State Attorney General (AG) Letitia James has backed down from taking action against the city’s Taxi & Limousine Commission (TLC) a year after announcing an $810 million lawsuit alleging fraud pertaining to the pricing of yellow cab medallions. The attorney general’s office told Crain’s in Feb. that it believes the relief package proposed last year by the New York Taxi Workers Alliance (NYTWA) is the best way to resolve the long-standing fiscal issues plaguing medallion owners.
“This proposal would provide a fiscally fair and responsible way to support the recovery of the taxi medallion industry by guaranteeing loans written down to no more than $125,000 – which is why I have been working with the city to approve it since last year,” James said. The AG’s office said a lawsuit against the city and TLC would draw out the process for months, or possibly years, and that the bailout package is the most efficient way to quickly support the needs of the industry.
“[The relief package is] an idea, a suggestion, not legislation,” said Christopher Lynn, TLC chairman from 1996 to 1998. “What’s that got to do with legal proceedings? How is that consistent or inconsistent with illegal conduct?”
The attorney general’s office issued a “notice of claim” Feb. 2020 to Comptroller Scott Stringer, stating its intent to file a lawsuit against the city and TLC, but never did, according to the AG’s office. They accused the TLC of artificially inflating the price of taxicab licenses beginning in 2004, permitting collusive bidding, and failing to disclose that the price of taxi licenses outstripped their underlying value.
Serious accusations in the AG’s notice of claim remain unresolved. James accused the TLC of fraud, unjust enrichment and violations of two state laws relating to fraudulent practices. The AG also had sought injunctive relief to halt the TLC from continuing what it called “unlawful conduct” relating to the taxi medallion market.
It is not clear if, or when, the AG’s office halted its investigation into alleged TLC malfeasance. At the time of the Feb. 2020 announcement, the AG’s office stated that “funds recovered will go toward restitution for medallion owners.”
“If the medallion is still delinquent and goes up for sale, the city would go in and place a minimum bid on whatever is left on the $125,000,” Bhairavi Desai, executive director of the NYTWA said. “If no one bids higher, the city would spend the money to purchase the medallion and then turn around and resell it to recoup the money.”
Desai estimated a net cost to the city of $75 million over 20 years. She said her risk model assumed a worst-case scenario including a foreclosure rate at 5%, 6,000 outstanding loans, and the resale value of the medallion never exceeding $75,000 over 20 years.
Source: Crain’s New York Business