Cabs Dont Run on Juice

How a powerful obbyist ran a taxi monopoly into the ground

Photo by Keith MayIn the language of the county's power brokers, Lyle Overby has juice. The county's most powerful lobbyist, he's on a first-name basis with almost every supervisor who has served on the county board for the past 20 years.

Juice helped Overby win an exclusive—and lucrative—county contract to provide taxi service at John Wayne Airport (JWA), but even juice can't stop him from running that monopoly into the ground.

Just eight months after his friends at the county Hall of Administration handed Overby the JWA deal, American Taxi is in deep trouble. Another cab operator is suing over the county's deal with Overby, and his company is losing cash. Overby is turning to his strength, betting that close ties to Anaheim officials will give him a piece of the big-money business at the city's convention center.

The city's selection committee has already visited the offices of all five bidders, including American. Sometime this month, they should choose a winner.

It's a big contract. One longtime cab operator observed that during peak times, even 500 cabs couldn't handle convention-center demand. Overby needs a piece of that action. Without it, sources familiar with the county's taxi industry—some of them Overby's competitors—say Overby's fledgling company is doomed.

American officials admit their company grew too fast and bought too many cars too quickly. It may be the exclusive taxi provider at JWA, but today American can't even pay for the natural gas it uses in its cabs. When American's provider, Pickens Fuel Corp. (PFC), threatened to cut off the company's fuel supply in June, American sued.

American doesn't deny it failed to pay on time. Correspondence between PFC and American included in court documents paint Overby's company as badly mismanaged, cutting special bill-paying deals and then failing to meet even those lowered hurdles.

"Briefly stated, American Livery [American Taxi's parent company] has failed to timely pay for gas it has obtained from PFC since December of 1999," PFC account manager James O'Neill declared in an affidavit. "American Livery by its own admission is a poor credit risk and is unable to timely pay for gas that it obtains from PFC."

O'Neill added that by the time of his lawsuit response, American still owed his company $13,000 "for gas delivered through June 31, 2000," as well as another $2,000 for gas purchased in July.

"[A]s of this time, all natural-gas fuel cards issued to your organization for use at PFC fueling facilities have been shut off and will no longer be accepted," O'Neill wrote on June 16. "[D]ue to the lack of response from your organization . . . we can only assume that you no longer wish to continue our business relationship."

O'Neill demanded $21,000 to keep the pumps open, and American eventually coughed up the money. But soon after, the firm's bill paying continued to slide. Company officials stressed that the reason was American's infancy.

Ironically, that fact—American's very recent entrance into the cab business—should have disqualified it from the JWA contract in the first place. It's a testament to Overby's political contacts that officials overlooked a county regulation requiring the monopoly at JWA go to firms with at least five years in business.

The fiasco at American suggests why. In a May 8 letter to county officials, Overby acknowledged that American spent a whopping $1.3 million on new cars the company bought within 36 hours of getting the JWA contract. By that time, the company, just six months old, was already $130,000 in the red. In a June 5 fax to PFC, American Taxi preident Richard Schorling was straightforward about the mess his company was in but said his partners, including Overby, "are for some reason afraid to tell you that we are in a cash bind. I guess they believe that bad news gets better with age."

Schorling bristled at O'Neill's inclusion of the June 5 fax in his affidavit, writing in his own declaration that O'Neill "presented [it] out of context." But it's hard to imagine a context that would explain away Schorling's statement in the fax: "[O]nce we are through the next 90 days, we will be okay," he wrote. "[W]e are mounting the LA battle which is so important to all of us."

Completed in October, the "LA battle" was a competition to see which taxicab companies get to serve the entire city of Los Angeles. Thirteen companies, including American, fought for thousands of cab slots. Schorling told PFC that his company had invested $150,000 "in cash and lobbying expenses and much more in labor, preparation and overhead" to get just 200 American cabs into the LA franchise.

"If we are successful in LA," Schorling told PFC, "then our financial troubles are over."

But in LA, American Taxi ran head-on into reality. The city of Los Angeles refused to allow American to operate even a single cab within city limits. The selection committee rankings were especially brutal, showing that, of 13 bidders, American came in dead last. Overby's baby—which he once referred to as one of Orange County's "top taxi companies" —barely earned 56 percent out of a possible 100 percent rating; the next lowest ranking was 71 percent.

For all his company's trouble and investment, American won nothing—except the selection committee's harsh rebuke. "Other parts of the management business plan submitted by American Taxi were either vague or failed to address several of the topics required," the committee wrote. "These areas included staffing, service reporting, driver training and benefits, service promotion, information reporting, accident tracking, and overall record retention."

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