L.A. Taxi Business Hits Bumpy Stretch of Road

Never a smooth ride, the taxi business in Los Angeles has detoured into rough territory, roiled by meter-rigging, corruption allegations and labor strife.

City officials and taxi franchise owners are blaming each other for failing to prevent widespread fraud; one city official estimates that earlier this year up to 20% of all licensed taxi drivers rigged their meters to reap illegal profits.

At the same time, dozens of drivers are organizing to confront company managers and city officials. They claim they are exploited by a system that forces them to work punishing hours for a pittance while the men who run their companies siphon off profits that should belong to them.

With gas prices near record highs, drivers want an increase in meter rates for the second time in three years -- and some have threatened a strike if they don’t get it.

If that isn’t enough, drivers and company officials say the industry is threatened by hundreds of unlicensed, bandit cabbies who steal their business and put customers at risk in unsafe vehicles. The drivers also say they are victimized by unscrupulous hotel doormen with their hands out for kickbacks to let drivers pick up guests.

Gary Vogan, 52, who has been prowling the nighttime streets of Hollywood in his taxi like “a shark” for 20 years, ferrying drunk revelers and charming customers with his comedy routines, says it is a pivotal moment for the industry.

“It used to be that nobody speaks for the driver ... most of us are immigrants; we don’t know how to play the political system,” said Sentayehu Silassie, a native of Ethiopia who has been a taxi driver since 1989. “Now the companies are being challenged, and the city too.”

The taxi business, which is one of the few low-skilled jobs in the U.S. that allows people to work when and where they want, has always attracted oddballs and mavericks -- which means the industry is rarely tranquil.

But the usual controversies escalated more than a year and a half ago when several drivers, with the help of legal aid lawyers and organizers, formed the Los Angeles Taxi Workers Alliance and began trying to challenge the city’s taxi system.

Company officials say the alliance represents only a small group of disgruntled drivers who have discredited themselves with wild claims.

The city has awarded nine companies franchises to operate all 2,300 legal taxis. Most of those firms are organized as cooperatives.

Drivers own their own cabs, and each week pay a set amount -- about $300, though the figure varies from company to company -- to cover overhead costs, including dispatch, advertising and liability insurance. Cabbies who drive someone else’s taxi pay an additional fee, as much as $200 per week. And all drivers buy their own gas.

Drivers keep everything else they earn -- but members of the alliance say they suspect that company managers use a web of complicated corporate structures and intimidation to skim off the weekly payments of unsophisticated drivers, the vast majority of whom are immigrants from Ethiopia, Armenia, South Asia and the former Soviet Union.

“The analogy we like to use is sharecropping on wheels,” said Betty Hung, directing attorney of the employment law unit at the Legal Aid Foundation of Los Angeles.

Drivers acknowledge that they have no evidence of specific corruption. But they say they think their weekly fees exceed expenses. They allege that many of the taxi companies, though claiming to be democratically run cooperatives, actually go to great lengths to shroud their financial dealings in secrecy and resort to intimidation and harassment to keep control.

Earlier this year, Gurmet Singh, a driver with United Independent Taxi Drivers Inc., charged that company President Martin Shatakhyan threatened his life after he asked for a financial statement.

“He told me that it was none of my business and don’t discuss this matter and if you continue to talk about this matter I will kill you,” Singh charged in a lawsuit filed in Los Angeles Superior Court.

Shatakhyan and his attorney, Neil Evans, dispute that allegation, saying Singh is a disgruntled driver who has been disrupting business. Shatakhyan had earlier sued Singh for slander.

Other drivers from United also filed suit seeking access to the company’s books, which they said they had been denied in violation of the firm’s own bylaws.

The drivers pointed to a 2001 audit of the company by the accounting firm Deloitte and Touche that found, among other things, that the company had destroyed financial records, misclassified political contributions and paid out $2 million to “cash” in 1999 and 2000.

Last fall, Los Angeles Superior Court Judge David Yaffe ordered the company to let the drivers examine the books.

Now, lawyers for the company and the drivers are squabbling over whether the order was followed.

“They sent me a bunch of documents. It’s not what I asked for,” said B. Kwaku Duren, the drivers’ lawyer. “So I filed an appeal.”

But Evans, a lawyer for the company, said the drivers could see the books any time they like -- and always could.

William J. Rouse, general counsel and general manager for the Administrative Services Co-op, which oversees several taxi co-ops including two that operate in the city of Los Angeles, called the alliance’s allegations “categorically false.”

He and other company officials also say alliance members do not speak for the vast majority of the city’s taxi drivers.

Rouse, a former city Department of Building and Safety commissioner who is the fourth generation of his family to work in Southern California’s taxi business, acknowledged that many drivers struggle to make a living. Few residents -- aside from the elderly, the disabled and the drunk -- take cabs here. Drivers are dependent on airport passengers, radio calls and tourists at hotels, he said.

But Gary Blasi, a UCLA law professor who has been studying the taxi industry for the last six months, said he thinks the city’s system “has created many opportunities for corruption to the disadvantage of drivers.”

“I mean everything from having to pay doormen at hotels all the way up to money disappearing in ways that accountants could not unravel,” he said. According to a draft study by Blasi and UCLA professor Jackie Leavitt, drivers who lease cabs work an average of 12 to 14 hours a day, six days a week, and earn less than $7 an hour.

The taxi controversy burst into the open last spring when members of the alliance went to the City Council and asked members to intervene to improve conditions at Los Angeles International Airport, where drivers claimed they lacked clean restrooms and were harassed by fines for tiny infractions.

City Council members pledged to look into the issue even as company officials protested that drivers were grossly exaggerating conditions.

Then, in May, the industry was rocked again by a KNBC-TV Channel 4 expose showing drivers cheating passengers by rigging their meters.

The blatant fraud, caught on camera, outraged elected officials and had company officials and city regulators pointing the finger at each other for not stopping it.

“It’s the city,” said Nettabai Ahmed, chief executive of Independent Taxi. He and Rouse contended that companies had turned in drivers who altered their meters, but the city did nothing.

But Tom Drischler, the city’s taxi administrator, said companies did not do enough to stop drivers whom they knew or should have known were tooling around town with rigged meters.

“Certainly its more widespread than we would like,” he said, guessing that it was “maybe in the 10% to 20% range” before the expose and crackdown on taxis with altered meters.

In coming months, city officials say, they plan to institute higher penalties and new measures to prevent fraud.

“There’s a lot of things going on, but there’s nothing that’s disrupting service to the public,” Drischler said.

And Ken Spiker, a lobbyist for many of the city’s taxi companies, said there is much less strife in the industry than there was a few years ago.

“It used to be horrible. There were fights. It was out of control,” he said, noting that the companies used to compete viciously with each other. “I’ve had to break up fights ... at the Palm Restaurant.”