New York attorney general threatens to sue NYC over alleged taxi fraud

New York Attorney General Letitia James has threatened to sue New York City for artificially inflating the value of yellow taxi medallions, claiming $810 million is owed to thousands of cab drivers across the city.

The city-issued medallions are permits that are required for owning a yellow cab. James claims that the city’s Taxi and Limousine Commission (TLC) operated a scheme from 2004 to 2017 that artificially inflated prices of the medallions, which are auctioned off.

The price of medallions went from $283,300 in 2004 to $965,000 in 2014, with James claiming that the TLC “knew that the price of a medallion had exceeded its underlying value” by at least 2011, “but failed to disclose that information to purchasers.”

“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,” James said in a statement Thursday.

“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,” she added.

James said the city must compensate taxi medallion owners within 30 days, or she would sue the commission for fraud.

The threatened lawsuit comes after a New York Times investigation last year found taxi industry leaders earned hundreds of millions of dollars by purposely raising the value of a medallion to more than $1 million from $200,000.

Bhairavi Desai, the executive director of the New York Taxi Workers Alliance representing cab drivers, said James’s call to action is welcomed as validation of the city’s liability in the taxi crisis, the Times reported. She called the alleged medallion price inflation a “betrayal by the city.” 

“Not only did they close their eyes to predatory practices and directly engage in inflating the prices, but they then allowed in Uber and Lyft completely unregulated,” Desai said.

In 2018, New York City became the first major American metropolitan area to adopt a one-year cessation on issuing new vehicle licenses for Uber, Lyft and other ride services.

Freddi Goldstein, a spokeswoman for New York City Mayor Bill de Blasio (D), said the mayor has been working to fix the city’s taxi crisis since he entered office in 2014.

“This crisis has been ours to solve — working tirelessly to clean up the carelessness and greed of others,” 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.”

Officials have taken measures to provide financial help to taxi drivers and increase the oversight of Uber and other ride-hailing companies. Still, Desai said the city’s response has been slow and underwhelming, noting the municipality waiving small fees for taxi drivers but not solving the root of the problem.

“There has been no substantial financial relief — this restitution would be the first,” she said, according to the Times.