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Lawsuit: Taxi companies extorting kickbacks from adult clubs

Updated Tuesday, June 2, 2009 | 5:07 p.m.

A lawsuit seeking class-action status was filed Tuesday in Las Vegas alleging taxi and limousine companies have extorted more than $40 million in illegal kickbacks from local strip clubs.

The complaint focuses on the long-running and controversial practice of taxi and limousine drivers receiving payments from the clubs of as much as $100 per male passenger. If the clubs refused to pay, the drivers would simply divert passengers to a different club, the plaintiff's attorneys said.

Businesses in the taxi and adult business industries, both of which were targeted in the lawsuit Tuesday, have not yet responded to the lawsuit.

An official in the adult entertainment industry said the problem is one perpetuated by the strip clubs themselves.

Wayne Bridge, co-founder and chief executive of the Sin City Chamber of Commerce, said he's testified unsuccessfully in the past in behalf of local efforts to outright ban the practice. His chamber of commerce includes about 15 strip clubs, or about 40 percent of the city's clubs, he said.

He said me met in 2006 with officials from about 15 clubs to discuss the problem and they told him they had paid about $20 million to cab drivers in 2005. But the topless and nude dancing clubs can't agree among themselves to stop the practice, he said.

"The problem is, there is always a club that is willing to pay more. You can't get all the club owners on the same page," he said.

Bridge said the practice of paying commissions is bad for tourists because the club owners seek to recover those fees with cover charges, while locals who drive to clubs can typically walk in for free. And there's a danger the practice will spread to restaurants and other businesses, he said.

This isn't the first lawsuit over the issue, and in an existing case in state court some club owners say paying commissions is a standard and acceptable procedure.

"Plaintiffs themselves have been tipping taxicab drivers for years. Moreover, adult nightclubs are not the only businesses that tip or provide another form of compensation to taxicab drivers that bring patrons to their businesses," lawyers for the Seamless and Sheri's Cabaret clubs said last year in response to a state lawsuit filed by Deja Vu Showgirls and Little Darlings.

In that suit, which is pending against several clubs, Deja Vu and Little Darlings complained competing clubs were paying kickbacks to cab drivers and that the cab drivers were accepting them in violation of state law. The suit said the drivers were bad mouthing Deja Vu and Little Darlings to cab riders so the drivers could earn kickbacks at other clubs.

"Restaurants, attorneys, massage parlors, adventure businesses and doctors, just to name a few, all provide tips of some sort to taxicab drivers," the lawyers for Seamless and Sheri's said.

They said Deja Vu and Little Darlings filed the current and previous suits "to prevent lawful competition between the various nightclubs because plaintiffs' profitability and market share has allegedly gone down over the years."

Deja Vu and Little Darlings, ironically, were among the clubs sued Tuesday in federal court.

Tuesday's suit was filed on behalf of Southern California resident Theodore Trapp by attorneys Jay Edelson and Rafey Balabanian of the Chicago law firm KamberEdelson and Las Vegas attorney James Smyth II of the law firm Kummer Kaempfer Bonner Renshaw & Ferrario.

The lawsuit claims that the kickback scheme hurts Las Vegas.

"Vegas has been one of the top tourist destinations in America for families, but its position is being threatened," Edelson, lead attorney for the lawsuit, said in a press release announcing it. "This is precisely the type of activity that keeps families away."

Besides Tuesday's lawsuit, another Las Vegas attorney, Al Marquis, has created a group called Fairness in Transportation that is fighting the kickback practice, arguing it hurts women because cab drivers are less likely to pick up women as they focus on male adult-club customers. That group's Web site is wedontdobusinessthatway.com.

Marquis said he was not involved in Tuesday's suit, but said he wasn't surprised it was filed because tourists are tired of being diverted from their intended destinations and then having to pay high fees at clubs as the clubs try to recover the commissions paid to drivers. Marquis said his group will work to get the city of Las Vegas and Clark County to enforce existing laws outlawing payment of such kickbacks and he would like to see taxi regulators enforce statutes barring diversion of passengers.

The attorneys in Tuesday's lawsuit reiterated the claim of Marquis that women suffer because of the kickbacks.

"As taxi drivers prefer to pick up men who are more likely to go to strip clubs, the suit claims that families and women were snubbed by drivers and found it hard to hail a cab at night. The suit also claims that millions of dollars in tax revenue have gone unpaid to the local, state and federal government," the press release announcing the suit said.

"The vast majority of taxi and limo drivers are honest and hardworking people, but this minority has a stranglehold on the city," Edelson said in the release. "It is finally time to put this practice to an end."

The suit alleges the defendant strip clubs and taxi companies are running criminal syndicates in violation of the state racketeer influenced corrupt organization act; and are violating Nevada's deceptive trade practices act.

The suit said Trapp got into a cab at Caesars Palace on Jan. 17 and asked to be taken to the Play it Again Sam club on West Spring Mountain Road, but instead was diverted to the Spearmint Rhino club by the driver, who said Spearmint Rhino was a better club but did not disclose he would receive a kickback and a higher fare for taking Trapp there.

Edelson said his firm has a reputation for bringing, and winning, high profile class action lawsuits. But it's unclear if Tuesday's lawsuit will change anything.

The Legislature in 2005 tried make kickbacks illegal, but cab drivers threatened strikes and held mass honking sessions, upset over the threat to their incomes. Then-Gov. Kenny Guinn vetoed the bill.

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