IRS investigates
businesses
paying extortion to cab
and limo drivers
INSIDE VEGAS by Steve Miller
AmericanMafia.com
June 15, 2009
LAS VEGAS - In 2007, a local business owner
who depends on attracting tourists to his off-Strip location, wrote a two
page letter
to the Fraud Division of the Internal Revenue Service.
In it he complained of being extorted out
of thousands of dollars in cash by limo, taxi, and van drivers who have
access to the front entrances of Strip hotels. At the time, he told the
IRS of having to pay the drivers between $30 and $70 dollars per passenger,
or his business would be boycotted.
The IRS did not immediately respond to
the letter.
In the meantime, some drivers have gone
high tech with personal push to talk phones. When a lead driver hits the
direct connect button on his phone, hundreds of other drivers can hear
his broadcast telling about what business is paying the most, or not paying
at all. The cab or limo company dispatcher is left out of the loop. Drivers
who do not subscribe to direct connect will soon be informed by other drivers
waiting for passengers in queues at the airport, hotels, and all over town.
In other words, a boycott takes only minutes to organize.
The City of Las Vegas, Clark County, state
Taxi Authority and Transportation Services Administration officials have
for years had strong laws on their books to prevent the practice that all
local government agencies opted not to enforce.
Transportation company owners are also
acutely aware that their equipment is used in the practice, but have told
INSIDE VEGAS that they do not pay their drivers a living wage or benefits,
and the illegal practice supplements driver's pay so they can "put shoes
on their children." However, none of the owners we spoke to volunteered
to pay a living wage and benefits as a way of discouraging a scam that
rips off tourists, and discourages new businesses from locating in our
city.
The all cash scam also deprives state and
federal coffers of millions in unpaid taxes.
City Council members and County Commissioners
have turned a deaf ear to complaints as have state Taxi Cab Authority members,
and state Transportation Administrators. It's as if the transportation
company owners -- who are well known for their generosity around political
campaign time -- don't want the practice to end.
Malfeasance is the proper word that describes
the lack of action being taken by government officials.
Since 2007, the bounty was raised to $100
per passenger. This occurred when casino bosses learned that their front
doors were being used to solicit hotel patrons to strip clubs and other
businesses that pay bribes. They demanded their cut.
In the meantime, casino owners are still
in the dark about the practice and have not investigated, though their
own casino bosses are now extorting their hotel's door men.
Targeted businesses include swinger's clubs,
gun stores that rent machine guns for target practice, escort services,
massage parlors, restaurants, divorce attorneys, flower shops, tux and
bridal gown rental stores, wedding chapels, check cashing services, and
of course, strip clubs.
Instead of being able to make a profit
by upping the payoffs to $100 to encourage transportation drivers to deliver
customers to their doors exclusively, according to the June 11, 2009 Wall
Street Journal; "Strip clubs in Las Vegas have long paid bounties to
cab drivers who deliver customers, but Rick's (Cabaret) didn't grasp the
payments' importance when it bought the former Scores strip club in September.
By February, its Las Vegas club was registering only $257,000 in sales.
Moving to reclaim its share of the slumping tourist trade, Rick's boosted
its payments to as much as $100 a customer from the usual $30. By April,
it was notching nearly $1.9 million in monthly sales in Las Vegas. The
club still lost money that month, because it paid the cabbies about $1
million, but the loss was smaller than in previous months."
Participating strip clubs are now realizing
that the pay outs total more than they're taking in! The scam is backfiring
on the clubs and businesses that out bid their competitors.
Rick's Cabaret revealed paying transportation
providers $1 million over a one month period. Another club owner told INSIDE
VEGAS he paid out $113,000 in one week during Spring Break. How can any
business survive with this much secret outlay of cash -- especially when
they can't write it off? Somebody ends up paying the bill, and that's usually
our tourists and the taxpayers.
Last week, the IRS finally made
their move. On June 10, all Vegas strip clubs received an official letter
from the IRS;
However, most club owners do not, or have
not, kept the records that are requested. If they didn't keep records including
the names of drivers, they may have broken the law. This fear, and the
knowledge that their clubs may be under surveillance could cause them to
curtail paying future bribes.
But there are several business owners who
have kept meticulous records, and I'm told the IRS will find hundreds of
1099 forms signed by transportation drivers quite interesting, along with
video tapes of the drivers receiving their bribes.
A 1099 is an IRS form that states how much
was paid to an independent contractor. When a business pays an independent
contractor, no taxes or benefits are withheld. The taxes are supposed to
be paid by the independent contractor himself, either quarterly or at the
end of the year when income taxes are prepared.
It will be interesting to learn how many
business owners and transportation drivers complied with this requirement.
And it will be even more interesting to see how many of those involved
turn government witness to avoid prosecution for Income Tax Evasion!
And to those who complain that everyone
deserves to make a decent living, I ask them to put themselves in the place
of a small business owner who, in these tough economic times, must pay
drivers to deliver customers to his door, or be boycotted by an entire
transportation industry. Or imagine being a tourist who gets gouged by
a business in order to cover the bribe paid to the person who drove him
there.
Not only is this practice illegal and harmful
to our town, it's un-American!
MORE INFORMATION:
http://www.americanmafia.com/Inside_Vegas/5-18-09_Inside_Vegas.html
Steve Miller is a former Clark County Regional
Transportation Commissioner
