By Rob PerezSunday, August 19, 2001
Waikiki cab drivers secretly pay employees of some prominent hotel chains as part of what appears to be an illegal scheme to steer business to those drivers.
The incentive for these "off-the-books" transactions is simple: No payments, no customers.
"If you don't give the tips, you don't get the calls," said one driver.
There's a name for this kind of activity. It's called payola. Or kickbacks. Take your pick. It's all against the law.
Yet the transactions happen every day, sometimes on public sidewalks with hordes of tourists nearby. The activity, though, typically goes unnoticed. Most people are unaware of this part of Waikiki's sleazy underside.
It's not clear how widespread the payola practice is. But spend a lot of time in Oahu's tourism hub -- especially around check-out times when people need rides to the airport -- and a keen observer can witness the illicit transactions.
The clandestine payments are made in several ways.
When a hotel guest requests a cab, someone at the bell station or front desk will summon a cabbie from a list of companies or drivers who give the kickbacks. Those who refuse to participate aren't called.
After the taxi arrives and the driver ushers the passengers into the vehicle, he discreetly reaches into his pocket, pulls out a dollar bill or bills folded into a tiny wad and positions the money in the palm of his right hand.
He then shakes the hand of an assisting bellhop and, in the process, transfers the payola.
In nearly the same motion, the bellhop inconspicuously slips the money into his pocket -- without even looking at it.
The exchange happens in an instant. Even someone specifically watching for it can miss the hand-off, which happens out of sight from the passengers.
The other variations are equally smooth and quick. Those payments typically occur at the front desks of smaller hotels with no bell desks.
The driver enters the lobby and ushers the waiting passengers out the door. While doing so, he quickly turns toward the front desk, placing a tiny fold of money on the counter. If other guests are around, the driver tosses the money behind the counter, sometimes into a plastic payola bucket.
The Star-Bulletin witnessed payoffs last week at several Waikiki hotels, including two Outrigger properties and the Radisson Waikiki Prince Kuhio. Payola is common at other hotels, according to people formerly and currently in the industry.
Outrigger Hotels & Resorts spokesman Jim Austin said the company doesn't condone such activity.
"If something like this is brought to our attention, it definitely will get the scrutiny it deserves," Austin said.
Mary Konig, assistant general manager at Prince Kuhio, said the hotel has a strict policy prohibiting workers from accepting gifts or money from vendors, including cab drivers.
"These kinds of things are completely unacceptable," Konig said. "It's not tolerated."
She said the matter would be investigated.
Cabs from Rainbow Taxi and Pacific Taxi & Limousine Service were involved in the payoffs witnessed by the Star-Bulletin, but former hotel workers say drivers from other companies participate as well.
The owners of Rainbow and Pacific Taxi denied that their drivers, who are independent contractors, give kickbacks.
"We don't pay anything for anybody," said Rainbow owner Son Lao. "It's not right to pay the hotel."
Pacific Taxi owner Loi Hang said he wasn't aware of any driver involved in a kickback scheme.
"We never pay nobody," Hang said.
But with or without the owners' knowledge, drivers are making payments.
According to former hotel workers and one driver, a cabbie typically pays the hotel employee $1 for a pickup involving a relatively short ride, such as from Waikiki to Ala Moana Center. The fare for such trips generally would be $10 or less.
For cab runs to the airport, which can generate fares of nearly $30, the payment is about $8 per ride.
For van rides to the airport (typically fares are about $6 per passenger), the kickbacks come at the end of the week and amount to about $2 per passenger, the former hotel workers said. They said the cash usually is delivered in envelopes and is divided among the participating workers.
All told, a hotel employee in a busy week can earn several hundred dollars of unreported income, the former workers said. Not reporting such income would be a federal offense.
The problem of cab payola has been fairly common in Waikiki for years, according to the former industry workers.
In fact, the city in 1993 enacted a law outlawing the practice. Violators are subject to fines and jail time.
City spokeswoman Carol Costa said no one has complained to the city about the problem since the law took effect, but the administration intends to look into the issue as a result of the Raising Cane findings.
The problem was mentioned two years ago in discussions involving a taxi-cab task force, according to Hawaii Hotel Association President Murray Towill, who was on the panel.
"It was anecdotal -- people saying this was happening," Towill said.
He said he was not aware of the industry doing anything in at least the past decade to combat the problem.
Towill said many of the large hotel chains, such as the Hilton and Sheraton, have exclusive contracts with specific cab companies, and he assumes their Waikiki properties don't have the problem.
If a hotel deals exclusively with one cab company, the incentive to steer business to others is eliminated.
Paying kickbacks does not lead to higher fares because the cab companies must compete with others that don't make such payments and because of the city's regulatory oversight, some say.
But the drivers suffer, and most of them are immigrants least able to afford the payments, said Arnold Van Fossen, who worked for Outrigger for more than a decade.
As a front desk worker, Van Fossen said he didn't accept payola, complained to Outrigger managers about the scheme and was harassed by colleagues who were profiting from it.
"This was extortion. It was that simple," Van Fossen said.
He said he left the company last year because of stress resulting from the harassment.
His cousin, Ed Brennan, an Outrigger worker until he was laid off more than two years ago, said he initially accepted the money because all his front-desk colleagues did. But Brennan said he had a change of heart after listening to Van Fossen's objections and getting to know some of the drivers, who, like many in the industry, were struggling to earn a decent wage.
The practice also has been criticized by drivers who refuse to make such payments. By taking the high road, they say, they are losing business to competitors willing to pay kickbacks.
As sleazy as the practice is, you would never know that from the name it is euphemistically given by some of the profiting hotel workers.
No, this isn't a payola, kickback or extortion scheme. The cabbies are simply "thanking" the workers for the business.
Hence, the sweet-sounding name: The mahalo program.
Star-Bulletin columnist Rob Perez writes on issues
and events affecting Hawaii. Fax 529-4750, or write to
Honolulu Star-Bulletin, 500 Ala Moana Blvd., No. 7-210,
Honolulu 96813. He can also be reached
by e-mail at: firstname.lastname@example.org.