A $1.7 Million Loan, $30,000 in Income. Prosecutors Are Now Investigating.


Federal prosecutors in Manhattan have opened an investigation into possible lending fraud in the New York City taxi industry, the most significant action taken so far in response to widespread practices that trapped thousands of cabdrivers under crushing debt, according to people with knowledge of the inquiry.

In the past month, agents have interviewed cabdrivers who said they were encouraged to take on massive debt under exploitative terms in order to buy a taxi medallion, the city permit that allowed them to own their own cab.

The investigation, which is in its beginning stages, appears to be looking at possible crimes including bank, wire or mail fraud.

The inquiry is being conducted by the United States Attorney’s Office for the Southern District of New York. It could reverberate throughout the city’s taxi industry, which has been engulfed in a financial crisis and rocked by a string of suicides among cabdrivers. More than 950 drivers have filed for bankruptcy, and many more are still buried in overwhelming debt today.

Taxi industry leaders, including the lenders and brokers who arranged loans, have denied any wrongdoing.

They have described their tactics as normal business practices, noting that regulators approved their methods, and blamed some borrowers for taking on too much debt. They have blamed the industry’s financial crisis exclusively on Uber and Lyft.

The day after The Times published its findings in May, the attorney general’s office opened its inquiry into the lending practices. On Monday, a spokeswoman for Ms. James declined to provide an update on that inquiry.

Mayor Bill de Blasio also launched his own review in response to The Times’s reporting. That review found that many of the city’s medallion brokers, who arrange private sales of the permits as well as loans for the purchases, engaged in “predatory practices.”

City officials have written new regulations to prevent any abusive practices in the future, waived $10 million in fees owed by medallion owner-drivers and arrested a debt collector notorious in the industry.

But officials have not agreed on a bailout for owner-drivers. Several members of the New York City Council are pushing to at least refund some of the drivers who bought medallions at city auctions, spurred in part by data showing that the city made more than $850 million off medallion sales during the bubble. But Mr. de Blasio has said he believes that such a move would be too expensive.

Many people in the taxi industry have been hoping that a criminal investigation could lead to a settlement that could help medallion owner-drivers climb out from under their debt. Some lenders have renegotiated loans to reduce payments for drivers.

Experts have called for investigations into the loans but said that the lending practices may not have been illegal, in part because the loans were classified as business loans, which are subject to fewer regulations.

The lenders in the taxi industry included several nonprofit credit unions, including Melrose Credit Union, Progressive Credit Union and Lomto Credit Union; the lending company Medallion Financial; large institutions such as Capital One, Signature Bank and New York Commercial Bank; and several large taxi fleet owners, including Neil Greenbaum, Roman Sapino, Richard Chipman, Savas Konstantinides, Basil Messados and Tony Georgiton.



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