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Baby you can drive my TAXI 

Taxi Commission officials say hundreds of medallion holders aren’t driving cabs, and that’s against the law

Wednesday, Feb 14 2007
Piloting a squirrelly, rattle-prone Crown Victoria with worn rubber on the rims and little spring left in the shock absorbers, the cabbie prowls the deserted streets south of Market on a cold Sunday night in late January.

A staticky voice comes over the Motorola radio mounted to the taxicab's dashboard: A fare is waiting at a bayside bar on the Embarcadero. The cabbie, a twentysomething San Francisco man, tells the dispatcher he'll take it, stomps on the gas pedal, and races up Bryant Street toward the waterfront, the orange speedometer needle flicking up to 55 miles per hour. Worried that another driver might scoop up the fare before he can get there, the hack pays scant attention to traffic laws.

"The taxicab industry is an alternate universe," a "vortex," where the norms of American life and commerce don't apply, the driver says. He's half-joking, but he certainly has a point.

Spend some time scrutinizing San Francisco's taxi trade, where thousands of drivers toiling for 34 companies compete for cash, and you'll find a business where laws are routinely flouted and dubious behavior abounds. Since the early 1990s, the Internal Revenue Service, the state labor commissioner, the workers' compensation system, local prosecutors, and plaintiffs' lawyers have all taken key taxi industry players to court.

Lawsuits aren't the industry's only problem. Now city officials and taxi business insiders say a wave of deception is eroding the law that governs the taxis, a law designed to benefit working cab drivers.

To control traffic congestion and ensure that cabbies can earn a living, the city strictly controls the number of cabs, limiting the total to 1,381 and requiring each vehicle to have a city-issued permit or "medallion." Since 1978, the city has awarded medallions only to full-time cab drivers — by law non-drivers and corporations aren't eligible. The idea is to give cabbies a financial stake in the industry by making them owner-operators.

The arrangement, however, is riddled with scammery. A person with a medallion who doesn't want to drive can make thousands per month simply renting the medallion out to a cab company or another driver — and apparently scores of them are doing just that.

It's a situation that infuriates some industry honchos. "There's corruption all over the place," Luxor Cab President John Lazar complains.

At the San Francisco Taxicab Commission, the body that oversees the town's taxis, Executive Director Heidi Machen says her investigators have discovered at least 150 medallion holders who don't appear to be driving — what she describes as cases of "egregious fraud" — and thinks as many as 500 people may be bilking the system.

"At the current rate we'll be having disciplinary hearings from now until 2011," says Machen.

To understand all this talk of corruption and fraud, you need a quick primer on taxicab history.

The legal framework governing San Francisco's taxi system has its origins in a spectacular 1970s-era corporate flameout, an Enron-esque implosion presided over by a felonious pal of Richard Nixon. The ill-fated company was the Westgate-California Corporation, a massive $2 billion San DiegoÐbased conglomerate helmed by C. Arnholt Smith, a financier and Republican activist tight with Nixon, whose empire, at its height, included a small airline, the San Diego Padres baseball team, a tuna cannery, a vast real estate portfolio, and the Yellow Cab operation in San Francisco.

Then Smith got busted by the federal government for income-tax evasion, prompting a federal judge to label him a "crook" before sending him to a federal correctional facility for three years, according to the New York Times. Westgate-California crumbled under the weight of more than $300 million in debt. The collapse spelled the end of Yellow Cab's San Francisco operations, sidelining 500 cabs. (Today's Yellow Cab Cooperative, the area's largest taxi fleet, is a separate outfit.)

The bankruptcy proceedings ground on for years.Taxis became a rare commodity.

Faced with this mess, then-Supervisor Quentin Kopp authored Proposition K, a local ballot measure designed to get cabs back on the streets, which was approved by voters in the summer of 1978, creating the legal framework that regulates the industry to this day.

To keep cab service from being crippled by future bankruptcy boondoggles, Kopp envisioned a plan that spread out medallions among individuals rather than concentrating them among a handful of companies. The business would be controlled by cab-driving San Franciscans, not corrupt San Diego tycoons.

To get a medallion under Proposition K, a driver first puts his or her name on a waiting list. When the applicant's name comes to the top of the list after 10 or so years, the Taxi Commission runs a cursory background check — law-abiding cabbies who drive full time get preference. After getting the prized medallion, the hack must put in either 800 hours driving annually or 156 four-hour shifts per year, in order to keep it. Eventually, when the cabbie decides to retire from the business, the medallion is returned to the city, which passes it on to the next driver in line.

"The intent was clearly to make medallions available to people who were bona fide taxi drivers," says Kopp, an independent politician who went on to serve as a state senator and a San Mateo County Superior Court Judge. "It was supposed to be a strict system of rewarding those who actually drive." Medallions, he continues, "are government permits, and when you're finished you turn them back in."

Unlike New York City, where medallions are auctioned off for hundreds of thousands of dollars and can be sold from one person to another, in this city medallions are available to cabbies for a minimal processing fee and can't be resold.

Still, possessing a medallion does offer an obvious financial benefit: When a driver with a medallion isn't on the road, he or she can legally rent their cab and medallion to another cabbie, or to a taxi company, an arrangement that keeps cabs circulating 24/7, and typically puts an extra $1,800 to $2,000 per month in the pocket of the medallion holder.

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