From Burton H. Wolfe (bhwrag@comcast.net)

Burton Wolfe's Internet Rag


"All the news and other stuff
the New York Times sees unfit to print"

September 2007





The nationwide taxicab 'lease' racket - part 1
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It has resulted in the destabilizing and deprofessionalizing of the major part of the taxicab industry, the loss of unionization and protection for cab drivers from safety regulators, increasing attacks on and murders of cab drivers who are now classified as engaging in the most dangerous kind of work in the U.S., and the loss to the city-state-federal governments of billions of dollars through evasion of taxes and contributions to unemployment funds and the Social Security system.

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Introduction: In the late 1980's I represented taxicab drivers denied unemployment and workers' compensation benefits by their employers on the pretext that they were not employees of the taxicab companies, but rather 'self-employed persons' who were 'leasing' vehicles from 'leasing companies,' and that they had 'agreed' to that description in a 'Taxicab Lease Agreement' they were compelled to sign as a condition of gaining work as a cab driver. (Though a layman such as myself cannot represent anyone in court - except in certain situations such as those wherein it is necessary for someone to be appointed guardian ad litem - a competent layman can represent individuals and groups as their legal agent before administrative agencies.) Lawyers who had attempted to gain statutory employee benefits for such cab drivers had struck out; but I attained a one hundred percent success record. Then, at the behest of several hundred cab drivers, I put together a group of plaintiffs for the filing of a complaint in the San Francisco Superior Court, and I induced a team of 20 lawyers to pursue it as a class action claiming that the 'Taxicab Lease Agreement' is an illegal fraud. But the lawyers dumped the action in return for a $1.3 million payoff from the bandits who run the taxicab companies. Hence, the 'lease agreement' remains in tact, not only in San Francisco, but also all over the U.S. For quite some time now, taxicab drivers and organizations representing taxicab drivers have been waiting for me to say more about the unlawful racket that exists, with full complicity of the state and federal governments despite the enormous damage resulting from it - not only damage to cab drivers, but also damage to the taxicab-riding public and to the taxpayers. My update will require a series of Rags, and I begin with background for the understanding of readers/viewers. I give full permission for anyone to reproduce this series, provided nothing is taken out of context and attribution to Burton Wolfe's Internet Rag is included, and indeed I urge everyone to wave the series in the face of municipal government officers, state legislators, and the members of Congress. The demolition of the insidious racket at issue is long overdue, as is wholesale reform of the taxicab industry.

AT THE ROOT OF THE RACKET

Oldtimers will remember the days when there was a big box, with a lever attached, bolted onto the dashboard of taxicabs. The big box was a meter that noisily clicked off dollars and cents, in contrast to the digital meters of today that silently display the increasing charge for the trip awaiting you at the end of it. The lever attached to the meter of olden times was called a 'flag.' When there was no passenger, the flag was in an up position. When the driver had engaged and was transporting passengers, the flag was supposed to be down. The trouble was that many cab drivers, not only with consent but also with encouragement from their passengers, were not pulling the flag down. 'I know what the fare is,' a regular rider would tell the driver, 'so you don't have to throw the flag. Keep the dough for yourself.'

That practice of high-flagging, as it was called, proved to be costly to the taxicab companies, because ninety percent of their revenue came from a 'meter split' with their drivers, rather than directly from the drivers' passengers. (The other ten percent came and continues to come mostly from advertisements on the cabs.) The only way for the company to determine its 45 to 55 percent share of fares recorded (the percentage varying from company to company, usually as specified in a collective bargaining agreement with unions) was to obtain a reading of the meter recording of fares. Obviously, when the flag was not activated to the down position, no fare was being recorded, and the company was being cheated out of its revenue sharing.

The companies tried various methods of beating the practice of high-flagging. They went to the expense of using 'road men' to ride around cities and towns to spy on drivers so as to ascertain whether or not they were high-flagging. But the recovery from the 'road men' and other methods of checking on drivers was minimal and nowhere near made up for the cost of the methods. So, some taxicab company owner whose name is lost to history decided upon a new arrangement that would make it useless for drivers to high-flag: a shared commission. The amount of money that a typical cab driver could be expected to reap in fares and tips on a given day or night would be determined, and a reasonable share of the money would be collected from the driver at the end of her or his shift. This shared commission became known as the 'gate,' probably because it is not until it is paid to the company that the driver enters into profit-making.


INITIAL FAILURE OF THE SCHEME

Since the gate was based on typical fare totals, since the gate varied on days or nights because the amount of fares taken in by drivers varies (weekdays are more profitable for day drivers, while weekends are more profitable for night drivers), and since the drivers did not own their cabs and were assigned to work shifts, they were still construed as employees and were able to enter into collective bargaining agreements with the cab companies through labor unions. And then some taxicab owner whose name also is lost to history got another bright idea.

Instead of construing the money collected from the driver at the end of the work shift as a shared commission, it would be called a 'rental' or 'lease' payment. Hence, the driver would be characterized as a renter or lessee of the cab company's vehicles, rather than as an employed driver. That idea in place, cab companies in some parts of the country began requiring, as a condition of obtaining work, that drivers sign contracts described variously as 'rental agreements' or 'lease agreements' or 'independent contractor agreements.' This scam that took shape in the 1940's was short-lived at that time. Unions challenged it and won decisions that the purported 'agreements' were coerced and were mere subterfuges of the true relationship between the company and the driver.

But then the taxicab companies got a break in the form of federal court decisions in 1977 holding that even though drivers were in unions, they did not have the right to be construed as employees under certain conditions. Those decisions marked the beginning of legalization for the taxicab companies' racket: the classification of hired drivers as 'independent contractors' or 'self-employed persons' not entitled to statutory employee benefits or to unionization.


[Coming next: the organization and corporate lawyer that have succeeded, on a nationwide basis, in cheating cab drivers out of employee benefits and beating the city, state, and federal governments out of taxes on a grand scale.]


The nationwide taxicab 'lease' racket - part 2

The Villainous Taxicab Companies' Organization

In part 1, I explained how and why the taxicab companies began classifying their hired drivers as 'independent contractors' or 'self-employed persons' and 'lessees'; and I summarized the resulting massive damage to cab drivers, the public, the taxpayers, the city-state-federal governments, and even the taxicab industry itself. You will need that article for full understanding of this series. If you missed it, request it in an email to bhwolfe(at)msn.com, and I will send it to you. - BHW

When there is intolerable action, there is a reaction. The reaction that changed the courts' attitude toward the taxicab companies' 'lease' racket was engendered by the outlandish activities of the Seafarers Union, which was representing cab drivers in the Midwest, and the maddeningly inconsistent rulings by the National Labor Relations Board (NLRB) on the work status of the drivers.

Central to the federal courts' rulings of 1977 were the operations of a conglomerate of taxicab companies known as Ace Cab. Not only had the union demanded employee status and benefits for drivers on daily work shifts, but also the union included in its collective bargaining agreement drivers who owned their cabs and drivers on yearly, bonafide lease agreements with individual owners rather than the taxicab companies. The courts found against the union, holding that classifying such drivers as employees entitled to statutory employee benefits and collective bargaining was as preposterous as it was in violation of the meaning and intent of the National Labor Relations Act.

At the same time, appellate justices became disgusted at receiving consistently inconsistent rulings from the NLRB on driver work status: rulings, as the justices held, that depended not on NLRB regulations or federal law or even the facts entailed, but rather on the individual biases of NLRB regional directors.

The end result was that the courts ruled in favor of the taxicab companies' right to classify drivers, under given conditions, as 'independent contractors' not entitled to statutory employee benefits and collective bargaining. Though the ruling was qualified, it opened the door for more effective lobbying in the state legislatures and the U.S. Congress by the taxicab companies, through their nationwide organization, then known as the International Taxicab and Livery Association (ITLA).



THE ANTI-HUMAN PROGRAM OF THE ITLA/TLPA

Until the 1977 federal court rulings, the ITLA was a rather insignificant trade association operating out of the Washington, D.C. suburb of Kensington, Maryland. It is still there, under the new name Taxicab, Limousine & Paratransit Association (TLPA). In addition to the great majority of taxicab companies in the U.S., the TLPA represents private car services, limousine firms, airport shuttle operators, and the companies which run paratransit services for the poor, elderly, and disabled.

Once the door was opened to change in cab driver work status, and the ITLA's members began reaping the benefits of hundreds of millions of dollars in taxes and benefit payments they were enabled to evade thereby, the member companies were able to pour more money into their organization and the organization in turn was able to spend much more money on lobbying for their social-political program. The nature of the men and women who run the organization and its member companies may be judged by that program which they have pursued over the years. Here are the nine major platforms they have set before the state legislatures and the U.S. Congress through their organization:

1. Make it legal to classify all hired drivers as 'independent contractors' who are construed as 'lessees' of 'leasing companies.'

2. Eliminate withholding of income tax at the source: the companies.

3. Eliminate all requirements for the companies to provide workers' compensation and contributions to the Social Security, unemployment compensation, and disability funds for their hired drivers.

4. Eliminate collective bargaining with labor unions.

5. Scrap legislation requiring taxicabs to be wheelchair-accessible.

6. Eliminate federal funding for mass transit systems.

7. Head off requirements for taxicab companies to install safety devices in taxicabs for the protection of drivers.

8. Free employers from requirements to provide health insurance, in whole or in part, for their reclassified help.

9. Eliminate cooperatives in favor of traditional capital-based corporations.

Such beneficent humanitarians, these entrepreneurs, are they not?

[Next, the crooked lawyer who wrote the standard 'lease agreement,' the provisions of the 'agreement,' and the massive damage from it that has resulted nationwide.]

Burton Wolfe's Internet Rag
All the news and other stuff
the New York Times sees unfit to print

September 2007 No. 67






The nationwide taxicab 'lease' racket - part 3

The lawyer who wrecked the taxicab industry


In parts 1 and 2, I explained how and why the taxicab companies began classifying their hired drivers as "independent contractors" or "self-employed persons" and "lessees"; I provided facts about the organization which has succeeded through lobbying efforts to facilitate this illegal, destructive, nationwide racket; and I summarized the resulting massive damage to cab drivers, the public, the taxpayers, the city-state-federal governments, and even the taxicab industry itself. You will need those two parts for full understanding of this series. If you missed them, request them in an email to bhwolfe(at)msn.com, and I will send them to you. - BHW



It is not often that one individual can wreck an entire industry; but there is one lawyer who has accomplished that extraordinary feat: Arthur L. Herold, senior partner of the Washington, D.C. law firm Webster, Chamberlain & Bean. It is not in that capacity, however, that Herold has wrecked the taxicab industry of the U.S. That accomplishment of his has been effected in his role as chief staff counsel for the Taxicab, Limousine, and Paratransit Association (TLPA). [See Rag Vol. 2, No. 66, for background facts about and a current description of the TLPA.]

Herold is the author of the standard "lease agreement" that dominates the taxicab industry of the U.S. It is through the "lease agreement" that the major taxicab companies of the U.S. have been able to reconstruct their identification, from taxicab companies in the business of providing transportation for public hire to "leasing companies" in the business of "leasing" vehicles to drivers of those vehicles.

It is through the "lease agreement" that the major taxicab companies of the U.S. have been able to convert their hired drivers to purported status of "self-employed lessees" who are "independent contractors" ineligible for statutory employee benefits, unionization, and protection from the Occupational Safety and Health Administration (OSHA); and it is the lack of protection from OSHA which has become a major factor in statistics from the U.S. Department of Labor showing that the rate of attacks upon and murders of taxicab drivers is higher than the equivalent rate for any other occupation, and that taxicab driving has become the most dangerous occupation in the nation, replacing police officers in that category.

It is through the "lease agreement" that the major taxicab companies of the U.S. have been able to evade billions of dollars in income taxes, health and welfare benefit payments to their employed drivers, and contributions to the Social Security, unemployment, and disability funds - and have also been able to avoid having to pay workers' compensation benefits for drivers injured on the job.

Finally, it is the "lease agreement" authored by Herold that has deprofessionalized and destabilized the major part of the U.S. taxicab industry.

WHERE HEROLD LEARNED HIS TRICKS

Like so many thousands of other lawyers now helping business owners, industrialists, and corporate executives to engage in corrupt practices, break laws, and evade taxes, Herold cut his teeth working in the field of government regulation of illegal business operations. As a young lawyer out of Tulane University's law school, Herold went to work for the Federal Trade Commission (FTC), specializing in detection and regulation of antitrust law violations in the FTC's Bureau of Competition. Having learned the tricks that can be used to violate antitrust laws and get away with it, Herold joined Webster, Chamberlain & Bean to become the law firm's specialist in teaching those tricks to the owners and executives of private clubs, foundations, business enterprises, corporations that are part of trusts and interlocking directorships, lobbyists, political committees, and candidates for and holders of public offices. His writings on the subject are among the most valued by monopolists and tax evaders.

Realizing how valuable Herold could be to their campaign to terminate employee status for their hired drivers, the TLPA hired him several decades ago to be its chief staff counsel and to write the standard "lease agreement" in use in one form or another throughout the taxicab industry.

WHAT THE "LEASE AGREEMENT" STATES

The so-called "lease agreement" which Herold authored, and which has been copied in its basic provisions by lawyers representing taxicab companies across the nation, is not always titled with those two words. It has been titled variously as "Rental Agreement" and "Independent Contractor Agreement" and "Independent Entrepreneur Agreement," among other names. No matter how it is titled, and no matter what differences the "agreement" contains as used by any given taxicab company, the basic provisions are standard. They are as follows:

+ The company is a "leasing" company in business to "lease" vehicles.

+ The individual signing the "agreement" is a "self-employed lessee" who is "leasing" a taxicab from the "leasing company," and therefore there is no master-servant or employer-relationship between the two.

+ Since there is no such relationship, the relationship strictly being between lessor and lessee, the "lessee" of the taxicab will not be entitled to any statutory employee benefits and will not request them.

+ As to the attached appendix assigning work hours and conditions, what was previously a work shift is construed instead as a "lease period."

+ When the driver called "lessee" is terminated - i.e., fired - that is construed as "cancellation of the lease agreement."

WHAT THE "AGREEMENT" HATH WROUGHT

The individual seeking employment from the taxicab company called "leasing company" usually has no choice; he or she must sign the "agreement" as a condition of obtaining work driving one of the company's taxicabs. Where a choice to be on "lessee" or employee status is provided, the individual opting for employee status is advised by the company's manager that whereas he or she will not be compelled to record all trips and to have income tax withheld on "lessee" status, on employee status he or she will be required to record every trip on a waybill (trip sheet) and to have not only fares taxed, but also eight percent of what will be construed as the average tips given to a driver. On top of that, the would-be employee is warned that the lessees will be given first choice of the most lucrative shifts and the newest cabs, since they are providing management with the work arrangement the company wants. Typically, shifts such as graveyard, and crummy cabs that lessen tips from disgruntled passengers, take as much as $200 in earnings out of the driver's pocket per week. Choice? As one driver explained it to me: "You got no choice. They have a gun at your head."

In addition to the specific results from the "lease agreement" already explained several times in this series, there is the deprofessionalization and destabilization of the taxicab industry, and those terms need some explanation.

There was a time when there were just two basic classifications of taxicab drivers: owners of taxicabs and the permits to operate those cabs, and employed drivers who own nothing. The latter always comprised the great majority of cab drivers, and they still do, except that they are now called "lessees." As "self-employed lessees," without protection from either unions or government agencies against the corrupt practices of the bandits who own and operate the taxicab companies, incoming drivers find that they cannot learn how to overcome the handicaps fast enough to make a decent living. After a few months struggling to earn a living, they abandon the considerable freedom involved for salaried employment, even at lower basic earnings, for the sake of work protections and benefits. The result is a huge number of rookies who do not know the area where they work or even what it takes to be a professional cab driver. The days when you could ride in a company's cabs and come across the same drivers for years, because they were making a profession of it and looking forward to a pension some day, are mostly over.

Nevertheless, there is a certain cadre of drivers who have managed to beat the exorbitant gate they are charged and who have stuck it out for many years. More than 90 percent of them have remained out of the tax system, with full knowledge of the Infernal Revenue Service. In time each one winds up evading tens of thousands of dollars in uncollected income taxes and contributions to the Social Security System. Heed the words of a driver who explains why he has no guilt feelings about it: "If the government is not going to provide me with benefits in return for my tax dollars, I am not going to give the government any of my tax dollars."



[Resuming Monday: The government agencies in complicity with the taxicab companies' illegal operations and the all-prevailing tax evasion.]

Burton Wolfe's Internet Rag
All the news and other stuff
the New York Times sees unfit to print

September 2007 No. 68




Internal Revenue Service - The Infernal Revenue Service.

- Lucifer's Dictionary of the American Language*






The nationwide taxicab 'lease' racket - part 4

Government agencies in complicity with the taxicab companies' 'lease' racket



It would be easier for me to tell you which city, state, and federal government agencies are not in complicity with the taxicab companies' "lease" racket than to list all of those that are, since those that are run into the thousands and even include the Federal Bureau of Investigation (FBI), which refused to act after I submitted a list of 7,000 working taxicab drivers who had not been filing income tax returns and I asked, under law, for a percentage of the uncollected tax money following the haul. Had the FBI instituted action for tax law violations, starting with my list and then compiling its own nationwide, the cab companies would have been held responsible and the "lease racket" would have been brought to an end.

I had first found out how all-prevailing the complicity in fraud and law violations are when I broke through the racket by obtaining unemployment compensation benefits for drivers declared to be ineligible for them under the "lease agreement" that dominates the taxicab industry. Unlike the lawyers who botched proceedings before the California Unemployment Insurance Appeals Board, I secured a ruling from an administrative law judge that the "lease agreement" is a subterfuge to disguise the true work status of hired cab drivers, and they are eligible for benefits no matter what is stated to the contrary in the "lease agreement."

Once I obtained the kind of decision that should have been rendered from the start, a tax auditor from the Employment Development Department told me the EDD would have to audit all the taxicab companies because the "lease agreement" is standardized, and if one driver is actually an employee and not a "self-employed lessee" of the "leasing company," as the bandits who run the cab companies assert, then all drivers must be treated as employees. It never happened. Kaye Kiddoo, who was the director of the EDD at the time, told the auditor to back off, keep his mouth shut, and let the Appeals Board handle the cases one by one. I tried to overcome that with a class action which would have produced a court ruling that the "lease agreement" is an illegal fraud; but it had to be handled by lawyers since a layman cannot prosecute such an action, and the team of lawyers sold out the lawsuit for a $1.3 million payoff from the taxicab company bandits. (I will have more about that in a subsequent newsletter.)

THE IRS COULD END THE RACKET - WHY IT IS NOT

As I mentioned in the prior parts of this series, more than 90 percent of the cab drivers are out of the tax system. So, I approached the Infernal Revenue Service with a proposal to nail the cab company bandits with nationwide action holding them responsible for the massive amount of income tax evasion - action encompassing an audit of all cab companies and/or a RICO (racketeering) litigation. I got a long-distance phone call from the man in charge of the IRS's Program Analysis division in Washington, D.C. at the time, Theodore (Ted) Strunk. He had called, he explained, to apologize for the non-action and to exchange information with me.

"We know everything you say is true," Strunk said. "Hell, when I was working in the field I found out the extent to which the hanky-panky is going on. I'm sorry we have left everything to you and haven't provided any help."

"Why not?" I asked. "There was an announcement on the front page of the Wall Street Journal that the IRS is going to crack down on all the fake independent contractor schemes, not just the one in the taxicab industry, because they're costing the government around fifteen billion dollars a year in lost taxes."

"I know," Strunk replied. "We're working on it slowly, but our budget has been cut; so, we're shorthanded."

"Well, how can the President and the Congress announce a crackdown on tax evasion schemes when the budget is cut so that the personnel are not available to do the job?" I wanted to know. "The cuts certainly cannot be to save money, since you and I know that every IRS agent of the most minimal competency brings in a hundred times his or her salary in recovery of evaded taxes and penalties. So, from what you say, I can only conclude that the President and the Congress are shucking the public."

"Draw your own conclusion," Strunk said. "I can't talk about that."

He then went on to exchange information with me as to the number of cab drivers not filing income tax reports, and after I estimated 75 percent he said that my figure was too low. "We know the figure for being off the tax rolls completely is closer to ninety percent."

Once I published that statement in a newsletter of the Homosapiens Educational and Legal Project that I was running, and the head muckamucks of the IRS saw it, Strunk was ordered not to talk to me any more. His telephone number was changed, and he and the entire staff were ordered to make it unavailable. The mail room employees were ordered to reject any mail from me to Strunk and to send me a notice stating "no person of that name employed here." As a checkup, I wrote to the IRS personnel director, Tom Nelson, asking him to find out if anyone by the name of Theodore or Ted Strunk was employed at IRS headquarters. Evidently the personnel director was one IRS employee who had not received the order for non-communication with Burton Wolfe. He returned my letter to me with a notation at the bottom of it: "Theodore Strunk, Program Analyst."

If all of this sounds like something out of some totalitarian state, then be advised that it is merely one aspect of how Sinclair Lewis's famous line "it can't happen here" is being reversed throughout what is advertised to the world as "American democracy."



[Next: How to restructure the destabilized, deprofessionalized taxicab industry.]