By Jeff German

Fri, Jan 25, 2002 (5:07 a.m.)

For the past 18 months, Lance Burton has recognized the value of using Las Vegas taxicab and limousine drivers to lure customers to his magic show at the Monte Carlo.

Burton runs a two-page ad each month in the Trip Sheet Magazine, a glossy taxicab industry publication that he owns, asking drivers to enroll in his "referral rewards" program.

Any driver who signs up gets two free tickets to his show and then $1 for every customer sent to the Monte Carlo. Drivers receive a check each month directly from the Strip casino's accounting department.

"It's a good promotion," Burton's publicist, Wayne Bernath, said. "We just do it to get his name out there and spread the word around about his show."

Burton, who credits cabbies for turning his act into a popular attraction on the Strip, is not alone in offering such monetary incentives to bring in customers.

Dozens of Southern Nevada businesses -- among them adult nightclubs, restaurants, wedding chapels, tour companies, auto body shops, outcall services and even brothels in nearby Nye County -- provide kickbacks to drivers.

There even are three publications devoted to helping drivers find the businesses willing to pay them extra cash.

The practice has been taking place within the taxi industry for so long that nobody can remember when it started. In recent years some adult nightclubs have upped the ante by tipping drivers as much as $40 for each customer steered to them. That has created a nasty bidding war within the lucrative, but highly competitive, industry.

Although state regulations prohibit cabbies from accepting tips from anyone other than passengers, the payoffs have become a way of life and a financial necessity for most drivers in the post-Sept. 11 slumping economy.

"Without kickbacks, the average driver doesn't make any money," said Mike Martinez, a former cabbie who now publishes Taxi, a monthly tipping guide for drivers.

Sept. 11 took a toll on the adult nightclubs, and it brought a new twist to the bidding war for the cabbies' services. Eventually it prompted some of the most well-known topless clubs -- Olympic Garden, Crazy Horse Too, Club Paradise and Cheetahs, which no longer were willing to pay off drivers -- to file an unprecedented lawsuit against their smaller, but higher-tipping, competitors to stop the practice altogether.

On Jan. 7 District Judge Sally Loehrer granted a preliminary injunction sought by the major clubs barring all cabbies from accepting tips and all of the adult businesses named as defendants from giving the drivers gratuities until the lawsuit is resolved.

The order was aimed at stopping the higher-paying clubs, mostly all-nude establishments, from "conspiring" with the cabbies to divert business away from the well-known cabarets.

It created an uproar within both the taxi and adult-nightclub industries.

City and county ordinances prohibit anyone with a liquor license from providing kickbacks to cabbies and limousine drivers. But the law does not apply to the all-nude clubs and other businesses that don't serve liquor.

Loehrer's order hit the all-nude clubs hard.

Cabbies, unwilling to give up the tips, vented most of their anger at Olympic Garden owner Pete Eliades, a politically connected businessman who has been leading the charge to eliminate the kickbacks. They've been bad-mouthing him on the street, on the Internet and even to his face. And they've been boycotting the Olympic Garden.

Eliades, who also has an interest in the valley's largest taxicab company, Yellow Checker Star, has been open about his anti-tip campaign.

In a letter posted on a cabbie website, he said he has been forced to pay drivers nearly $4 million on the side in the past two years to keep up with his competitors. He said he's been shelling out $10 for each customer brought to his club.

"The city is suffering just as other cities across the country," Eliades wrote. "The convention authority spends millions of dollars, as does the hotel and casino industry, to advertise and bring people to our city and state.

"Drivers without morals divert and cheat the tourist by not taking them where they want to go, by throwing them out of the cab ... How can these drivers go home and face their families?"

In an interview, Eliades said this form of diversion, which is illegal under state law, amounts to kidnapping and extortion of the public.

"I want the public to get to its destination without interference," he said.

Eliades, however, hasn't always held that point of view so strongly.

After unsuccessfully lobbying the 1999 Legislature to ban all outside tips, he threw in the towel and decided to provide kickbacks to drivers, knowing he might be contributing to the diversion problem.

In 2000 Eliades even persuaded Las Vegas Mayor Oscar Goodman to introduce an ordinance repealing the city code that made it illegal for adult clubs with liquor licenses such as his to tip drivers.

The measure failed, but Eliades, along with his competitors, continued to pay cabbies under the table.

But after Sept. 11, Eliades and other major nightclub operators decided business was too slow to give the drivers $10 or more for each patron brought in. They agreed at a meeting to scale back the payments to $5 per customer. That lasted until some of the newer clubs and the all-nude cabarets not party to the informal agreement began offering more money to the cabbies.

Then came the lawsuit, and Eliades and Olympic Garden once more landed on the side against tips in an unusual alliance with his biggest rivals: Crazy Horse Too, Club Paradise and Cheetahs. Historically the four clubs have not had cordial relations, but they banded together in the common interest of heading off their more aggressive competitors.

Allen Lichtenstein, who represents four all-nude clubs sued by Eliades and company, said he has "serious doubts" about whether the lawsuit is aimed at solving the problem of diversion.

"This is about competition," he said. "It's a question of the big clubs in town not wanting to compete with the smaller clubs. If these people were serious about getting rid of diversion, they should be spending all of their time and energy going after the cabbies diverting people."

In her preliminary injunction, Loehrer chided the state Taxicab Authority for not enforcing its regulations banning cabbie tipping and diversion.

Taxicab Authority Administrator John Plunkett, a retired FBI supervisor, said the tipping regulation basically is unenforceable because the practice is so widespread among the valley's 4,000 cabbies.

Plunkett, however, said his over-worked agency will cite drivers if they're caught accepting the kickbacks.

But he added: "When you're out investigating 3,000 accidents a year, 150 robberies and a host of batteries, whether a driver is getting a tip is the least of our priorities."

At the same time Plunkett said he understands that cabbies are upset about the preliminary injunction prohibiting them from accepting tips from other businesses.

"It's something that's become an integral part of their salary," he said. "It's not that it's a dastardly crime, but it is a regulation."

Plunkett said he had concerns about allegations cabbies were taking money to unlawfully divert passengers, but he received no complaints from the public since he took over the Taxicab Authority last July.

Diversion has long been a subject of interest to the Taxicab Authority, he said. The agency from time to time over the past two decades has cracked down on the small band of drivers doing it.

About 15 months ago, investigators noticed that the problem had spread to doormen at hotels along the Strip, Plunkett said. The doormen were demanding a share of the kickbacks limousine drivers were receiving from the topless clubs. In return they were steering hotel guests to cash-friendly limousine drivers instead of cabbies.

The cabbies became enraged and staged a boycott of the Rio, allegedly one of the biggest offenders, Plunkett said.

At the time Plunkett was chief of enforcement at the state Transportation Services Authority, which oversees limousines.

Eventually about 20 to 30 limousine drivers were cited for soliciting business away from the cab lines on the Strip, and the hotels agreed to clamp down internally on the problem. Plunkett said.

But Ted Pribnow, the current TSA enforcement chief, said he suspects doormen still may be receiving money from limousine drivers to divert potential adult club patrons away from the cabbies.

"I believe it is not something that has stopped," Pribnow said. "It seems to be a common practice by the doormen. It's part of Las Vegas life."

Pribnow said his agency is prepared to investigate any complaints from the public that it receives about that kind of activity.

Plunkett, meanwhile, in the wake of Loehrer's preliminary injunction, has sent out a memo instructing his investigators to aggressively look for incidents of diversion.

Proving such cases, he said, basically is impossible without conducting an undercover investigation.

In the past couple of weeks, even though members of the media have claimed to have been diverted during cab rides, undercover investigators on 20 occasions have failed to catch any driver breaking the law, Plunkett said.

"We've given them opportunities to divert, but they haven't done it," he said.

But the agency will continue to conduct undercover investigations for the next two months until the adult night club lawsuit goes to trial, he said.

Some adult businesses aren't covered by the preliminary injunction and are said to be continuing to tip drivers.

Other clubs bound by the order have come up with ways to circumvent it.

Pussycat's has been encouraging taxi passengers to give their drivers a healthy tip in return for free admission to the all-nude cabaret. Late last week the club considered abandoning the tactic, fearing it might be held in contempt of court.

Some adult businesses, meanwhile, have been allowing drivers to sell admission coupons.

The January editions of the taxi industry publications, which went to press before Loehrer's preliminary injunction, are packed with ads from a variety of businesses offering to pay drivers.

Graceland Wedding Chapel, 619 Las Vegas Blvd. South, offers $70 to drivers for each referral in the Taxi tipping guide. Simone's Auto Plaza, 6770 Bermuda Road, which does body shop work, advertises that it will pay a $50 to $250 referral fee to cabbies.

Hot Bodies Spa, 3131 S. Industrial Road, offers drivers $35 for each customer, and the Cherry Patch Ranch in Nye County is willing to hand out a 40 percent commission of what the passenger spends at the brothel. The Iron Horse tattoo shop, 700 E. Naples Drive, pays drivers $10 for each customer.

One outcall service, A Touch of Class, has taken out an ad in the Taxi tipping guide under the name Taxi-1-United in tribute to the drivers. It offers $100 for steering customers to its strippers.

"Tease," a musical comedy at the Desert Passage's Blue Note jazz club, has taken out an ad in this month's Las Vegas Taxi & Limo Drivers magazine offering $10 for each referral. It's also is giving out a $500 cash prize to the driver who brings in the most referrals.

Outcall services advertise their upcoming "driver appreciation" parties at local bars, where free food and drink and cash awards are handed out.

Other businesses have taken a similar subtle approach to currying favor with the drivers.

Station Casinos runs an ad in Las Vegas Taxi & Limo Drivers offering cabbies a two-for-one buffet at all six of its neighborhood properties.

Several restaurants, among them McCormick & Schmick's and Shalimar, advertise two-for-one dinners. The NASCAR Cafe at the Sahara gives drivers half off drinks and food, and the nearby Beach nightclub has a complimentary beverage stand and half-price lunches.

Prior to the preliminary injunction, providing financial incentives to drivers was so common that a list of the top adult clubs willing to pay the most was on the Internet on VegasCabbie.com, a chat room for local drivers.

The Trip Sheet also printed a list of its "friendly places." Managing Editor Craig Harris said the list won't appear in February's edition because of the uncertainly over Loehrer's preliminary injunction.

All three industry publications reported losing some advertising revenue because of the legal controversy. But the editors insist there are plenty of businesses buying ads for February.

Even Burton seems unfazed by the legal order. Bernath said the entertainer has no plans to change his referral program.

And most within the industry, including regulators, don't believe that the practice of giving kickbacks to drivers will end in the near future.

"I can't see this ever being stopped," Martinez said.