New York City taxi commission accused of $810 million fraud

New York Attorney General Letitia James announced plans to sue New York City for allegedly fraudulent practices by its Taxi and Limousine Commission, accusing the agency of running a scheme on taxi drivers that created a "trapdoor of despair."

A taxicab medallion, often seen bolted to a vehicle's hood, is a numbered plate required to operate a yellow cab. James is alleging that the TLC played a role in inflating the price of thousands of medallions over a 14-year period, 2004 to 2017, sometimes by more than 200%.

"Government should be a source of justice, not a vehicle for fraudulent practices," James said in a statement, announcing a notice of claim for $810 million. She's alleging the city profited by that same amount selling medallions and by collecting a 5% tax on third-party transfers.

"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 TLC's unlawful practices," she added.  

The government, instead of creating a fair 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," James alleges.

The TLC's actions affected "some of the city's most financially exposed immigrant families," she added.

The TLC promoted medallions as investments with greater returns than the stock market, a statement from James' office alleges. It also set up an artificial floor for bids and permitted taxicab brokers and large owners to "bid up" medallion prices.

The price of an individual taxi medallion sold at an auction skyrocketed 240% from 2004 to 2014, from $283,300 to $965,000.

Even when the TLC knew medallions were overvalued, it failed to disclose that to buyers, according to James' office.

Freddi Goldstein, press secretary at New York City Mayor Bill de Blasio's office, told ABC News in a statement that they have been "working tirelessly" to clean up the crisis.

"We have spent the last six years putting money back into the pockets of drivers, and attempting to curb the harm from Uber, years before anyone else wanted to recognize the threat," the statement 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."

James' legal action comes after the taxi medallion industry has been embroiled in controversy for months.

In May 2019, The New York Times published a multi-part investigation that put a spotlight on the allegedly predatory lending practices that trapped hundreds of low-income cab drivers with millions of dollars in debt.

In August, Rep. Alexandria Ocasio-Cortez and New York City lawmakers wrote a letter to several federal financial and banking regulators demanding tighter oversight of lending in the taxi medallion industry.