The epic rise and hard fall of New York's taxi king

Evgeny Freidman was once so powerful in the cab industry that he was known as New York's Taxi King. Photo / Patrick Dodson, The New York Times

The man known as the Taxi King arrived at his 2014 holiday party in a US$384,000 ($586,000) Ferrari, wearing a custom Italian suit. He told the guests whom he had invited to an upscale Manhattan club — including executives, politicians and celebrities — that he had flown in from Saint-Jean-Cap-Ferrat, a town in the French Riviera where he owned two villas.

Five years later, that man, Evgeny A. Freidman, stood in a mostly empty courtroom in Albany, New York, as a judge sentenced him to probation for tax fraud. In a hushed voice, he said he had lost everything.

"I'm trying to be remorseful and understanding for anybody I might have harmed," he told the judge at the hearing in October. "I'm very humbled by what has happened."

For more than a decade, New York taxi industry leaders got rich by creating a bubble in the market for the city permits, known as medallions, that allow people to own and operate cabs.

In several articles this year, an investigation by The New York Times found that government officials stood by as industry leaders artificially inflated medallion prices and channeled immigrant drivers into loans they could not afford to purchase the permits. The leaders reaped hundreds of millions of dollars before the bubble burst, wiping out thousands of buyers who are still mired in debt today.

And no one embodies the glittery rise, unfettered recklessness and spectacular collapse of the industry more than Freidman.

A Russian immigrant and a cabdriver's son who got his nickname by building the city's biggest fleet, Freidman was a primary architect of some of the tactics used to build the bubble, according to records and interviews. At the height of the market, he had accumulated US$525 million ($801 million) in assets. He befriended filmmaker Spike Lee, baseball star Mo Vaughn and Mayor Bill de Blasio. His outsize antics and lavish spending often landed him on Page Six, the New York Post's gossip column.

As a generation of cabdrivers became buried in overwhelming debt, Freidman created offshore trusts that protected some of his money when the bubble burst, records show. While his business partners lost millions because of his tax fraud, Freidman avoided prison by cooperating with a federal investigation into one of his partners, Michael Cohen, President Donald Trump's former lawyer.

"He hurt so many people in so many different ways," said David Pollack, former head of the Committee for Taxi Safety, an association of fleet owners that once included Freidman. "Your headline could be: 'The man who brought down the taxi industry.'"

Freidman did not respond to repeated requests for comment. Government officials declined to answer questions on why they did not intervene sooner.

This account is based on interviews with more than 20 of Freidman's former associates and a review of thousands of pages of court records and other documents.

Freidman is now cooperating with prosecutors who started investigating the taxi industry after The Times published its series this year on the exploitative tactics that drove medallion prices to soar past US$1 million ($1.5 million) by 2014 from $200,000 in 2002. He has met with them three times so far.

"I'm in, you're out"

Freidman, 49, who is known as Gene, likes to portray himself as a scrappy fighter who rose from first-generation immigrant to multimillionaire solely through his wits and fists.

But like everything involving Freidman, the reality is more complicated.

He was born in St. Petersburg, Russia, in 1970, an only child. Six years later, his family emigrated to New York, he has said in interviews. His father, who Freidman said had been a thermonuclear engineer, got a job as a cabdriver but soon began buying medallions and building a fleet, records show.

Freidman attended the Bronx High School of Science, Skidmore College and Cardozo Law School. Afterward, he has said, he moved to Russia to work in private investing.

The city permits that allow people to own and operate cabs are known as medallions. Photo / Getty Images

Freidman has said in speeches that he returned to the United States in 1996 at the request of his father, who had become a successful and respected fleet owner. During the flight home, he crafted a plan to use what he learned in Russia to revolutionize the taxi industry.

His idea was straightforward: He wanted the industry to take more risks to increase profits.

Specifically, Freidman has said he wanted lenders to allow medallion purchasers to borrow more money, with smaller down payments and longer repayment periods. Former associates said he believed this strategy would allow him and others to buy more medallions, enable lenders to increase profits and, mostly, drive up medallion values. He believed that would spur more purchases, more loans, more profits and even higher medallion values.

"I walked in and took over," he later recalled. "I told my dad, 'I'm in; you're out.'"

Prominent — and polarising

Freidman was 26. He was cocky, but he needed help. He turned to the small nonprofit that had lent to his father, Progressive Credit Union, and its chief executive, who had become a family friend, Robert Familant.

Between 1997 and 2004, Progressive's loans enabled Freidman to buy about 100 medallions to expand his fleet, according to city records and former associates.

At the same time, Freidman became a licensed broker and helped some drivers purchase medallions, mostly using loans from Progressive, the former associates said.

Other industry leaders used similar tactics. But few were as aggressive as Freidman.

More than a dozen industry veterans said Freidman's success emboldened others and helped encourage lenders to push low-income drivers to take on massive loans to buy medallions.

"He changed the market," said Ira Goldstein, a former chief of staff at the city commission that oversees the industry. "People copied him, and it affected everybody, including the driver-owners."

Robert Familant, the head of Progressive Credit Union, loaned to Freidman and drivers. Photo / Marilynn K. Yee, The New York Times

Familant did not respond to requests for comment.

As Freidman expanded his fleet, he became increasingly prominent — and polarizing.

To his allies, Freidman was charming and passionate, with a perspective that improved a long-stagnant industry. He put his fleet in several neighborhoods, making it more accessible for his drivers. He worked long hours. He embraced energy efficiency, becoming the first to use hybrid cabs.

Others saw him as vindictive and vulgar. Lawsuits have accused him of cheating his drivers, clients and partners. Last year, he was ordered to pay $1.3 million to an assistant who sued him for sexual harassment. On his desk, he kept a snow globe sprouting a middle finger.

The highest bidder

Freidman unleashed his most radical idea June 16, 2006, at an auction where the city sold new medallions.

At the time, a medallion cost US$350,000 ($534,000) on the private market, according to a Times analysis. But at the auction, Freidman and his associates bid $477,666.50 ($729,483.13) apiece.

They won all 54 medallions sold.

The results reshaped the small medallion market. In effect, Freidman single-handedly had increased the value of all medallions, including ones he had owned for years — and also increased prices for everyone, making it harder for drivers to buy without enormous loans.

Years later, Freidman admitted he had intentionally overpaid to inflate the values of medallions he owned. He said in a 2012 speech that he used the values to persuade lenders to loan him more money.

"I would bid crazy prices. People would look at me like I'm crazy, and I wouldn't care," he said, "because I would look at the prices and say, 'This is market value.'"

Freidman repeated the strategy at three other auctions, records show. In all, he bought more medallions at auctions than anyone else in city history.

Riches and power

The medallion bubble turned Freidman into a remarkably rich man.

His fleet had about 900 of the city's 13,587 medallions. Most were owned by others who charged him a fee for the right to operate their cabs and keep the profits. He personally owned about 250 permits, and at the height of the market, each was worth US$1.3 million ($1.9 million), although they were mortgaged, records show.

Freidman knew the prices would not last, according to five former associates. So he used the medallions as collateral to borrow money that he invested elsewhere.

He bought 20 commercial properties, records show. He opened locations of a French whimsical pajama store in New York, Arizona, California, Georgia and Washington state. He acquired medallions in Chicago and Philadelphia, helping to spike prices in those cities.

Freidman as he left an Albany, N.Y., courtroom in October. Photo / Patrick Dodson, The New York Times

He bought a 4,000-square-foot town house on Manhattan's Upper East Side, an estate in the Hamptons and a condo in Chicago, in addition to the French villas.

He also invested in politics. He donated to former Representative Anthony Weiner's 2013 mayoral campaign and to de Blasio. Later, he bragged to associates that de Blasio placed one of his friends at the taxi commission.

Mayoral spokeswoman Freddi Goldstein rejected that notion. "Any suggestion that we hired anyone at his request is a blatant lie," she said, adding that, "The mayor ceased contact with Gene Freidman as soon as he realized he was a bad guy."

Freidman also began managing Cohen's medallions. They became friends; during Freidman's divorce, Cohen found him an apartment in Trump Tower.

Several of Freidman's former associates said as he became wealthier, he stopped paying his debts.

During the bubble, when Freidman was worth millions, he was sued or otherwise accused of failing to fully pay his drivers, employees, clients, partners, lawyers, contractors, landlords, lenders, an accountant and a car dealer as well as child support payments, association dues, insurance premiums and taxes.

Between 2013 and 2016, the state ordered him to pay nearly US$1.5 million ($2.2 million) for cheating drivers. But he has failed to fulfill that order, too, records show.

The aftermath

Now that the bubble has burst, Freidman is awash in lawsuits and eviction notices.

A judge ruled in 2016 that he transferred more than $60 million into trusts in Belize, Nevis and the Cook Islands in order to avoid paying creditors. Freidman had defended the transfers as part of estate planning. "It is impossible to conclude that the timing of the transfers is merely coincidence," the judge wrote in ordering the trusts to pay the creditors.

The tax fraud case, filed in 2017, involved two surcharges collected by cabs that Freidman owned and ones he managed for others: a 50-cent fee for regional transit improvements, and a 30-cent fee for more wheelchair-accessible taxis.

Officials initially accused Freidman of pocketing more than US$30 million ($45 million).

But after agreeing to cooperate against Cohen, he ultimately repaid US$1 million to the state and US$826,000 ($1.2 milllion) to the city. In addition to five years of probation, he had to exit the industry and authorise officials to seek US$4 million ($6 million) more in the future. (Cohen is now serving a three-year sentence for campaign finance violations and other crimes.)

"He no longer has any involvement whatsoever in taxi operations in New York City. He's done," said Allan J. Fromberg, a spokesman for the city Taxi and Limousine Commission.

The city and the state still have demanded millions from the owners who entrusted medallions to Freidman's fleet, even though they did not know about the scheme or benefit from it. The taxi commission did not respond to questions about the collections. The state attorney general's office, which prosecuted the tax fraud case, declined to comment, citing its ongoing investigation into the industry.

"It's unbelievable," said one owner, Robert Rosen, 72.

Rosen, who said he committed his medallion to Freidman because he knew his father, lost US$30,000 ($45,000). "The things the government has let this crook get away with. It's shocking."

Written by: Brian M. Rosenthal

Photographs by: Patrick Dodson and Mariynn K. Yee

© 2019 THE NEW YORK TIMES