N.Y. Attorney General Seeks $810 Million From NYC for Taxi Fraud

(Bloomberg) -- The New York State attorney general accused New York City’s taxi and limousine commission of defrauding taxi drivers of hundreds of millions of dollars by allowing large fleet owners to collude on the pricing of operating permits known as medallions.

Taxi medallions soared between 2004 and 2014, with prices for individual medals reaching almost $1 million. But the market subsequently collapsed with the onset of digital ride-hailing apps. Last year, a bidder picked up 60 medallions at a Queens auction for $6.63 million, or $110,500 each, according to Crain’s New York Business.

That left thousands of New York operators with oppressive debt and little means to pay it off. The situation has created an economic catastrophe for many cab drivers, leading to a spate of suicides -- including one driver who shot himself in his car at the gates of city hall in 2018.

The move by New York Attorney General Letitia James represents a rare legal broadside by the state against the city, and is the first legal action to be taken by any official enforcement or regulatory agency over the fallout from the medallion crisis.

“NYC taxi drivers were sold on a promise that buying medallions would achieve the American Dream,” James said on Twitter. “Yet, NYC schemed & defrauded these drivers, profiting off their backs & leading them down a trapdoor of despair.”

The attorney general filed a claim against the city for $810 million, which represents the amount the state claims the city profited from the scheme. A claim is a predecessor to the filing of a lawsuit, unless the city agrees to pay the amount within 30 days. The attorney general’s office said the money would be used as restitution for taxi medallion owners.

The New York mayor’s office said it has already been working to repay drivers.

“This crisis has been ours to solve -- working tirelessly to clean up the carelessness and greed of others,” Freddi Goldstein, a spokeswoman for Mayor Bill DeBlasio, said in a statement.

The attorney general said the commission knew as early as 2011 that medallion prices had exceeded their underlying value, but continued to promote them as a “solid investment” and a path to stability to a population of financially precarious immigrant families who became taxi drivers.

To contact the reporter on this story: Christian Berthelsen in New York at cberthelsen1@bloomberg.net

To contact the editors responsible for this story: Peter Jeffrey at pjeffrey@bloomberg.net, Joe Schneider, Steve Stroth

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