This morning, the Observer has exclusively learned, the city’s largest owner of taxi medallions, Evgeny “Gene” Freidman, will enter a courtroom in lower Manhattan to ask a judge to force Citigroup to offer some relief to the LLC that owns several dozen (estimates range from 46-90) of the 1,000 or so New York City he controls. This “pre-bankruptcy” maneuver is sure to send shockwaves through an industry that is being roiled by competition for app-based ride-sharing services like Uber, Lyft, Gett and Via.
In a further exclusive, the Observer can report that last night at approximately 6 p.m.—the timing is important here, for reasons that will be spelled out below—Mr. Freidman received a call from Meera Joshi, the chairwoman and chief executive officer of the New York City Taxi and Limousine Commission, inquiring about the possibility of Mr. Freidman making a last ditch effort to secure financing to bridge the gap between what he claims he is able to pay and the terms that Citigroup is demanding to fulfill the terms of the loans it made to help him acquire the medallions.
Gene Freidman and his representatives view the city as having been unwilling to work with him to protect the value of his medallions.
Ms. Joshi is said to have asked Mr. Freidman, “Hey, did u get a call from Mario Rivera at Fortress investors about possibly investing in your (troubled) LLC? We met them a few weeks ago about you. You ought to have someone speak to him.”
The puzzling call was interpreted by those close to Mr. Freidman as a “C.Y.A. tactic,” according to one source who used the abbreviation for “cover your ass.” In other words, Mr. Freidman and his representatives view the city as having been unwilling to work with him to protect the value of his medallions. All of a sudden, after the close of business on the night before he’s to appear in court to seek relief, the commissioner herself phones Mr. Freidman directly. His side interprets that move as a smokescreen that will enable her to say, when other medallion owners start to panic, “Hey, we tried to work with Gene—I even phoned him personally to offer the names of financial companies that might be able to help.”
Another person close to Mr. Freidman found the call mysterious. “It’s odd. They never call him.”
In a very brief phone call, T&LC spokesman Allan Fromberg categorically denied that a phone call took place last night. “It didn’t happen. There was no phone call last night. The commissioner is out of town on other business today. There was no phone call last night.” The Observer, unsure why the call could not have taken place with the commissioner out of town, asked if it was possible that the call occurred Sunday night. At that point, Mr. Fromberg abruptly excused himself from the call, saying that Commissioner Joshi was on his other line.
(This fast-developing story will be updated to include her Ms. Joshi’s comments should she provide any. An email and call to Fortress Investments have not yet been returned.)
How it got to this point is, at least from Mr. Freidman’s point of view, a simple matter. He’s paying his bills but Citigroup wants out of the business.
In an interview with the Observer conducted before court this morning, Mr. Freidman unloaded on the financial services conglomerate:
“Citibank has created this zoo. You get to a point where somebody is a panicked yelling hysterical child. If you reward them for doing that, then others say, ‘Why don’t I act like that, too?’ So it’s to a point where we can’t afford to pay all the balloons, whether we have the money or not. Their irresponsible, hysterical, childish behavior toward the industry has affected not only my medallions but the medallions around the country.”
As the Observer has been reporting, the taxi industry is facing tremendous disruption from these new entrants to the field. Mr. Freidman has led his fellow medallion owners in efforts to receive a bailout or some other sort of relief from the city, which after all, stands to lose millions the next time it brings medallions to auction. Industry-friendly politicians like Ydanis Rodriguez, the chair of the City Council’s Transportation Committee, have come to their aid but the apps are gaining traction so quickly it appears that no legislation can hold them back.
But if laws won’t do the tricks, maybe the courts will. Mr. Freidman wouldn’t confirm that he’d seek bankruptcy protection if today’s hearing doesn’t go his way, but that would seem to be the logical next step, as even he hinted.
“I’m an immigrant, fresh off the boat. The two words we never use are ‘food stamps’ and ‘bankruptcy.’ But when there’s an unethical predatory lender, Chapter 11 is a wonderful business tool.”
Meanwhile, cabs continue to run just fine and even the medallion owners, who’ve seen the value of their investments shrink, don’t seem to be suffering on a day-to-day revenue basis. With the ever-confident Mr. Freidman, it’s not easy to separate bravado from bluff, especially as his lawyers prepare to ask for financial relief. But as Mr. Freidman told the Observer, despite these several dozen medallions that may eventually end up in bankruptcy protection, “We’re operating close to 1,800 medallions in the U.S. in four major markets, hopefully getting into a fifth market soon.”