Wednesday, February 2, 2011

Taxi Cab Fraud in Las Vegas: The Fraud Triangle

FraudBytes encourages guest posts. The following post was written by Professor Jason L. Smith, PhD, CPA, who teaches and researches about fraud at the University of Nevada Las Vegas.

A recent article by E.C. Gladstone in the Las Vegas Sun details allegations of taxi cab fraud as drivers are taking tourists on “long hauls” around Sin City in order to meet aggressive fare quotas.  Although the author makes no explicit reference to the Fraud Triangle, each of its three elements – pressure, opportunity, and rationalization – are clearly evident in this intriguing description of a serious problem in a city with more than 2,200 taxis serving more than 35 million visitors each year. Below is an analysis of how pressure, opportunity and rationalization all exist in this industry and lead to the fraud detailed in the Las Vegas Sun article.

 Taxi drivers are pressured by their companies to “make book” in order to avoid getting assigned to bad shifts, bad routes, or less-popular vehicles.  Given that taxi drivers work long hours and earn a modest living, drivers mentioned that they feel compelled to skip lunch breaks, drive more aggressively, and to “be creative” with their route selection in order to maximize revenues for each shift.

Because tourists coming to Las Vegas are generally unaware of the quickest routes from the airport to their hotels on The Strip, taxi drivers are alleged to choose longer routes that may add anywhere from 33% to 80% to the final fare.  The Nevada Taxicab authority doesn’t have the resources or controls in place to prevent drivers from taking the circuitous routes, so the opportunity to take the customer for a ride certainly exists. 

Some drivers who were interviewed for the article or who commented on the article once it was published suggest that the longer routes are more scenic, that customers spend less time sitting in traffic with creative routes, or that there’s nothing wrong with choosing a longer route if the customer doesn’t specifically request a shorter one. Rationalizations such as this have led some cab drivers to take "the scenic route" and charge over $90 for a trip that could be as short as two miles with a fare well under $20!

As with most frauds, the costs aren’t borne solely by one entity.  Although paying customers might be the obvious victims of this type of behavior, the taxi industry is also adversely affected.  When the industry receives a black eye for this type of behavior, ethical drivers are also harmed as tourists turn to rental cars, buses, and other transportation options as alternatives to taxis. 

Although most people who visit Las Vegas arrive expecting to lose some of their money, they probably don’t suspect that hailing a taxi cab is the first gamble they make.

1 comment:

  1. what was the outcome of the taxicab fraud in las vegas?