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Checkered past: why Washington's 13-year taxi scandal won't end.

Since 1979, a generation of scandals has come and gone: Wedtech, HUD, Solomon Brothers; government investigators cracked down on Wall Street insider trading and uncovered widespread fraud at the Defense department. They even got John Gotti. Nineteen-seventy-nine also happens to be the year the D.C. government decided to crack open the corruption in the city's taxicab industry. The result? After 13 years of investigation, the D.C. government has managed to convict one official: Richard Little, in 1987. Never heard of him? You're not alone. Little was but a low level cab inspector involved in taking payoffs to approve unsafe cabs. Thirteen years -- more time than it took the Columbian government to put away cocaine kingpin Pablo Escobar--and about all the D.C. government can point to for its efforts is Richard Little.

Could it be that the cab industry is clean? Not a chance. Cab company owners and taxi drivers openly admit that fraud is widespread. "Anyone who thinks this business isn't corrupt is naive," says one cabby, who, echoing the sentiments of many other drivers, explains that illegitimate cabbies routinely overcharge passengers, bribe their way through safety inspections, swap cabs, and drive without insurance. The fraud and abuse goes well beyond the petty: The media in recent years has not only reported allegations of corruption among city officials, but one TV investigative team even aired video of what could be nothing other than illegal payoffs changing hands to secure certification for unsafe cabs. Other widely reported allegations include the selling of permits to drivers who failed the hack exam or who owe thousands of dollars for outstanding violations. Nearly $4 million in fines remain uncollected, and according to members of the D.C Taxicab Commission, the 13-person body appointed by the mayor to oversee the cab industry, there may now be as many as 4,000 illegally operating cabs in the District (compared to approximately 6,500 legal ones). As many as 1,000 of these may have obtained licenses by bribing city workers. One commission member claims to have witnessed--in the parking lot of the cab administration building--the illegal selling of an exam given to all prospective cabbies. So out of control is the industry that one brazen cabby who owed more than $20,000 in fines recently showed up at a taxicab commission meeting to issue a complaint. "It's not a question of whether fraud exists," explained one member of the commission, "but how much and where."

Of course, Washington isn't the only city with a cab industry plagued by corruption; but the problems here are widely acknowledged to be among the worst in the nation. "We consider the D.C. system about the best example of how not to run a cab industry," says Alfred Laglasse, executive vice president of the International Taxicab and Livery Association.

And still, the government investigates and investigates. Could these problems be such stumpers that, despite staring at them for 13 years, the D.C. council, police, and taxi commission have been unable to get to their core? Or even to bring someone to trial? Unlike most cases of corruption, where the tough part is discovering that a problem exists, the problem here is known and well documented. But virtually nothing concrete has ever been done to fix it. Why?

The answer, of course, is of importance to anyone who, even occasionally, hails a cab. It's not just that passengers are overcharged, or might find themselves heading toward Glen Echo when they asked for Glenn Dale. Of greater concern is the issue of safety: You don't have to be Mr. Goodwrench to figure out that there are hundreds of cabs cruising the District that couldn't possibly pass a safety inspection; and that's no surprise considering that D.C.'s cabs were found to be, on average, the oldest of any in 10 of the nation's largest cities. Yet many of the city's cab drivers display valid registrations and the cabs they drive are often tagged as being in excellent operating condition. What's their secret? Money, for the most part. Fifty bucks is about what it takes these days to get any scrap heap a safety sticker; and no matter how many driving violations you have, as little as $5,000 will set you up with an illegal permit.

Of course, the police might pick up an illegal cabby now and again, but that's missing the point. The root of the problem lies in the way the D.C. government regulates--or has failed to regulate--the cab industry. While there is no single reason the D.C. council and the cab commission--the two branches charged with overseeing the industry--have allowed fraud and abuse to run wild, peel back the layers of excuses and alibis and you'll find that the regulators and legislators have been virtually captured by the industry they are charged with controlling.

That, of course, is hardly a problem unique to D.C. government; it is played out on a grander scale at the federal level. Some 15 years ago, a congressional investigation on federal regulation concluded that the central characteristic of nine regulatory agencies studied was their devotion to "the special interests of the regulated industry." Today, little has changed. One need only look as far as the S&L scandal or to the Nuclear Regulatory Commission's dictates which consistently toe the nuclear power industry's line. Whether it's the D.C. cab commission or the Food and Drug Administration, government regulators can be the most effective safety net protecting the public's interests against the special interests. Unfortunately, as the case of the cab industry illustrates, it often tends to work the other way around.

Taken for a ride

To understand why neither the city council nor the cab commission has come close to keeping the cab industry clean, you have to first consider the unusual amount of evidence of corruption that has been revealed over the years. Here's a sampler:

Fall 1979: The D.C. Department of Public Works produces a report showing evidence of bribery and corruption within the cab industry. Further investigation by government officials is promised.

November 1985: Washington's WUSA-TV, as part of a series documenting widespread fraud among D.C. inspectors, shows one approving an unsafe cab (balding tires, defective brakes, missing lights) without inspecting a single part of the vehicle. The approval came just minutes after the cabby paid $50 to a middleman who promised to use the money to pay off inspectors. Shortly after the reports are aired, then-mayor Marion Barry publicly accuses WUSA reporter Mark Feldstein of "jeopardizing" the city's six-year-old investigation into the cab industry, but says the city's probe would continue.

Summer 1987: The D.C. city council establishes a permanent 13-member D.C. Taxicab Commission to regulate the troubled industry and further investigate allegations of wrongdoing.

Fall 1987: Government officials discover that 3,000 D.C. cab inspection stickers have been stolen from a government storeroom and suspect that they are being sold on the street for approximately $50 each.

October 6, 1987: D.C. police's public integrity department arrests three city officials suspected of stealing the stickers. Members of the taxicab commission, however, show little enthusiasm, with one saying, "We are trying to strengthen communications with the cab industry; those arrests could set us back." The next day, charges against the city officials are dropped on a technicality.

December 1990: In an open hearing before the taxicab commission, several cab drivers detail the widespread sale of illegal cab licenses and charge that city officials are involved in the crimes. The commission responds by suggesting the establishment of a "hot line" to allow cabbies to call in anonymous tips.

March 1992: 7,500 operating permits--the entire supply for the D.C. cab fleet--are reported stolen from the taxicab commission offices. The fresh supply of stickers on the streets (black market value of $5,000 to $15,000 each) are considered a boon to cabbies unable to renew their licenses because of previous violations or unpaid fines. Another police investigation begins.

The city council announces its own investigation into improprieties at the cab commission.

May 1992: The city council calls off its investigation, because, as one council member explains, "There are serious problems over there and I want to see what happens after the [police] investigation."

October 1992: D.C. police department reports new evidence of city motor vehicles department officials and cab company owners selling stolen 1993 safety inspection stickers. Shortly after, Chief of Taxicabs Ronald Stokes is placed on paid leave from his $65,000-a-year job pending the outcome of four concurrent investigations into corruption at the agency.

Clearly we have a problem. Yet despite all the probing, the creation of the taxicab commission, and the media exposes, the results can be fully recorded on the back of a matchbook. Granted, with Washington posting one of the highest crime rates in the nation, a few million dollars worth of cab-related fraud isn't exactly on the hit list for the overextended police force--which is one reason why the city spends $1.5 million a year on a commission to deal with the problem. But ask officials at the cab commission and the city council why they haven't been able to curtail the abuse, and the excuses come fast and furious.

"Our role is to write budgets and legislation," explains Craig Pascall, general counsel of the city council's Public Works Committee, which is charged with overseeing the cab agency. "We can't issue warrants for arrest." That's true, of course, but the council can hold investigative hearings if it desires. And what about the cab commission? Though it has made progress on some issues, such as combatting discrimination by cab drivers, wiping out fraud in the industry is not one of them. Why? While the commission views cracking down on fraud as "its number one priority," according to its general counsel, George Crawford, it has never been able to accumulate enough evidence of wrongdoing to build a case. "People are reluctant to identify the culprits," he says. Commission chairman Daniel Jordan, on the other hand, is still in the denial stage, maintaining that he "hasn't seen any fraud [within the cab agency] proven yet." So much for the stated excuses. What's the real reason for the failures? Not unlike several regulatory agencies at the federal level, the taxi commission and council are in many ways led by the very interests they are charged with overseeing. Of course, many of the owners of D.C.'s 102 cab companies would benefit from sweeping the fleet of illegal cabbies off the streets. But they also realize that the tighter the commission's grip on fraud, the better it will be able to keep track of legit cabbies and cab companies--a tradeoff some owners thus far have been wary of making.

Cab company interests, for example, helped persuade commissioners to oppose a reform that would have made life rougher for any cabby--legal or illegal--by requiring that a violation be punished with immediate towing. When one commissioner proposed freezing the approval of new permits for a several-month period to allow a survey to determine the extent of fraud and abuse, owners again, leery of closer scrutiny, led a drive to kill the plan. Likewise, since 1987, the commission has been "examining" updating the industry's rules and regulations, a set of guidelines drafted in--and essentially unaltered since -- 1959. In five years, the commission has yet to make a single noteworthy revision, even though many of the rules, such as one stipulating that cabbies need not carry change for anything larger than a five-dollar bill, are neolithic.

And why are the commissioners so eager to side with the owners? "It's simple," explains Arrington Dixon, the commission chairman from 1987 to 1990, "money and politics."

Here's how it works: All but four of the commissioners are political appointees--people selected for the most part based on their connections with the administration or people on the city council. (The other four are industry representatives: cabbies or owners.) The advantage of such a system is that it brings to the commission a "citizen's perspective." But it also means that the commissioners, if they are not a courageous group, can easily fall prey to the pressures of cabby interests who are wedded to the status quo. Savvy cab industry leaders, well aware that the commissioners are beholden to the politicians, make their presence known both through political contributions and lobbying. And family connections, no matter how ethically questionable, don't hurt either. The owner of one of D.C.'s largest cab companies has hired the son of Councilman Harry Thomas to lobby the council on behalf of the cab firm. (Councilman Thomas, by the way, happens to be the chairman of the council's Public Works Committee, which is responsible for oversight of all cab issues.)

The commission pays heed not only to preserve its contacts on the council, but its coffers; after all, the council controls the commission's $1.5 million budget. "It's just not smart to say anything against the council," admits taxicab commission member Lillian Cooper-Wiggins, "even off the record."

Cooper-Wiggins, however, does concede that the council "is lobbied very hard" by cab company interests. Consider the clout of Willie Wright, a director of one of the city's largest cab associations, Capitol Cab. Wright, who served as an industry representative on the commission until last year, is not only regarded as an able political fundraiser, but he knows how to treat a politician. Capitol Cabs' drivers, for example, are especially busy on election days, providing free rides to the polls for voters in selected areas; it's not uncommon for a special Capitol Cab to wait at the airport to ferry local leaders about, gratis, upon arrival in D.C.; and Wright's political endorsements carry weight, as he is viewed as the informal leader of a large block of cabbies. So influential is Wright that he openly boasts (and few in the industry deny) that he has handpicked some of the members of the commission. So when Willie doesn't get his way, you can be sure he lets his friends in public office know.

And what's Wright's way? Maintaining the status quo, for the most part. While he is praised by even his business competitors for running a clean shop, he is as widely criticized for blocking reforms, such as holding up for several years the computerization of the agency's data even though it would have cut into corruption. Why the stubbornness? "The computers would also monitor the performance of the companies," said Dixon, who proposed computerization five years ago. "If a complaint came in, a letter went out. That, they didn't like."

No fare

Certainly, the cab commission and council's failure can be felt every time you ride in a cab with shoddy brakes. But it also teaches a larger lesson about regulatory breakdown that applies equally to the federal government. While there was no single cause of the collapse of the savings and loan industry, one key factor was Congress's 1982 decision, under pressure from powerful (and never-stingy) banking lobbyists, to allow the S&Ls to make risky, high-yield investments. Similarly, D.C. politicians are loathe to offend the cab interests. And, just as so few banking regulators had the courage in the seventies and eighties to stand up to Congress, the cab commission has largely shied away from taking on D.C. pols.

Whether it's the U.S. Congress or the D.C. council, legislators must not only be aggressive about overseeing the regulators, but willing to push them in the right direction. This means resisting the temptation to cater to lobbyists and contributors whose interests may not be in sync with the public's. When such temptation is not resisted, the results can be disastrous, as when Congress, long at the beck and call of tobacco interests, refused for years to push federal health regulators to warn the public about the dangers of smoking. And at the same time regulators must have the courage to stand up to legislators and the administration even though their positions may be in jeopardy if they do.

As the federal government gears up for a re-regulatory burst under the new Democratic administration, it could do worse than consider the lesson of a tiny local agency across town. The bad news is that we've learned again that even the best-intended agencies can be swayed by the very interests they are created to oversee. The good news, however, is that it won't take much to draw the new federal bureaucrats' attention to D.C.'s cabby morass; the first time they ask for a ride to Capitol Hill and find themselves headed towards the Capital Centre should do the trick.
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Author:Georges, Christoper
Publication:Washington Monthly
Date:Dec 1, 1992
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