Topless/Taxi War: Battles on several fronts

For months I’ve been telling you about the river of cash flowing from local topless cabarets to cab and limo drivers, who are being paid to drop off customers. Often those customers are being diverted to the club that pays the drivers the most money – up to $100 per person in some cases.

The more successful clubs have been writing off the expense under the general concept of business marketing. Other clubs have felt the pinch and have jacked up their admission fees and drink prices. Word is some have also taken a bigger cut of the dancers’ dough to offset the arrangement.

Meanwhile, those limo drivers who have been making big scores are compelled to kick some of the cash up the line to Strip resort door personnel, who the good word is also have palms to grease.

Now the topless/taxi war has broken out on multiple fronts, all of which add up to a troubling picture for both industries, state regulators, and potentially federal law enforcement. In tough economic times, this underground economy helps feed a lot of working families; whether it also feeds Uncle Sam his piece of the action remains unclear.

What is very clear is the fact the war is heating up with each passing day.

On Tuesday, attorneys for a California man filed a sprawling document seeking class-action status in U.S. District Court in an effort to sue a dozen local topless clubs along with taxi and limousine companies over the alleged kickbacks.

The lawsuit alleges Californian Theodore Trapp was diverted from another club to the Spearmint Rhino by a cabdriver who was paid a kickback by the popular strip joint.

What is unclear is whether Trapp can successfully claim damages. Will thousands of supposedly diverted customers come forward and sign their names to affidavits claiming they were harmed by being diverted from one club to another? I’m guessing that’s unlikely.

Upon hearing of the lawsuit’s existence, one veteran attorney said, “Class action lawsuits are devices by which attorneys make money.”

The potential to disrupt the kickback activity appears highly probable.

Could that be the larger point of the legal exercise?

We shall see.

On a second front in the war, attorney Al Marquis continues to represent a group of businessmen, cab company owners among them, called Fairness in Transportation. The group has written letters to Las Vegas casino presidents raising issues of ethics and fairness regarding the kickback scheme.

In April Marquis said, "We really want to put a stop to the practice of strip clubs, or any business for that matter, paying for the delivery of passengers. We want to put an end to doormen pulling people out of taxi lines and putting them ahead of other customers. All of those things are bad for business in Las Vegas, and we want to put a stop to all of it."

The Marquis group set up a Web site called wedontdobusinessthatway.com.

In addition to that, there are the intriguing comments made by Rick’s Cabaret CEO Eric Langan, whose publicly traded company has been in the middle of the topless/taxi debate.

For a short time in mid-May the strip clubs had a ceasefire, lowering the tips paid to drivers to $30 per person. Then the bidding jumped again.

At a stockholder conference call Langan made his philosophy appear simple enough: Use any reasonable means necessary to bring in the customers, who in turn will keep the prettiest dancers occupied and “vice” versa. If that meant getting into a bidding war with limo drivers for customers, so be it.

“You gotta remember, in our industry it's all about the girls. So he who has the girls has the customers, and he who has the customers has the girls,” he said. “So it's really a chicken and egg and which came first. The trick is keeping the girls and the customers on a platform. ... The guys will always go where the girls are."

And it’s clear Langan knew the impact his high-rolling marketing concept might have on the competition.

“They've tried a lot of things to offset those expenses," he said. "We've kept right on eating the losses we've been sustaining before. We're happy."

We’ll see how long Langan and the rest of the Vegas strip club moguls keep smiles on their faces now that the topless/taxi war has broken out on several fronts.

After reviewing the lawsuit, Marquis said, “The problem with paying for the delivery of customers is that it’s been escalating in recent years. It has begun to substantially alter the conduct of lots of different parties from hosts and doormen at casinos; to individual cab and limo drivers; to tourists getting diverted over their objection. Our position has been, this is bad for Las Vegas. It leaves a sour taste in the mouth of tourists.

“We’ve been saying all along this activity is bad for Las Vegas We don’t see how this news story and lawsuit can help the city in any way.”

Marquis is working on changing local ordinances regarding the payment of drivers by businesses for the delivery of customers.

“We need to bring a stop to businesses paying for the deliver of customers whether it’s strip clubs, wedding chapels, or restaurants. It’s bad for Las Vegas.”