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April 23rd, 2014:

Draft ordinance on vehicles for hire is out

Mayor Parker puts another item on City Council’s to do list.

A proposed Houston ordinance could legalize hundreds of for-hire drivers providing rides through smartphone applications, but would require those drivers meet the same permitting and safety requirements as taxicab and limousine drivers already regulated by the city.

Under the proposal by the city’s Department of Administrative and Regulatory Affairs, the ride-sharing services would have to meet the same standards for fingerprint-based background checks and vehicle inspections already required of cab and limo drivers.

Other city and state governments have allowed the companies to do their own record checks based on Social Security numbers, or loosened inspection rules.

The proposed ordinance also would set fees for the new services based on revenues, allow all for-hire drivers to charge for no shows, mandate all companies accept credit cards, eliminate a 30-minute wait requirement for “pre-arranged” pick-ups, and drop a $70 minimum limo fare originally designed to shield the taxicab industry.

“We see this as leveling the playing field,” said Tina Paez, head of the city’s regulatory affairs department. “Uber and Lyft will probably tell you we’re overreaching. If there is some compromise that council makes, I hope it’s one that still works for passengers in terms of public safety.”

[…]

Yellow Cab lobbyist Cindy Clifford said technological advancement does not preclude businesses from following existing law, nor should it weaken standards set in the proposed ordinance.

The city, she said, should set a cap on the number of licensed drivers and keep the $70 minimum limo fare intact.

“If you flood the market with drivers, it will be very hard for anyone to make a decent living,” Clifford said.

For example, she said, existing rules require cab and limousine companies to serve all neighborhoods at all hours, regardless of profit margins and overhead costs. Under the proposed ordinance, she said it appears Uber and Lyft could ignore low-profit calls.

“A lot of our business is taking people to the grocery store, to their doctor’s appointment,” Clifford said. “They’re not always lucrative trips. That’s balanced by the fact drivers have access to other trips.”

You can see the draft ordinance here. As you know, I don’t agree with the belief that the vehicle for hire market in Houston is zero sum. The market will definitely change when Uber and Lyft are allowed in, and those changes may well not be beneficial to the legacy cab companies, at least in the beginning, but I am persuaded that on balance these changes will be beneficial for customers. It’s interesting to me that the cab companies are now touting the Seattle solution, which suggests to me that they don’t think they can keep Uber and Lyft out all together. Falling back on limiting the total number of drivers seems to me to be their way to mitigate the damage. There may be some merit to this approach – I’m a bit dubious, but I am willing to give it six or twelve months to see what the effect on the market has been.

Anyway. I sent emails to spokespeople for Uber and Lyft to ask for their comment, as they hadn’t had much to say in time for the Chron story. This is what I got from Lyft:

The proposed ordinance marks a starting point to a thoughtful discussion around Lyft in Houston. The people of Houston have enthusiastically welcomed Lyft to the city for affordable, convenient and safe rides. We will continue working with city leadership toward a solution that prioritizes safety, innovation and consumer choice.

I didn’t get a response from Uber by the time this was published. If I get one later, I’ll add it. What do you think of the draft ordinance? Hair Balls has more.

Paxton’s disclosure issues

Oopsie.

Sen. Ken Paxton

State Sen. Ken Paxton, the leading Republican candidate for attorney general, has launched an internal review of his disclosures to state regulatory authorities and the Texas Ethics Commission to determine whether he violated any laws by failing to report several business and professional relationships.

Paxton launched the review after The Texas Tribune obtained 2006 letters showing the McKinney lawmaker was being paid to solicit clients for a North Texas financial services firm at a time when he was not registered with the State Securities Board. Registration in such circumstances is typically required. Nor did Paxton ever reveal his solicitor work on the employment history section of his personal financial statements, which must be filed regularly with the Texas Ethics Commission.

Also missing from his ethics filings is any disclosure of his service on the boards of at least a half-dozen nonprofit corporations, the Tribune investigation found. Ethics laws require legislators to reveal service on corporate boards, including nonprofit ones.

[…]

This much is known from regulatory filings and the 2006 letters obtained by the Tribune: Paxton began working as a solicitor for companies run by his friend and business associate Frederick “Fritz” Mowery as far back as the summer of 2001. While Paxton has been associated with Mowery’s firm as a solicitor on and off for a decade or so, records show he was registered with the State Securities Board for a total of about two years.

Solicitor is the informal title for “investment adviser representative,” an official designation for people who refer investors — for a fee — to an investment adviser.

Records from the Securities Board show Paxton was registered once between July of 2003 and the end of 2004 for Mowery’s Oxford Advisors Corporation. He got registered again for Mowery Capital Management on Dec. 13 of last year, and that registration remains active.

Robert Elder, spokesman for the State Securities Board, confirmed that Paxton was not registered as a Texas investment adviser representative between Jan. 1, 2005, and mid-December of 2013. He said that he cannot discuss the hypothetical oversight of an individual solicitor or comment on whether Paxton should have been registered in other years.

The Texas Securities Act defines a solicitor, in part, as “each person or company who, for compensation, is employed, appointed, or authorized by an investment adviser to solicit clients for the investment adviser.” The law also says that unless a person is specifically exempted, he or she “may not act or render services as an investment adviser representative for a certain investment adviser in this state unless the person is registered.”

Paxton’s campaign has not said whether the senator believes state or federal securities laws required him to register when he was working as a solicitor. When asked specific questions, Holm, the campaign spokesman, referred to his written statement about the campaign’s promised review of Paxton’s disclosure obligations.

According to Elder, the Securities Board spokesman, penalties for acting as a solicitor while failing to register “can range from those administrative penalties to include suspension, up to revocations, to fines, and then things could move into, obviously, the criminal arena as well.”

“But it is all completely fact-specific,” he added, emphasizing that he was speaking in broad terms and not about any individual.

The facts in at least one case from 2006 demonstrate that Paxton was being paid at a time that he wasn’t registered with the state to do paid solicitor work.

The case involved two of Mowery’s customers — Teri and David Goettsche of Dallas. In a September 2006 letter, Mowery informed a concerned and apparently surprised Teri Goettsche that Paxton — whom she had previously retained as a lawyer on a separate matter — was being paid a 30 percent commission for referring her to Mowery’s investment firm.

“Mr. Paxton receives a percentage of Mowery Capital Management’s quarterly investment management fee for certain clients referred to us,” Mowery’s letter said. “This fee arrangement was a verbal arrangement between Mr. Paxton and us and therefore no documentation exists.”

Teri and David Goettsche later sued Mowery and Paxton, alleging that their actions helped lead the couple into a doomed real estate investment scheme with one of Mowery’s own business partners, who soon declared bankruptcy. David Goettsche entered into a separate investment arrangement with Mowery in 2005 and was later told in writing that Paxton was getting a 30 percent cut from his fees, too.

The Goettsches’ lawyer, John Sloan of Longview, said the couple lost hundreds of thousands of dollars in the failed land deal, and only found out about Paxton’s role when things started to go south in the summer of 2006. Teri Goettsche was referred to Mowery after hiring Paxton to prepare a post-nuptial agreement in 2003 and didn’t realize the lawyer-turned-politician was also getting paid as a solicitor, they said in the lawsuit.

According to state and federal court records, Mowery declared bankruptcy a little more than a month after David Goettsche and Mowery jointly signed a brokerage account agreement. Paxton received referral fees for David Goettsche as well, letters from Mowery indicate.

“They were shocked that this Paxton guy was getting a kickback. They just thought he was doing them a favor,” Sloan said. “He saw an opportunity for himself to profit and did.”

There’s more at the link, so go read the whole story. Paxton’s been an elected official since 2002 when he won a race for State House. You’d think a guy that wants to be Attorney General would have a better understanding of what the laws are in these cases, and you’d hope that such a person would have a better record of complying with the law. His runoff opponent, Rep. Dan Branch – who came under some pressure by fellow Republicans to drop out of the race since Paxton had a pretty big lead in March – is now making noise about this and calling on Paxton to drop out. Seems to me that if perhaps the campaign prior to March had included a bit more discussion of the candidates’ credentials and a bit less about guns, abortion, President Obama, and who loves or hates each in the proper amount, we might have had this discussion at a more opportune time for Rep. Branch. Oh, well. Whether any of this hurts Paxton for the runoff, or whether the faithful read it as just another attack by the liberal media remains to be seen. Consider this further evidence of the Republican statewide slate being woefully underqualified, and another reason to support Sam Houston now and in November. PDiddie and John Coby have more.

First wage theft complaints filed in Houston

I hope these workers get the justice they seek.

For three years Erik Lopez and his three brothers say they each often worked 80-hour weeks, building highway ramps and trash landfills for city projects.

Yet they say their employer refused to pay them overtime. Nor did the company provide tax forms, such as a W-2, instead giving them cash or personal checks so the brothers couldn’t pay their taxes – and stayed off the company’s books.

“(My boss) would tell me it didn’t really suit him to pay me overtime,” said Lopez, 30, a native of Guerrero state in Mexico, who came to Houston 14 years ago seeking work. “I worked all the time, but we struggled paying our bills.”

It was not until he heard about Houston’s wage theft ordinance, passed last November, that he realized he had some recourse. With the assistance of the nonprofit Faith and Justice Worker Center, Lopez and 12 others on Tuesday became the first to file a complaint under that law, saying they’re collectively owed more than $200,000 in unpaid wages for work performed for sub-contractors on city-funded sites.

[…]

Yet workers most affected by rogue employers are often those too afraid to complain. Jose Santa Cruz, a 33-year-old father of two from Michoacán, Mexico, said his employer didn’t provide safety equipment and threatened to call Immigration and Customs Enforcement if his workers reported violations.

Finally, when the boss said he might stick employees with the bill for broken heavy machinery, Santa Cruz just didn’t come back.

Now he said his employer owes him more than $900 in wages and he’s yet to find steady work. “I’m counting on some friends to pay the bills,” he said.

About half of all construction workers in Texas are foreign-born, many of them lacking work authorization, according to a 2013 survey led by the Workers Defense Project.

Researchers found more than 20 percent of Texas workers say they were denied payment for their construction work and 50 percent reported not being paid overtime.

See here, here, and here for the background. The city ordinance isn’t about enforcement per se, it’s about barring firms that have had wage theft complaints enforced against them from doing business with the city. The workers themselves are generally left to pursue the complaints. What isn’t discussed is what the penalties are for committing wage theft. These are usually treated as civil offenses, and as Catherine Rampell documents, the problems are widespread and involve much bigger players than construction firms.

In the past few weeks, New York Attorney General Eric Schneiderman extracted settlements from dozens of McDonald’s and Domino’s locations around the state for off-the-clock work. Last month, workers in California, Michigan and New York filed class-action lawsuits against McDonald’s alleging multiple charges of wage theft. These suits have upped the ante by implicating the McDonald’s corporation, not just individual franchisees, in bad behavior. The plaintiffs allege that McDonald’s corporate office exerts so much control over franchisees — including by monitoring their hourly labor costs through a corporate computer system — that it had to have known what was going on.

“It doesn’t take a company dictating the specific method for violating the law in order to obtain those violations,” Michael Rubin, an attorney with Altshuler Berzon LLP who filed the California suits, told me. “If you keep coming with this directive that labor costs must be lowered, there are only a finite number of ways that can be done, most of which are unlawful. The lawful ways get exhausted quickly.” (McDonald’s said in a statement that it is “undertaking a comprehensive investigation of the allegations.”)

These cases aside, wage theft mostly goes unreported. Workers who do report the stolen wages to authorities — lately, at the urging of national labor campaigns such as Good Jobs Nation — can wait months before an investigation is resolved, even though they probably need the missing money to pay their next electricity bill. (This has been the case with fast-food workers employed by government contractors at the Ronald Reagan Building and International Trade Center, who filed a wage-theft complaint with the Labor Department last summer.) The consequences for wage theft are rare, small and not particularly deterring. Even when government investigators pursue these complaints, for example, criminal charges are rarely filed.

Harsher penalties, including prison time, should be on the table more often when willful wrongdoing is proved. Thieves caught stealing thousands of dollars from someone’s home can go to jail; the same should be true for thieves caught stealing thousands of dollars from someone’s paycheck.

Can you even imagine our Attorney General filing lawsuits and pursuing these complaints against corporations? I know, right? Greg Abbott would be in court arguing that the workers have no right to sue and that the companies are immune to such lawsuits in Texas. Such amusing thoughts aside, it’s a good question why complaints like these aren’t generally punished with jail time. I mean, if someone reached into your bank account and took a week’s pay from you, you’d call that theft and would consider jail time to be a possibility for the thief. How is this any different? It’s a disgrace that this happens to anyone. As a society, we should not tolerate it and we should take all reasonable steps to prevent and punish it.

Will the Ashby Highrise ever be built?

The Chron reviews the bidding so far prior to Monday’s Ashby hearing.

Sue me!

Key to the jury’s finding was that the project should be considered a nuisance. The residents’ attorneys will ask the judge to grant a permanent injunction for the Ashby high-rise, stopping the project from being built. The developers’ side will ask the judge not to enter judgment on the jury’s findings and allow the project to go forward, arguing in part that the evidence was not presented in trial to prove the project was “abnormal and out of place.”

“It’s very hard to balance the interests and assign a remedy that will compensate anyone who suffered harm, but try not to impede the property rights and system of development for the state as a whole,” said Matthew Festa, professor at South Texas College of Law, who specializes in land use and testified during last year’s trial.

[…]

Festa said the judge can take the jury finding of nuisance and award a permanent injunction, compensate residents with the monetary award or rule that the verdict did not comply with the law. He said the court will likely factor in the delays to the project, the investments and costs to developers in his decision.

“This could have some pretty interesting implications for development, not just in Houston and Texas, but nationally,” he said. “The idea of being able to stop something otherwise legal before it’s built is novel.”

It’s a tough call. If the project is a genuine nuisance, then it doesn’t make sense to let it be built as is. But if that’s the case, then what can be built there? And if it’s not a nuisance, then what’s the problem? The residents will be awarded damages, which in theory at least makes them whole. It’s no wonder the city submitted a brief asking for the project to be allowed. It’s a big mess from a regulatory perspective otherwise.

I don’t envy the judge in the case, who is fully aware that all eyes are on him.

Having heard the last of the legal arguments on Monday, state District Judge Randy Wilson acknowledged a dilemma he faces in having to rule whether the Ashby high-rise can go forward: If he stops the 21-story tower, could developers come back with, say, a 20-story model that might spark another lawsuit from outraged neighbors?

The case of 1717 Bissonnet differs from some previous nuisance cases that were more clear-cut, he said, such as a slaughterhouse or tanning facility that was planned alongside private residences. In this case, a permanent injunction would block a residential tower that would replace the two-story Maryland Manor apartments that were demolished.

“It’s not putting a racetrack next to somebody, so what type of residences should be permitted?” Wilson asked. “We know a Maryland Manor is fine, but 21 stories is not fine. But what is? That’s a horse of a different color.”

The judge asked for a final set of documents from attorneys on both sides and promised to make a decision promptly.

“This case has intense public interest and has stretched for some time,” Wilson told a courtroom packed with observers interested in the outcome of the seven-year-long battle. “Because of this, I will rule quickly.”

I have no idea what he will rule. We’ll just how quickly he produces his opinion. Prime Property and Stop Ashby Highrise have more.