And why is Rhode Island entering into a $1 billion no-bid contract to manage its video lottery terminals (VLT)?
As states legalize gambling and conduct state-run lotteries, gambling and gambling technology have become big business – a multi-billion-dollar business. There are many companies capable of managing Rhode Island’s VLTs. But Rhode Island is only considering one company, and appears poised to award that company a 20-year contract worth more than a billion dollars.
And unless something changes, Rhode Island’s contract award will happen without any competitive bidding.
There are certainly rare times when no-bid government contracts may be justified. Highly specialized fields may only have one or two firms capable of handling unique tasks. Scale may also be an issue, though large-scale projects can attract bids led by one firm working with multiple subcontractors. But gambling technology is a growing field with dozens of competitors vying for the gambling business, and the technology that goes along with it, which is now run by states, private resorts, tribal authorities and others.
Rhode Island’s Gov. Gina Raimondo, a Democrat, is pushing legislation that would award International Game Technology (IGT) a massive no-bid contract across the next 20 years to manage its more than 1,000 VLTs across the state. Several competitors and the Taxpayer Protection Alliance question Gov. Raimondo’s decision and the process leading up to it. One of those firms, Twin River, does casino business in the state. Another, Camelot Lottery Solutions, wants to bid on the work. But the no-bid process locks them out.
Other states work with IGT without issue, but that’s not the heart of the matter. The heart of the matter is the benefits the bidding process brings to taxpayers. By entering into competitive bidding, government forces companies to find efficiencies and reduce prices, ultimately saving taxpayer money. According to the Taxpayer Protection Alliance, VLT fees in Rhode Island cost an average of more than five times the fee rate of similar state VLT systems. Where bidding processes are enforced, in Pennsylvania and Oregon, IGT charges the state three to six times less in fees. The 20-year no-bid Rhode Island contract is therefore likely to cost Rhode Island taxpayers millions in unnecessary fees.
The no-bid nature of Rhode Island’s process was already generating controversy, when Gov. Raimondo’s chief of staff, Brett Smiley, had a series of phone conversations with Marc Crisafulli, Twin Rivers’ CEO, on June 27, 2019. Both participants admit the conversations were “tense.” Twin Rivers was considering publicly opposing the no-bid contract legislation. But Crisafulli says it was a lot more than merely tense. He says the conversation included an explicit threat: If Twin Rivers publicly opposes the IGT no-bid contract, there would be consequences for Twin Rivers in an entirely separate case. The Providence Journal reports:
Twin River’s Marc Crisafulli told Senate Finance Chairman William Conley in a letter that he was initially reluctant to name Smiley as the aide who made the threat because the casino operator was still negotiating a settlement with the Raimondo administration over a contract dispute involving a debt limit. But that changed after the governor publicly denied the threat this week.
Raimondo on Wednesday again told reporters: “He [Smiley] has assured me there was no threat.”
That amounted to accusing Crisafulli of lying, which he says prompted him to make the threat and its originator public:
Crisafulli, the executive vice president of Twin River Worldwide Holdings and president of the company’s Rhode Island operations, filled in the blanks on what he alleges Smiley said in a series of calls on June 27, the day the IGT legislation was introduced:
“Mr. Smiley’s message was crystal clear: If Twin River opposed the IGT legislation which was being introduced that day … we would suffer regulatory consequences with the State.”
Crisafulli said he decided to name Smiley after hearing Raimondo in recent days “repeatedly deny this unfortunate incident occurred … [She] has even gone so far as to accuse Twin River and myself of, in effect, lying.”
Gov. Raimondo does not have a great deal of maneuvering room. Kentucky’s Gov. Matt Bevin is the nation’s most unpopular governor. He was defeated on November 5, despite a last-minute push from President Donald Trump.
The nation’s most unpopular governor who has not yet been turned out of office is Rhode Island’s Gina Raimondo. The Democrat’s job approval rating languishes at just 36%, with a majority clearly disapproving. Raimondo, re-elected in 2018, does not have a deep well of support among the voters or the state’s general assembly, despite the fact that Rhode Island is among the nation’s 14 Democratic trifectas. Rhode Island limits governors to two consecutive terms, meaning Raimondo is a term-limited lame duck. That raises yet another question, though: Should a term-limited governor have the power to dictate who operates VLTs – which impact the state’s revenues and the fees it is charged – for the next 20 years without any competitive process at all?