‘Bandit’ Limos Driving Legitimate Firms to Ruin

It was one of those glittering entertainment industry evenings. A fleet of sleek stretch limousines fanned out around town, scooping up Cher, Bobby McFerrin, kitsch horror queen Elvira and others to fetch them to the 1988 MTV Video Music Awards show last September.

Reclining in the plush splendor of their chauffeur-driven coaches, the stars were unaware that the limousine company hired for the occasion was a renegade firm operating outside the law--although one of the celebrities did complain after arriving at Universal Amphitheatre that her driver had made sexual overtures.

The rich and famous, as well as the couple down the street, have been victimized by price-slashing “bandit” limousine companies. Legitimate operators say that the bandits are driving them out of business, and that state regulators are failing to control them.

Operating potentially unsafe vehicles without proper licenses and insurance, the renegades have been involved in hit-and-run accidents and prostitution. Some have offered “prom night specials” of drugs to high school students. Studies in Sacramento and Los Angeles have shown that more than half of the advertisers in the local Yellow Pages are “bandit” companies, often operating on a shoestring out of storefronts or private homes.

“It’s tantamount to an unlicensed industry when statistics show over 50% in L.A. are unlicensed,” said Sue Frauens, supervisor of the consumer protection branch of the Los Angeles city attorney’s office, which has filed suits against three of the companies.

‘Most Serious of All’

The state Public Utilities Commission, which regulates the industry, has found problems with renegade operators in Sacramento, Modesto, San Diego, Orange County and Palm Springs. But Los Angeles County, with its affluent neighborhoods in Beverly Hills and the San Fernando Valley, “is the most serious of all,” said Larry McNeely, a PUC enforcement official.

State law requires limousine operators to have at least $750,000 in public liability insurance on each vehicle and to obtain an operating license from the PUC, which takes 1% of the gross revenues as a fee. Experts in the field say these bills can add up to more than $20,000 a year for the average “mom-and-pop” fleet of three limousines.

Avoiding the insurance and PUC fees allows the bandits to undercut legitimate operators by $10 an hour or more, according to Alan Shanedling, vice president of the Limousine Owners Assn. of California, based in Lawndale. As a result, it has put pressure on the legitimate side of the industry, forcing some limousine companies to become “bandits” themselves, according to McNeely. “It’s almost a cannibalistic” situation, he said.

Some established operators say the PUC must shoulder some of the blame for the problem.

“The PUC takes our money and in return they are supposed to keep us from being harassed by local municipalities and to keep illegals off the street. But they don’t have the manpower to do it,” said Harold Berkman, president and owner of Music Express Inc., a respected limousine operator in Southern California specializing in the celebrity trade.

According to investigators and industry experts, the problems with unlicensed firms are an unwanted side effect of the Gold Rush-like boom in the limousine industry in recent years. After the 1984 Olympic Games in Los Angeles, when some operators offered their cars for $1,500 a day, interest blossomed in the business as an investment.

“For a couple of years, it was at the top of everyone’s list of business opportunities,” said Scott Fletcher, editor of Limousine and Chauffeur magazine. “Everyone jumped into it.”

‘Almost Nothing Down’

Creative auto financing allows small businessmen with big dreams to get into the driver’s seat. A buyer can drive off the lot in a $50,000 vehicle with “almost nothing down,” Shanedling said.

McNeely estimated that there are now 2,000 licensed firms in California, up from about 900 five years ago, adding that “there has been tremendous growth in the ‘bandit’ side of it.”

While there are no statistics on it, unregulated firms are having a serious impact on legitimate operators. Betty Lewis of Highland, near San Bernardino, opened Lewis Limos in 1987 with two Lincoln stretch vehicles but shut down last December after losing $100,000 in a single year of operation. “You can’t compete with people running for $20 an hour when you’re charging $50,” she said.

Fletcher, the trade magazine editor, said a recent survey found that the average hourly limousine rate around the country is $48, compared to $40 an hour in Los Angeles. The difference, he said, is the depressing effect on prices of the “bandits” in Southern California.

PUC officials said that unregulated limousine companies have served as fronts for illegal activities. “We’re fully aware they are involved in narcotics and prostitution,” McNeely said. “During prom season, we heard more than once that companies would take you to the prom and you would get five lines of coke.”

Delivered Cocaine

A Monterey County drug dealer used his unlicensed limousine service to deliver cocaine, authorities said. After penetrating the operation, they discovered well-maintained “trip sheets” showing the destination of the drug shipments.

Critics in the industry say the PUC has been slow in getting tough with the lawbreakers. McNeely agreed that the criticism “probably is correct. Several cases went by the wayside” in the past because of a shortage of enforcement officials. In August, 1987, however, the Legislature authorized the creation of the Passenger Compliance Unit in the PUC, with six new enforcement positions, to deal with the problem. McNeely, a former state Department of Justice official, was brought in to work more closely with local prosecutors around the state.

The new approach has yielded results. At least 17 unlawful business practice lawsuits have been filed against unregulated limousine firms, including three in November by Los Angeles City Atty. James K. Hahn. Judges have issued restraining orders to stop operations in some of the cases and ordered the seats removed from one company’s limousines to make sure that the vehicles stayed off the streets.

In two of the Los Angeles cases, the limousine operators’ phone service was terminated--a “unique prosecutorial tool,” said Frauens of the city attorney’s office. Lawsuits and restraining orders do not stop customers from scanning the Yellow Pages and calling the “bandits” for service, but cutting off the phones effectively shuts down the business.

A January state auditor general’s report indicated that the PUC still has its work cut out for it, however. The report said the agency had not followed up on nearly half--35 out of 74--of the cases against unlicensed operators. Further, seven of the companies involved in those cases were still doing business in December.

Blatant Operators

“I’ve never seen this, where companies are blatantly operating in violation of the law,” McNeely said. “They continue operating even when they know we’re watching them, thumbing their noses at the investigating agency.”

In one of the Los Angeles cases, the operator of JJ&T; Limousines was accused of leaving high school students stranded on graduation night and of failing to return deposits. Sir Michael’s Limousines Ltd., which has since obtained a license, was spotted at the Academy Awards show last year carrying a Los Angeles city councilman, according to a PUC investigator. Twenty-one other illegal operators carried clients attending the same Academy Awards show.

Another Los Angeles suit was filed against Elegant Limousines Inc., which provided limousine service at the MTV awards show. Karen Sortito, an account director for the Western division of MTV Networks, said MTV paid Elegant $17,737 and promoted the limousine company in millions of American homes with a free, on-air advertisement.

Although there were no accidents, Sortito said a celebrity complained “that one of the drivers was sexually suggestive to her.” Sortito said she did not check the status of the company because “they were referred to me” by a co-worker.

That was not the only problem involving Elegant. When the future Margery Pinedo met a limousine in Van Nuys to be taken to a San Gabriel church for her wedding last Sept. 3, she found a red-faced driver without a necktie who proceeded to lose his way, she said in an interview. Worse, the vehicle’s air conditioner was out of order. With the temperature soaring, the interior got so hot that Pinedo’s 3-year-old niece suffered a bloody nose. Pinedo’s $900 wedding dress wilted. Refused a refund and a replacement car, the newlyweds finally discharged the limousine at the church, abandoning plans to ride to the reception in luxury, according to Pinedo.

Bill Was $200

The bill was over $200 for 45 minutes, Pinedo said. “We tried not to let it spoil the whole day.”

The PUC said passengers have been injured in accidents involving “bandit” companies. The agency is investigating two recent accidents in the Los Angeles area. In one, an Orange County “bandit” service carrying two passengers hit a parked car, then sped off. A wheel came off of another limousine operated by the same company and the limousine struck a car.

The PUC is expected to file several cases against unregulated firms in Orange County within the next few weeks.

Legitimate companies, whose operators say the “bandits” are giving them a black eye, are applauding the PUC’s stepped-up enforcement efforts.

“Even though only a few cases have been prosecuted, the word does spread and cleans up quite a few others,” said Glenn Barrons, president of the Limousine Owners Assn.

Compare Prices

While operators are supposed to list their PUC permit numbers in their advertisements, not all do. Also, some firms have been using phony numbers for several years. A simple rule of thumb for a person shopping for a limousine is to look at the price, industry experts say. If the company advertises a rate much lower than others, it might be wise to be suspicious.

“Cheap is cheap,” said Berkman of Music Express. “You can’t give cheap and be legal.”