Earlier quoted context omitted.
Explain what the compromised selection process does here. NIST doesn't control the submissions.
Seems pretty obvious no? 1. Pretend to be someone else and enter a backdoored algorithm. Or pressure someone to enter a backdoored algorithm for you. Or just give them the algorithm for the reward of being the winner. 2. Be NIST, and choose that algorithm.
This is the problem with all these modern NIST contest theories. They're not even movie plots. Your last bit, about them paying someone like Peikert off, isn't even coherent; they could do that with or without the contest.