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 exorbitant prices from 2004 to 2017, according to an investigation by the attorney general’s office. The attorney general, Letitia A. James, said the city must provide financial relief to the debt-ridden taxi medallion owners within 30 days or she would sue for fraud, unlawful profit and other violations of state law. “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.’’Bhairavi Desai, the executive director of the New York Taxi Workers Alliance, which represents cabdrivers, said she welcomed Ms. James’s action and saw it as a validation of the city’s culpability in the taxi crisis. “The devastation that has happened across the taxi industry has been a deep betrayal by the city,” she said. “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.” Freddi Goldstein, a spokeswoman for Mayor Bill de Blasio, said that although the taxi crisis began under Michael R. Bloomberg’s administration, city officials since then have taken steps to provide financial help to taxi drivers and tighten oversight of Uber and other ride-hailing companies. The attorney general began her inquiry in response to an investigation by The New York Times, which found that a handful 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. The Times found that thousands of drivers, many of them immigrants, thought they were safe taking out loans to buy medallions because of the taxi commission’s assurances of their high value. City, state and federal officials exacerbated the problems by exempting the industry from regulations, The Times revealed. The city also filled in budget gaps by selling medallions and running ads promoting the permits as “better than the stock market.” Ms. James said that the city continued to market the medallions at inflated prices even after internal warnings were raised. During the last auction for medallions in 2014, the city sold 350 new medallions at the height of the market, generating $359 million in revenue. Since then, medallion prices have cratered, selling for a fraction of the record $1.3 million price in 2014. In many cases, they are worth far less than what their owners borrowed to buy them. In 2018, New York became the first major American city to adopt a one-year moratorium on issuing new vehicle licenses for Uber, Lyft and other ride-hail services. It came three years after Mr. de Blasio attempted to adopt a similar cap but abandoned the effort after Uber waged a fierce campaign against him. Since then, the city has extended the moratorium. “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.” But Ms. Desai said the city’s response has been slow and its efforts so far have generally been underwhelming. She noted that the city waived some small fees for taxi owners even as they drowned under huge debts. “There has been no substantial financial relief — this restitution would be the first,” she said.
The city comptroller, Scott M. Stringer, said Ms. James had made “significant allegations” and that his office “takes these issues very seriously.” The city controls the number of medallions — currently capped at just under 13,600 — to prevent an oversupply of cabs like what happened in the 1930s when concerns over congestion, reckless driving and cut-rate fares led the city to step in. As medallion prices soared, drivers were steered into taking out loans totaling billions of dollars that they could never repay, plunging many into bankruptcy. A spate of suicides by taxi owners and professional drivers in recent years underscored the severity of their plight and has spurred city legislation to try to improve their working conditions. 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 entirely 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 Mr. de Blasio proposed a bailout of up to $600 million for taxi drivers, but most of that money would come from private investors. Ms. James is seeking $810 million directly from the city. It is unclear how her demand would affect the bailout plans. City Councilman Ydanis Rodriguez, who was the co-chairman of the panel, said he believed the city did bear some responsibility for creating the taxi crisis, and as a result, it had an obligation to provide financial relief to taxi owners. He added that the city should consider all proposals, including Ms. James’s demand for compensation as well as the private-public bailout proposed by the panel. “What I know is this crisis is so huge and the medallion owners are so desperate that they cannot wait any longer,” Mr. Rodriguez said. Ms. James said the payment from the city 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.Nino Hervias, a taxi owner and spokesman for the Taxi Medallion Owner Driver Association, which represents many immigrant taxi owners, said that it was time that the city was held directly liable for destroying the yellow taxi industry and pushing so many drivers into bankruptcy.
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