Did the McAuliffe Administration Ban Uber and Lyft from Operating in Virginia as a Favor to the Cousin of the Governor’s Father-in-Law?
Last Friday (6/6/14), Virginia’s Department of Motor Vehicles fired the latest salvo in the ongoing battle of corrupt governments and tech start-up firms Uber and Lyft, which use technology to match drivers and riders. Virginia’s DMV issued a cease and desist order to the companies because they do not have the appropriate business model per state law. This action follows civil penalties the DMV assessed in April: $26,000 for Uber and $9,000 for Lyft.
We are always suspicious when a government shows a sudden and unexplained interest in an issue—much like our suspicion of New York City mayor Bill De Blasio’s immediate fixation upon taking office with banning the city’s horse drawn carriages despite it being a rather distant issue in his campaign. Likewise, we became very interested when one of Virginia’s executive agencies, under the administrative direction of Governor Terry McAuliffe, showed a sudden and intense interest with Uber and Lyft.
We have to build the case from several scraps of information, so bear with us.
Virginia’s DMV Commissioner Richard Holcomb returned to head the DMV in 2010 following an appointment from Virginia’s previous governor, Bob McDonnell. He remains in office now under the McAuliffe administration. Lyft and Uber have had a presence in the Northern Virginia area outside of DC since 2011—without any publicly reported issues from the DMV until this year. So the timing is certainly curious. Why the focused attention on these two companies? Why now? Why with so many other issues in the Commonwealth, from passing a budget to fixing roads, is Lyft and Uber worthy of attention?
By our reckoning, only one thing has changed since the DMV Commissioner returned to office in 2010. Terry McAuliffe. McAuliffe assumed office in January 2014 after winning a plurality of votes in Virginia’s 2013 gubernatorial election to succeed Bob McDonnell.
Does the governor have an axe to grind against Lyft and Uber? Maybe not a personal one, but organized taxicab companies sure do. They view these start-ups as unregulated and not playing on a level playing field. And that’s where things start to get interesting.
The Taxicab Limousine & Paratransit Association (TLPA) is a trade group representing 1,100 member companies with 100,000 passenger vehicles. This association, like any “good” trade group, sends letters to elected officials asking for rules and laws that favor their members—or for governments to simply ensure that those rules and laws are applied to all competitors in the marketplace “equally”—to ensure “fairness” you see. To translate into basic English, this group wants to protect the status quo, with all the rules, regulations, and barriers to entry for new competitors, and political gift giving intact. If you’re a new business like Lyft or Uber, and you are a threat to the status quo, or you don’t give your fair share of political tribute to elected officials, then woe be unto you.
Following the money was the logical starting point.
According to the Virginia Public Access Project, Virginia’s taxi and limousine transportation industry was the fifth largest provider of campaign cash in the 2013 Virginia election cycle. We drilled down to statewide campaign donations, and found that the largest individual donor from this industry group was Paul S. Mears, Jr., of Orlando, Florida. His political contribution of $5,000 to the McAuliffe campaign was more than double the second-largest individual donation recorded from the taxi and limousine industry. Paul Mears III also showed up on the list, contributing an additional $1,000 to the McAuliffe campaign.
Paul Mears, Jr. operates Orlando-based Mears Transportation Group. According to the company’s website, Mears offers luxury van, sedan, SUV, and shuttle services in 51 airports and metropolitan areas, including Dulles International Airport and Reagan National Airport in Virginia.
Interesting stuff indeed, but would McAuliffe, following the nationally-splashed ethics headlines of the previous governor’s administration, engage in political chicanery for a measly $6,000? If he would, it certainly would be a fantastic return on investment for the Mears family.
But perhaps there’s a force even stronger than money and the political influence it can buy.
Further digging into the bowels of the Internets turned up an Orlando Sentinel article from 1998 describing business deals between Terry McAuliffe and father-in-law Richard Swann.
Of McAuliffe, the article quoted Eileen Miller, then the executive director of Public Campaign, which seeks to reform campaign fund raising (emphasis is ours):
“He’s always been a mover and shaker when it comes to the money trees,” said Ellen Miller, executive director of a nonprofit group, Public Campaign, which advocates reform of campaign fund- raising. “It’s inevitable he would get caught with his hand near the cookie jar. McAuliffe is playing fast and loose on the edges of what’s ethical.”
A separate Orlando Sentinel article on Richard Swann had this to say:
Whispers of political cronyism seem to dog Swann whatever he does. A prominent Orlando lawyer and full-time chairman of American Pioneer, Swann has been mentioned in federal investigations of prominent Democrats at both the state and national levels.
Swann is comfortable in gray areas. A teetotaler at home among clinking cocktail glasses, Swann is not addicted to politics, friends say. Rather, his political strength comes from an ability to mix politics with business to forge a powerful network of friends that help him in both worlds, which is something he calls ”synergism.”
The article additionally discussed the relationship between Swann and McAuliffe, and Swann’s uncle, one Paul Mears, Sr., father of Paul Mears Jr.
The Mears family doesn’t seem to be a fan of Uber and Lyft. Mears III co-signed a letter (full text here) earlier this year from the TLPA discussing concerns with Uber and Lyft and other traditional taxi/limousine service company competitors.
Now isn’t that a coincidence? The governor’s father-in-law believes in mixing politics with business and calls it “synergism.” The cousin (Mears) of the governor’s father-in-law (Swann) provided the largest individual contribution by more than double of any other person involved in the taxi/limousine industry in Virginia in 2013. He provided it to Terry McAuliffe. And he has a taxi/limousine business presence in Virginia that sure doesn’t appear to care much for competitors such as Uber and Lyft. What a coincidence!
Perhaps Paul Mears and Terry McAuliffe are just engaging in Swann’s “synergism” though most honest people might call it corruption instead.
Of course money, cronyism, buying influence, and corruption is not limited to Terry McAuliffe or Democrats. We reported VPAP’s listing of campaign contributions from the taxi and limousine industry was the 5th largest of all Virginia industries. The largest organizational donation within this group ($60,500) belonged to the Virginia Taxicab Association. Seventy-five percent of those contributions went to Republican candidates for the Virginia General Assembly. The largest recipient was Republican Speaker of the Virginia House, William Howell.
Such contributions are rarely made without some expectation of a political dividend. Suppose Terry McAuliffe had not become governor. Who’s to say that the General Assembly might not have passed a state law to formalize what the DMV did instead?
Examples like this are exactly why government’s power must be limited. When government’s power grows, the value of holding office, and holding influence with office holders increases. In such a dynamic, free markets are perverted into the kind of crony capitalism (or crapitalism) that are so pervasive today where businesses spend more time coddling political relationships than improving their products or services. Free markets and the consumer would be better served by removing laws and restrictive regulations that limit competition and raise the cost of doing business.
We’ll leave you with the parting thought from the OS article that discussed McAuliffe’s and Swann’s business dealings:
The ethical watchdogs see people such as McAuliffe as a symptom of a political system in which fund-raisers earn clout that can be turned into opportunities to make money for themselves. “One of the problems we see is that very often the lines between political fund-raising and doing personal business are very blurry,” said Paul Hendrie of the Center for Responsive Politics, a non- partisan watchdog group. “It raises questions about whether the policy decisions being made are influenced by these relationships.”