Driving a cab is a tough job -- business is bad, there's constant traffic on the Strip, high gas prices, stick ups, accidents, you name it.
Drivers have been able to supplement their modest incomes with bounty payments from adult nightclubs for delivering passengers. The problem is, such payments are illegal, especially when the drivers divert passengers to clubs that pay more.
But it's not the cabbies who rake in the biggest chunk of the action. That's accomplished by someone else.
The scenery inside the newly opened Rick's Cabaret hasn't changed all that much from the days when the ornate club was called Scores, and before that it was Jaguars. But, the new owners represent a profound change in the jiggle joint business.
Rick's is the first adult club here to be owned by a publicly traded company.
"Our financials are public information. Everything we do that is of significance is filed with the SEC and our financials are audited every year," said Eric Langan with Rick's Cabaret.
Things could get tricky when Rick's files that first report. Like the other clubs in town, Rick's pays a bounty to cab and limo drivers, $50 to $70 for each passenger dropped off.
It wasn't hard to record the kickbacks on camera. Other clubs don't try to hide it either. In fact, most of them now require drivers to sign a receipt with their name and taxi license number, even though the practice is essentially illegal both for the clubs and the drivers.
"It is not legal," said attorney Neil Beller. "Under the Taxicab Authority regulation."
Beller has filed a blistering lawsuit against the 12 largest adult clubs, accusing them of paying kickbacks to cab and limo drivers, which Beller says leads to something akin to extortion.
His clients, Deja Vu and Little Darlings, also pay out, but less than some rivals. That means some drivers divert passengers to clubs that pay more.
"We advertise quite a bit, and for the cab drivers to divert them to a different club, after we put them in the cab, is just wrong," said Deja Vu Marketing Director Larry Beard.
There's little doubt that diversion occurs and that some drivers go to extreme lengths to cash in -- lying to passengers, not charging for the ride, even kicking back part of the payoff. Beller hired detectives to document it and compiled a massive file of examples.
Larry Beard says some drivers wait in the Deja Vu parking lot and offer rides to customers who drove their own cars, "When they got to the front door, they were demanding their, I'm going to call it, extortion fee."
The I-Team had little trouble getting drivers to talk openly about the kickbacks. Our producer hailed cab rides and recorded the conversations on a hidden camera, as another camera followed behind.
What was heard, again and again from taxi drivers, is that cabbies are themselves victims of diversion since the doormen at most major hotels funnel strip club passengers to limos and then split the kickback with the limo driver.
"The doorman is the one scooping everybody up. He's the one making all the freaking money, because -- you keep doing that all night, he's like getting $700, $800, $900 a night. So he's a greedy bastard, all of them," said the cabbie.
Cab drivers are cut out of the bulk of hotel-to-strip club trips. The amounts are staggering according to industry sources. Collectively, the nine largest clubs shell out nearly $3.5 million a month.
Prior to its new ownership, Ricks, for example, paid $400,000 a month to drivers, a tough sum to explain once it goes to the SEC. Neal Beller's lawsuit demands the payments stop and he filed a second complaint with the state Taxi Authority, demanding the TA enforce the law against the cab companies it regulates.
"Since I've been here, we haven't cited anybody for accepting a kickback from any of these adult establishments," said Nevada Taxi Authority Administrator Gordon Walker.
Walker says there are good reasons for the lack of enforcement. For one, he hasn't received a single complaint until Beller's arrived on his desk. Second, his 24 investigators have their hands full with complaints about long hauling, accidents, robberies, DUI's that pop up in a town that generates 70,000 cab rides every single day.
There is a simple way to eliminate diversions, Walker says, "It sits with the adult industry. They can decide amongst themselves not to tip cab drivers."
The issue of kickbacks and the lawsuit was going to be mentioned Thursday at the meeting of the taxicab board, but whether the board can do anything about it is a big question.
Another question is, what about the IRS? All of this money being paid out can't be claimed as a business deduction by the clubs since it is an illegal activity. And all those receipts being signed by drivers, might the IRS be interested to find out if the income is being declared?
It's a big mess and there are many fingers to point. The clubs started the problem and now can't find a way out. It's bleeding them dry and it's not a good thing for tourists either.
Click here to email reporter George Knapp.
