Attorney General to Smack Taxi Mogul Gene Freidman with Lawsuit Tomorrow: Sources

Eric Schneiderman expected to file suit against the city's biggest medallion owner alleging failure to live up to the terms of an earlier settlement

Gene Friedman, CEO of Taxi Club Management, the largest privately held taxi company in the US. (Photo: New York Observer)

Gene Freidman, CEO of Taxi Club Management, the largest privately held taxi company in the US. Gene Freidman

According to a source with knowledge of the Attorney General’s plans, tomorrow Eric Schneiderman will file suit against New York City taxi magnate Evgeny “Gene” Freidman, the single largest holder of medallions in the city.

In late 2013, Mr. Freidman settled a suit brought by Mr. Schneiderman that alleged that Mr. Freidman’s companies consistently overcharged drivers and imposed improper fees that violated TLC rules. The improper fees were things like “shift excess time surcharge” fees of $3.50 per shift that Mr. Freidman charged drivers who leased his vehicles or medallions.

That settlement called for restitution of approximately $750,000 plus a penalty of $500,000. Tomorrow’s expected action by the Attorney General will allege that Mr. Freidman has failed to live up to the reforms he agreed to in the settlement and continued some of the practices that the first suit alleged were illegal. After settling the suit in 2013, Mr. Freidman signed an “Assurance of Discontinuance” or AOD with the AG’s office. That’s basically an agreement to cease doing things the Attorney General contended were illegal so a resumption of those activities is prevented both by the agreement and because the activities themselves are prohibited.

Mr. Freidman disputes that he has failed to live up to his obligations. “Mr. Freidman honors his agreements with the Attorney General, and finds the timing of any action suspicious. He has been transparent in negotiating with the AG’s office over the last year and a half, and finds them very professional,” said Ronn Torossian, spokesman for Mr. Freidman, in a statement emailed to the Observer.

“The conduct we will allege in our lawsuit demonstrates a basic disregard for the struggles and rights of hard-working taxicab drivers, as well as for the laws and rules that apply to everyone in the taxi industry,” said Attorney General Schneiderman. 

With approximately 900 of the tins, Mr. Freidman is thought to be the largest medallion owner in the city. As recently as 2013, the medallions, which provide a license for a car to pick up a street hail, were trading for up to $1.3 million apiece – that would make Mr. Freidman’s holdings worth more than $1.1 billion. However, the value of the medallions has taken a severe hit over the past several months as Uber and other ride-sharing apps have cut into the business of taking New Yorkers from one place to another.

The Observer was the first to report yesterday about a meeting scheduled for Thursday convened by Mr. Freidman at which the mogul was expected to ask several bankers to help draft a plan to bail out medallion owners whose lenders were getting cold feet as the value of the medallions plummeted. Mr. Freidman was supported in these efforts by Councilman Ydanis Rodriguez, the chair of New York City Council Transportation Committee, who had agreed to attend the meeting – which was closed to the press. Today, Mr. Rodriguez put out the statement that the Observer reported would be forthcoming, promising that “Rodriguez [would] take steps to stymie further decline.” While those “steps” were not spelled out, Mr. Rodriguez has a long history of going to bat for the traditional yellow taxi industry.

Last month, he introduced legislation that would have increased the amount of information aspiring drivers for Uber, Via and Lyft would have to provide to the TLC and he also co-sponsored Councilman Greenfield’s Surge Bill that would have capped Uber’s “surge pricing” at 2 times normal rates. In fact, Mr. Rodriguez indicated that he’d prefer a bill that made the “surge cap” even lower, telling Crain’s, “I will support [the bill] if it’s lowered to 20%.”

In an opinion piece in the Observer last year, Mr. Freidman spoke out strongly against the ride-sharing companies, criticizing “Rogue app companies dispatch drivers and vehicles, hire and pay drivers, and collect money from passengers, yet they don’t follow the same rules as all other cab companies. These app companies claim that because they use mobile device applications they are “technology” companies and not “transportation” companies. These false claims allow them to operate with a different set of rules from black, yellow and green cabs.”

In the same piece, he defended the venerable taxi: “Yellow cabs offer reliability and are regulated. We go where passengers need us to—at all hours of the day and night and follow ever-changing rules and regulations. We carry ample commercial insurance coverage in case of accident, and have protections in place for both drivers and consumers.”

As one of Mayor de Blasio’s biggest donors – the Daily News reported that he “raised $49,450 for de Blasio’s campaign” and joined the victor in the VIP section at the Brooklyn YMCA for the election night victory party – many wondered whether the defender of the traditional means of getting from point A to point B would have the political sway to fend off the disruption sweeping the nation. The Attorney General’s new lawsuit will certainly change the calculus.

This story has been updated to include comment from Attorney General Eric Schneiderman.

Attorney General to Smack Taxi Mogul Gene Freidman with Lawsuit Tomorrow: Sources