New York City is accused of fraud over taxi medallion prices
NEW YORK - In the latest development in the ongoing disruption of the taxi industry due in large part to the explosion of app-based car services, New York City is accused of fraudulently inflating the prices of its once-coveted medallions for yellow taxis.
And the accuser is New York State.
State Attorney General Letitia James on Thursday sent a letter to City Comptroller Scott Stringer indicating that her office intends to sue for $810 million to help medallion owners who are hundreds of thousands of dollars in the hole because of the huge loans they took out to buy the engraved metal disks aren't worth what they paid and may be worth even less in the future as the industry shifts and changes.
The city's Taxi and Limousine Commission sold hundreds of medallions in the last two decades or so. From 2004 through 2017, the TLC held several auctions at which it set minimum bids and also profited from the transfer of medallions from one owner to another, according to the AG's office.
"These taxi medallions were marketed as a pathway to the American Dream, but instead became a trapdoor of despair for medallion owners harmed by the TLCs unlawful practices," James said in a statement. "The very government that was supposed to ensure fair practices in the marketplace engaged in a scheme that defrauded hundreds of medallion owners, leaving many with no choice but to work day and night to pay off their overpriced medallions."
A City Council-led task force studying the taxi crisis recently issued a report noting that the TLC marketed its medallion auctions as an investment opportunity for buyers.
"New York City Taxicab medallions have a long history as a solid investment with steady growth. Taxi medallions also provide both a reliable and consistent income and guaranteed employment," a TLC periodical from 2004 stated, according to the task force. "In addition, a medallion is collateral that can assist in home financing, college tuition, or even 'worry-free' retirement."
The report found that the highest price paid for one medallion at an auction in 2014 was $965,000, up from a high bid of $360,000 at 2004 auction.
The attorney general claims that the TLC continued to market its medallions at "overvalued rates" even after agency staff issued internal reports raising warnings about those values and even after companies such as Uber and Lyft entered the New York City market.
"What's worse is that the TLC knew their actions were affecting some of the city's most financially exposed immigrant families," James said in her statement. "We are taking action to ensure New York's hard-working taxi drivers can be made whole again and are repaid the hundreds of millions the city unlawfully pocketed."
Under the administration of Mayor Bill de Blasio, the TLC held one medallion auction in early 2014 that had been authorized and planned by the Bloomberg administration. The TLC has not held a medallion auction since.
Freddi Goldstein, a spokesperson for the mayor, called the attorney general's probe "frivolous."
"We have spent the last six years putting money back into the pockets of drivers and attempting to curb the harm from Uber years before anyone else wanted to recognize the threat," Goldstein said in a statement to FOX 5 NY. "This crisis has been ours to solve—working tirelessly to clean up the carelessness and greed of others."