New York Attorney General Accuses N.Y.C. of Fraud Over Taxi Crisis

New York State’s attorney general has accused New York City of committing fraud by significantly inflating the value of yellow taxi medallions and demanded $810 million from the city to compensate the thousands of cabdrivers who are now saddled with debt.

The city’s Taxi and Limousine Commission marketed the medallions — city-issued permits required to own a yellow cab — as “a solid investment with steady growth” and reaped a profit from the sale of thousands of them at auction at artificially high prices over a 14-year period, from 2004 to 2017, according to an investigation by the attorney general’s office.

The attorney general, Letitia A. James, formally notified city officials on Thursday that she planned to sue the city for fraud, unlawful profit and other violations of state law within 30 days unless the city agreed to provide financial relief to the cash strapped taxi medallion owners.

“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 T.L.C.’s unlawful practices,” Ms. James said. “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.”

Officials at the Taxi and Limousine Commission referred a request for comment to the mayor’s office.

Freddi Goldstein, a spokeswoman for Mayor Bill de Blasio, said that the decisions that led to the taxi crisis were made during the administration of Mayor Michael R. Bloomberg. Since then, Ms. Goldstein said, city officials have taken steps to provide financial help to taxi drivers and tighten oversight of Uber and other ride-hailing companies that compete with the taxis.

“This crisis has been ours to solve — working tirelessly to clean up the carelessness and greed of others,” Ms. Goldstein said. “If the attorney general wants to launch a frivolous investigation into the very administration that has done nothing but work to improve the situation, this is what she’ll find.”

The city comptroller, Scott M. Stringer, whose office was notified by the state attorney general about her intention to sue the city, said Ms. James had made “significant allegations” about the Taxi and Limousine Commission and that his office “takes these issues very seriously.”

The attorney general began her inquiry in response to an investigation by The New York Times. It closely tracks The Times’s findings that a group of taxi industry leaders earned hundreds of millions of dollars by deliberately inflating the price of a medallion to more than $1 million from about $200,000, sending thousands of mainly immigrant drivers into reckless loans to purchase the medallions.

City, state and federal officials exacerbated the problems by exempting the industry from regulations, The Times’s investigation found. The city also filled in budget gaps by selling medallions and running ads promoting the permits as “better than the stock market.”

Ms. James found that the city continued to market the medallions at inflated prices even after warnings were raised.

Drivers were steered into taking out loans totaling billions of dollars that they could never replay, plunging many into bankruptcy and leaving them struggling to survive.

A spokesman for Ms. James said that while Thursday’s action was 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 launched a criminal investigation.

Taxi industry leaders have denied doing anything wrong, characterizing their actions as normal business practices. They have sought to blame the taxi meltdown on the rise of competing ride-app services such as Uber and Lyft.

Last month, a city panel appointed by the New York City Council and Mayor Bill de Blasio proposed a bailout of up to $500 million for taxi drivers, but most of that money would come from private investors. Ms. James is seeking $810 million directly from the city.

Ms. James said the money would be used to pay restitution to taxi medallion owners, which could include paying off loans, and compensating them for damages resulting from the city’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.

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