New York attorney general accuses NYC of fraud in taxi crisis


The New York State Attorney General on Thursday accused New York City of committing fraud by artificially inflating the value of yellow taxi tags, and demanded $ 810 million from the city to compensate the thousands. taxi drivers who are now in huge debt.

The City’s Taxi and Limousine Commission marketed the medallions – the city-issued permits required to own a yellow cab – as “a solid investment with steady growth” and profited from the sale of thousands of them. auctioned them off at exorbitant prices from 2004 to 2017, according to an investigation by the attorney general’s office.

Attorney General Letitia A. James said the city must provide financial relief to owners of debt-ridden taxi medallions within 30 days or it would sue for fraud, illegal profit and other violations of the law. State.

“These taxi medallions were marketed as a route to the American dream, but instead became a trap of despair for medallion owners harmed by TLC’s illegal practices,” Ms. James said. “The very government that was supposed to ensure fair market practices embarked on a scheme that defrauded hundreds of locket owners, leaving many others to work around the clock to pay their money back. overpriced medallions.

Bhairavi Desai, executive director of the New York Taxi Workers Alliance, which represents taxi drivers, said she welcomed Ms James’ action and saw it as validation of the city’s guilt in the crisis. taxis.

“The devastation that has taken place in the taxi industry has been a deep betrayal on the part of the city,” she said. “Not only did they turn a blind eye to predatory practices and directly engage in price inflation, but they then licensed Uber and Lyft without any regulation.”

Freddi Goldstein, spokesman for Mayor Bill de Blasio, said that although the taxi crisis began under the administration of Michael R. Bloomberg, city officials have since taken steps to provide financial assistance to taxi drivers. and strengthen oversight of Uber and other ridesharing companies. .

The Attorney General began her investigation in response to a investigation by The New York Times, which found that a handful of taxi industry leaders made hundreds of millions of dollars by deliberately inflating the price of a locket to over $ 1 million, down from around $ 200 000 dollars.

The Times found that thousands of drivers, many of them immigrants, thought they were safe take out loans buy medallions because of the taxi commission’s assurances about their great value.

Municipal, state and federal authorities have exacerbated the problems by exempting the industry from regulation, the Times revealed. The city also filled budget gaps by selling medallions and running ads promoting the permits as “better than the stock market.”

Ms James said the city continued to market the lockets at inflated prices even after internal warnings were issued.

At the last medallion auction in 2014, the city sold 350 new medallions at the peak of the market, generating $ 359 million in revenue. Since then, the prices of the lockets have plummeted, selling for a fraction of the all-time high of $ 1.3 million in 2014. In many cases, they are worth much less than what their owners borrowed to buy them.

In 2018, New York City became the first major U.S. city to adopt a one-year moratorium on new vehicle licensing for Uber, Lyft, and other ridesharing services. It came three years after Mr de Blasio tried to pass a similar cap, but dropped the effort after Uber waged a fierce campaign against him.

The city has since extended the moratorium.

“This crisis has been for us to resolve – by working tirelessly to cleanse the recklessness and greed of others,” Ms. Goldstein said. “If the attorney general wants to launch a frivolous investigation into the very administration that has only worked to improve the situation, she will find it.”

But Ms Desai said the city’s response has been slow and its efforts so far have generally been disappointing. She noted that the city waived some small fees for taxi owners even as they drowned in huge debts.

“There has been no substantial financial relief – this restitution would be the first,” she said.

City comptroller Scott M. Stringer said Ms James had made “significant allegations” and her office “takes these matters very seriously”.

The city is controlling the number of medallions – currently capped at just under 13,600 – to avoid an oversupply of taxis like what happened in the 1930s when concerns about congestion, reckless driving and reduced fares led the city to intervene.

As medallion prices skyrocketed, drivers were pressured into taking out loans totaling billions of dollars they could never repay, plunging heavily into bankruptcy.

A wave of suicides by taxi owners and professional drivers in recent years has underlined the gravity of their plight and prompted municipal legislation to try to improve their working conditions.

A spokesperson for Ms James said that while Thursday’s action focused on the city’s role in the taxi crisis, their ongoing investigation continued to examine “all aspects of the taxi industry” .

The United States Attorney’s Office in Manhattan has also opened a criminal investigation.

Taxi industry executives have denied doing anything wrong, calling their actions normal business practices. They sought to blame the taxi collapse entirely on the rise of competing racing app services such as Uber and Lyft.

Last month, a city panel appointed by New York City Council and Mr. de Blasio proposed a bailout up to $ 600 million for taxi drivers, but most of that money would come from private investors.

Ms James is asking for $ 810 million directly from the city. It’s unclear how his request would affect the bailouts.

City Councilor Ydanis Rodriguez, who was the panel’s co-chair, said he believed the city had some responsibility for creating the taxi crisis and therefore had an obligation to provide a financial assistance to taxi owners.

He added that the city should consider all proposals, including Ms James’ compensation claim as well as the private-public bailout proposed by the panel.

“What I do know is this crisis is so huge and the locket owners are so desperate they can’t wait any longer,” Rodriguez said.

Ms James said the town’s payment would be used to reimburse owners of taxi medallions, which could include repayment of loans and compensation for damages resulting from the town’s actions.

She also plans to take additional measures to prevent the Taxi and Limousine Commission and the city from inflating taxi prices in the future.

Nino Hervias, taxi owner and spokesperson for the Taxi Medallion Owner Driver Association, which represents many immigrant taxi owners, said it was time the city was held directly responsible for the destruction of the taxi industry. yellow taxis and the bankruptcy of so many drivers.

“Finally, we have someone focused on how this whole nightmare started,” he said. “What we’re looking for right now are meaningful solutions. “

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