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San Diego restaurants giving money to hotel concierges?

“It is probably pervasive in full-service hotels"

When a San Diego hotel concierge recommends a restaurant, he or she may be getting a fat kickback. “It’s an extortion ring. Like the Mafia. Restaurants are bribing concierges in hotels. It’s a bidding war,” says one downtown restaurant owner, who says he could be destroyed if his name got out. “On a given night, some restaurants are full and others are half-full. The full ones are paying the concierges.”

In some cases, the concierges are paid in cash tucked into envelopes, delivered clandestinely. It’s folly to think the Internal Revenue Service is told about this income. The kickback on a meal reservation is often a minimum of $5 per person. For a party of ten, the concierge may demand and get 10 percent of the gross.

Earlier this year, the city attorney’s office investigated the practice. The investigator, Dan Andrews, refuses to discuss the matter, so it’s not known if the new city attorney, Jan Goldsmith, will pursue it. However, I was able to get a copy of a letter to hotels mailed by then–city attorney Mike Aguirre in March. “Concierges at your hotel may be in violation of Business and Professions Code section 17200,” said the letter. Such violations “may occur where a concierge makes referrals to a restaurant or business without disclosing to the hotel patron that gratuities, gifts or other items of value have been provided by the restaurant or business for the referral.” The letter told the hotels to cease and desist the activity.

“The concierges are destroying the downtown restaurant market,” says Aguirre. “It’s not fair to clients [of both restaurants and hotels]. One of the things I had intended to do was to bring an action. I sent letters to get concierges to knock it off. But I understand it is getting worse rather than better.”

Upon learning of the letter, the San Diego County Hotel–Motel Association “recommended to our members that concierges not engage in that practice; if they do, they should disclose it,” says Namara Mercer, executive director. “Many of our general managers had conversations with staff and said to stop it.” (Not many intelligently managed hotels would post a sign confessing, “Warning: Our concierges get under-the-table payments for making recommendations.”)

Ed Rose, concierge at the Hotel del Coronado, is incoming president of the San Diego Concierge Association. Upon hearing of the letter, “We advised each hotel to check with their legal representatives. It’s not a matter involving everybody. In the association bylaws we are not supposed to receive cash or money for a service, although we accept free dinners. I’m cool with that. That is the way most of us are able to find out about the restaurants.”

Says Rose, “I have heard rumors of [cash in envelopes], but that is an individual issue. We know it is out there. We discourage the practice.” He says that concierges make $10 to $12 an hour in salary. “It’s not the highest paying of industries.” Hotel managers say that concierges can make $13 to $15 an hour with fringe benefits and, including tips, can make $50,000 a year.

I interviewed San Diegans in the restaurant and hotel industries. They said they were aware of kickbacks but claimed they themselves did not participate. One defended the practice.

“I know it goes on. It happens in a lot of places. The real shame is that the concierge’s job is to fulfill hotel guests’ requests,” says David Cohn, whose Cohn Restaurant Group has 12 eateries, 5 downtown. Still, Cohn believes that “a small percentage” of concierges engage in the practice. “We’ve never been approached directly by a concierge — ‘If you guys give us 10 percent, we will send more reservations.’ ”

Jimmy Parker, executive director of the Gaslamp Quarter Association, says he has been hearing about the kickbacks since the 1970s, when he was a busboy in Fashion Valley. “I hear complaints about it,” he says, but the complainants don’t get specific about restaurants engaged in the practice. “I hear about direct payments but can’t prove it.” Restaurants fete concierges — giving them complimentary meals — and have guided tours, but that is legitimate familiarization, he says.

Howard Hian of Hian Hotel Sales Affiliates is tolerant: “If you get an airline ticket and pay a travel agent a commission, is that a bribe?” he asks. “Some taxis have exclusives with hotels. Ask how they got them. Car rentals have exclusives with hotels. Ask how they got them.” Getting paid for sending a hotel customer to a restaurant is essentially getting a commission, says Hian, “but if the restaurant is no good, it is a different story.” And he has questions about whether cash in envelopes is being reported for tax purposes.

Hian has questions about people staying in fancy hotels but having to ask a concierge for a restaurant recommendation. “A traveler is staying at a $250-a-night hotel and asks a front-desk person where there is a nice place to eat,” he says. “There is a little disconnect there.”

“I know [giving kickbacks to concierges] happens,” says Mike Morton, chief executive of the Brigantine Family of Restaurants, which has 14 restaurants in the county. “We don’t do it. It’s a Pandora’s box. If you put cash in an envelope, pay X number of dollars per guest, how do you stop? If you pay one concierge, what do you say to the next one? It can spiral out of control.” Besides, it’s unethical, he believes.

“It definitely is pervasive, and we have to work hard to keep it out of our workplace,” says Jack Giacomini, whose company runs two Mission Valley hotels. “Our strict policy is that none of our employees will take any kind of commission or referral or kickback. But it is hard to enforce and does happen under the table.” A hotel has nothing to gain and lots to lose: “Cabdrivers are notorious for kickbacking to bellmen and so forth. But what happens when guests walk up and say, ‘What cab should I take?’ and the kid says, ‘Don’t take ABC, take XYZ,’ and there is an accident? Who gets sued? Not the kid but the hotel, because we are the deep pocket.” The same can happen with a restaurant. “The kid says go to XYZ Restaurant, the guest gets food poisoning, and all of a sudden we are named in a lawsuit.”

Robert Rauch, who owns two hotels in the Del Mar area and teaches hospitality at San Diego State, says, “It is probably pervasive in full-service hotels, downtown in particular, and possibly at the resorts.” He doesn’t think the practice is necessarily illegal — “not different from a server who gets a cash tip.” He says, “The problem is that when a guest goes to a concierge, he should feel comfortable he is getting objective recommendations. So I do not allow my team members to recommend any business based on a commission. I can monitor it generally, but I can’t monitor every possible transaction.”

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When a San Diego hotel concierge recommends a restaurant, he or she may be getting a fat kickback. “It’s an extortion ring. Like the Mafia. Restaurants are bribing concierges in hotels. It’s a bidding war,” says one downtown restaurant owner, who says he could be destroyed if his name got out. “On a given night, some restaurants are full and others are half-full. The full ones are paying the concierges.”

In some cases, the concierges are paid in cash tucked into envelopes, delivered clandestinely. It’s folly to think the Internal Revenue Service is told about this income. The kickback on a meal reservation is often a minimum of $5 per person. For a party of ten, the concierge may demand and get 10 percent of the gross.

Earlier this year, the city attorney’s office investigated the practice. The investigator, Dan Andrews, refuses to discuss the matter, so it’s not known if the new city attorney, Jan Goldsmith, will pursue it. However, I was able to get a copy of a letter to hotels mailed by then–city attorney Mike Aguirre in March. “Concierges at your hotel may be in violation of Business and Professions Code section 17200,” said the letter. Such violations “may occur where a concierge makes referrals to a restaurant or business without disclosing to the hotel patron that gratuities, gifts or other items of value have been provided by the restaurant or business for the referral.” The letter told the hotels to cease and desist the activity.

“The concierges are destroying the downtown restaurant market,” says Aguirre. “It’s not fair to clients [of both restaurants and hotels]. One of the things I had intended to do was to bring an action. I sent letters to get concierges to knock it off. But I understand it is getting worse rather than better.”

Upon learning of the letter, the San Diego County Hotel–Motel Association “recommended to our members that concierges not engage in that practice; if they do, they should disclose it,” says Namara Mercer, executive director. “Many of our general managers had conversations with staff and said to stop it.” (Not many intelligently managed hotels would post a sign confessing, “Warning: Our concierges get under-the-table payments for making recommendations.”)

Ed Rose, concierge at the Hotel del Coronado, is incoming president of the San Diego Concierge Association. Upon hearing of the letter, “We advised each hotel to check with their legal representatives. It’s not a matter involving everybody. In the association bylaws we are not supposed to receive cash or money for a service, although we accept free dinners. I’m cool with that. That is the way most of us are able to find out about the restaurants.”

Says Rose, “I have heard rumors of [cash in envelopes], but that is an individual issue. We know it is out there. We discourage the practice.” He says that concierges make $10 to $12 an hour in salary. “It’s not the highest paying of industries.” Hotel managers say that concierges can make $13 to $15 an hour with fringe benefits and, including tips, can make $50,000 a year.

I interviewed San Diegans in the restaurant and hotel industries. They said they were aware of kickbacks but claimed they themselves did not participate. One defended the practice.

“I know it goes on. It happens in a lot of places. The real shame is that the concierge’s job is to fulfill hotel guests’ requests,” says David Cohn, whose Cohn Restaurant Group has 12 eateries, 5 downtown. Still, Cohn believes that “a small percentage” of concierges engage in the practice. “We’ve never been approached directly by a concierge — ‘If you guys give us 10 percent, we will send more reservations.’ ”

Jimmy Parker, executive director of the Gaslamp Quarter Association, says he has been hearing about the kickbacks since the 1970s, when he was a busboy in Fashion Valley. “I hear complaints about it,” he says, but the complainants don’t get specific about restaurants engaged in the practice. “I hear about direct payments but can’t prove it.” Restaurants fete concierges — giving them complimentary meals — and have guided tours, but that is legitimate familiarization, he says.

Howard Hian of Hian Hotel Sales Affiliates is tolerant: “If you get an airline ticket and pay a travel agent a commission, is that a bribe?” he asks. “Some taxis have exclusives with hotels. Ask how they got them. Car rentals have exclusives with hotels. Ask how they got them.” Getting paid for sending a hotel customer to a restaurant is essentially getting a commission, says Hian, “but if the restaurant is no good, it is a different story.” And he has questions about whether cash in envelopes is being reported for tax purposes.

Hian has questions about people staying in fancy hotels but having to ask a concierge for a restaurant recommendation. “A traveler is staying at a $250-a-night hotel and asks a front-desk person where there is a nice place to eat,” he says. “There is a little disconnect there.”

“I know [giving kickbacks to concierges] happens,” says Mike Morton, chief executive of the Brigantine Family of Restaurants, which has 14 restaurants in the county. “We don’t do it. It’s a Pandora’s box. If you put cash in an envelope, pay X number of dollars per guest, how do you stop? If you pay one concierge, what do you say to the next one? It can spiral out of control.” Besides, it’s unethical, he believes.

“It definitely is pervasive, and we have to work hard to keep it out of our workplace,” says Jack Giacomini, whose company runs two Mission Valley hotels. “Our strict policy is that none of our employees will take any kind of commission or referral or kickback. But it is hard to enforce and does happen under the table.” A hotel has nothing to gain and lots to lose: “Cabdrivers are notorious for kickbacking to bellmen and so forth. But what happens when guests walk up and say, ‘What cab should I take?’ and the kid says, ‘Don’t take ABC, take XYZ,’ and there is an accident? Who gets sued? Not the kid but the hotel, because we are the deep pocket.” The same can happen with a restaurant. “The kid says go to XYZ Restaurant, the guest gets food poisoning, and all of a sudden we are named in a lawsuit.”

Robert Rauch, who owns two hotels in the Del Mar area and teaches hospitality at San Diego State, says, “It is probably pervasive in full-service hotels, downtown in particular, and possibly at the resorts.” He doesn’t think the practice is necessarily illegal — “not different from a server who gets a cash tip.” He says, “The problem is that when a guest goes to a concierge, he should feel comfortable he is getting objective recommendations. So I do not allow my team members to recommend any business based on a commission. I can monitor it generally, but I can’t monitor every possible transaction.”

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Comments
26

I've always suspected this was the case.

Dec. 21, 2008

Response to post #1: It appears to be worse than most suspected. Best, Don Bauder

Dec. 21, 2008

This is one of the reasons that, when I travel, I make it a point to ask random locals, and not concierges, for advice on where to dine.

Dec. 22, 2008

Response to post #3: You know more about this than I do, but probably the best thing to do would be to go online and find objective comments from gourmands about restaurants in any given city. If you're paying $200 a night for a hotel, why eat mediocre food? Best, Don Bauder

Dec. 22, 2008

The Internet has chaged the world.

Dec. 22, 2008

Response to post #5: The Internet has completely changed the world. Of course, not everything you read on the Internet is reliable, either. Best, Don Bauder

Dec. 22, 2008

Response to post #6: When you say "hairbrained syncophants," I assume you mean "harebrained sycophants." The word "punk-bitch" may be spelled correctly, but I confess I have never heard it before. Best, Don Bauder

Dec. 22, 2008

Response to post #7: Yes, "Christmas" is a better spelling, but you could have always spelled it "Xmas." Best, Don Bauder

Dec. 22, 2008

Christmas? Xmas? A cheap adaptation of the real thing:

Saturnalia!

"In Roman times, Bacchus, the god of wine, became the lord of these festivals. During the Bacchanalian festivals the everyday rules were turned topsy-turvy. The masters waited on the servants. All sexual prohibitions were lifted. It was a time of true good will towards all men. Erotic dances were performed with a large erect phallus being carried around in the dancing processionals."

http://www.carnaval.com/saturnalia/

I'm skipping Xmas this year...but anyone who wants to attend my traditional Saturnalia party, just drop me a note!

Io Saturnalia everyone!

Fred "Petronius" Williams

Dec. 22, 2008

Response to post #11: Yes, Christmas originated as a pagan holiday. Our Humanist group had a party last night, and reminded ourselves that we launched this thing. We secular humanists are the enemies of humanity, according to the fundamentalists. Best, Don Bauder

Dec. 22, 2008

someone PLEASE get johnny a breath mint so his family does not suffer this Cristmas.

By fumber 9:35 a.m., Dec 22, 2008 > Report it

"Cristmas".....classic!

Hey FUmbler, is Mommy giving you any presents this year?????

Dec. 22, 2008

In response to post #11. WOW! Sounds like that "Saturnalia party" you speak of is straight outta "Caligula" the movie. Damn!! You excite me Fred "Petronius" Williams. :)

Dec. 23, 2008

Response to post #13: "Santorum-alia?" Please explain. Best, Don Bauder

Dec. 23, 2008

Response to post #14: Does anybody have any ideas for gifts for Fumber? Best, Don Bauder

Dec. 23, 2008

Response to post #15: Fred is one of our more exciting posters. Call him a poster boy. Best, Don Bauder

Dec. 23, 2008

Response to post #16: santorum is a dirty word, named after Rick Santorum as a response to his inanity: http://www.spreadingsantorum.com/

Dec. 23, 2008

Response to post #19: I thought it might be named after Rick Santorum, but I was afraid to say it. Best, Don Bauder

Dec. 23, 2008

How about the Tourette Chia Pet? Or the Crapper? Crap on, crap off. Although these may be a tad too sophisticated for Fumbler, perhaps we can all chip in and provide a tutor as well. A puppy would be nice, but please provide the pork chop to tie around Fumbler's neck.

Dec. 23, 2008

Response to post #21: We need more great ideas from the likes of you. Best, Don Bauder

Dec. 23, 2008

How about the Tourette Chia Pet? Or the Crapper? Crap on, crap off. Although these may be a tad too sophisticated for Fumbler, perhaps we can all chip in and provide a tutor as well.

You're killing me...!

Dec. 23, 2008

Response to post #23: Nobody could kill you, Johnny. Best, Don Bauder

Dec. 23, 2008

Response to post #25: We enjoy your writing, Fumber. Happy holidays to you, too. Best, Don Bauder

Dec. 24, 2008

From crooked concierges to an orgy in 11 comments - the Reader never disappoints.

Dec. 29, 2008

Response to post #27: There are more crooks than there are orgies. But we will keep both coming. Best, Don Bauder

Dec. 29, 2008

Back to the article, that started this insult slingfest. I've worked in a number of restaurants in the Gaslamp over the years and some of the restaurants have bought cars for concierges, I've heard that some pick-up 'pay checks', and that they are on the 'pay roll' of these places. The hilarious thing is that some of the restaurants I mention are mediocre at best. They just have the ability to close down and 'sell out' at a moments notice, because no local would want to go there. The concierges 'open hand' behavior causes small and big operations, like the wonderful Cohn Group, and Lou and Mickey's too often put a cap on what a server makes in tips during a 'buy out'. Service should be based on the tip generated by the event, not some nebulous 'cap' the corporation comes up with so they can reap all the rest of the service tip as profit. There are small operators that struggle under the weight of this tax on their restaurants. It drives up prices for everyone. There are 'free dessert for two' cards that go out with the concierges initials on them, so they can have their kickback recorded properly. Do you think these people are paying taxes on this money? They make more than the service professional(after tip-out), in some 10% cases, and corrupt the natural selection process of location, reputation, atmosphere, cuisine and curb appeal. Restaurants in Hillcrest, La Jolla and other beach communities are involved as well, the practice is 'growing'.

CORNELL UNIVERSITY LAW UNIVERSITY website has this to say about kickbacks,

"kickbacks: an overview A "kickback" is a term used to refer to a misappropriation of funds that enriches a person of power or influence who uses the power or influence to make a different individual, organization, or company richer. Often, kickbacks result from a corrupt bidding scheme. Through corrupt bidding, the official can award the contract to a company, even though the company did not place the lowest bid. The company makes profit by having been awarded the bid and getting to perform the contract. In exchange for this corrupt practice, the company pays the official a portion of the profits. This portion is the “kickback.” Such a practice falls within a sphere practices often referred to as “anti-competitive practices.” Organized crime has been traced to using kickbacks for many years. Some also consider kickbacks to be a type of bribery.

See White-collar crime."

Dec. 31, 2008

Response to post #29: "Dessert for Two" passes might be acceptable on the argument that concierges should be familiar with restaurants' food. Certainly, direct pay or bribery with an automobile are not. Best, Don Bauder

Jan. 1, 2009

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