The January 2015 Auction
On January 21, 2015 an auction was held at the law offices of Big Taxi attorney Peter Kline of Kline and Gordon. Michael Saperstein of Paul E. Saperstein Co. (PESCO) was the auctioneer. PESCO is by far the Big Taxi auctioneer of choice.
There were only eight of us in a small conference room. I used my real name and identified myself as an Uber driver. However, no one was aware of my role as a Big Taxi critic in general and specifically a prolific critic of Medallion Financial (NASDAQ:TAXI), the leading provider of taxi medallion loans.
There was a lot of bantering about the taxi industry before the formal auction started. Many spoke in their native Russian to each other. Alec Raberov, Medallion Financial’s regional manager for Boston attended just as an observer, not a participant and didn’t say much. Raberov’s family emigrated from Russia, so presumably he was recruited to work with the many Russian-speaking Big Taxi players.
The auction was scheduled to dispose of Boston taxi medallion #997. The owner, Alex J. Alcindor, defaulted on his loan from Concept Capital Corporation of Revere, MA. Alcindor also owns Hill Street Cab. Alcindor held #997 through Alex A. Inc. formed on May 24, 2000. So Alcindor owned this medallion at least 15 years before losing it to the hard money lender, Concept Capital.
Concept Capital is owned by James Cummings and Julie Rainier Cummings. It’s predecessor company, Tis We Own Ting, Ltd of Revere, MA is also owned by James Cummings and Julie Rainier Cummings. Both companies have appeared in public documents as taxi medallion lenders for many years. Tis We Own Ting was formed by James Cummings on December 21, 1991. Julie is the daughter of Ron Rainier, now eighty years old. Rainier operated as one of Big Taxi’s hard money lenders to several generations of immigrant taxi drivers. He played many roles in the industry.
Tis We Own Ting was listed as the secured party in a Uniform Commercial Code (UCC) filing for medallion #997 on October 8, 2009. Their lien was later terminated and Concept Capital became the new secured party. Concept Capital’s representative at the auction didn’t greet any attendees or introduce himself. He only spoke during the very short bidding process itself.
What is a Hard Money Lender?
A hard money lender doesn’t depend on a borrower’s credit history or demonstrated ability to pay. He’ll lend against hard assets. He doesn’t particularly care how the borrower manages to make his monthly payments. If the borrower defaults, he just seizes the hard asset.
Before Uber, when Big Taxi hard money lenders were active, taxi medallions were very, very liquid. Unlike any other hard asset, repo is simple. Go into the garage with a screw driver and pop off a little piece of metal. The next morning the borrower can’t support his family unless he pays up, whether or not extra fees and terms have been attached.
If the borrower fails to pay, the Big Taxi hard money lender immediately sells the taxi medallion to a new vulnerable purchaser through another member of the Big Taxi Cartel. Often publicly held institutional lenders and credit unions participated in providing conventional loans. However they just looked the other way. The NEW borrower was persuaded he was getting a great deal — often with 100% financing.
The scheme succeeded because taxi medallions kept on swelling in price faster than the stock market, faster than gold, faster than paintings by the Dutch Masters.
Medallion prices were driven up by mysterious forces, even rivaling the real estate bubble that exploded in 2008.
This went on for decades in New York, Chicago and Boston.
As in all three cities, almost all Boston taxi drivers are immigrants with few other ways to make a living wage. Without a medallion, they lose the right to drive their taxi.
Owners of a single or a handful of medallions in financial trouble will
- Pay whatever percentage of income is necessary
- Accept predatory fees and terms
- Borrow against 100% of their home value
- Tap the resources of their extended family
Once ensnared in financial crisis, the borrower is unable to refinance their medallions or homes with institutional lenders. So the hard money lender steps in to provide funds at high interest rates secured by the medallion owner’s home, any other attachable property or just secured by the clarity of the overnight repo threat.
In many cases a hard money lender provides the high interest rate funds to cover the borrower’s down payment. As during the real estate bubble, not all of these side deals were properly disclosed.
Industry Snapshot 2004: Fare Game
The excerpts below describe the hard money world of Big Taxi that created these financial problems.
Big Taxi operated way, way below the radar — long, long before Uber came to town.
By Chris Berdik
“…Boston taxis are the third most expensive in the country, yet the profits clearly aren’t going to the drivers…
…So, somebody must be making money, right? The answer lies partly with money lenders who profit from people who seek to drive their way to the American dream…
…Even as interest rates have fallen, lending to cab drivers with dreams of owning their own medallions has remained very profitable for the businesses that specialize in it. Take Progressive Credit Union, 75 percent of whose loans are for medallion purchases in New York, Boston, and other cities. In 2002, Progressive was the most profitable credit union of its kind in the country. Another example is Medallion Financial, a “specialty financing company” that holds about $15.5 million worth of medallion loans in Boston. [$27 million as of 2015] The company’s philosophy, “In Niches There Are Riches,” proved true last year, when it reported more than $14 million in interest income…
…Knowing what they’re getting into can be tough for drivers in the world of medallion lending. Back in the 1980s, when [Eddie] Tutunjian was accumulating much of his empire and medallions cost a fraction of what they do now, most of the purchases were made with bank loans. In recent years, however, banks have become more conservative in their lending, and cab drivers, many of them recent immigrants with little credit history, often don’t make the cut.
In general, the riskier a borrower, the more interest and fees he will be charged on a loan. And when a cabbie looking to buy a medallion has been turned down by banks, credit unions, and places like Medallion Financial, there is at least one more place he can turn. It’s a company called Tis We Own Ting, headed by a Swampscott businessman named Ronald H. Rainer.
You won’t find Rainer’s company in the phone book, but almost everyone in Boston’s cab industry knows about it. Since the early 1990s, Tis We Own Ting has made hundreds of loans, often at high interest rates, to would-be medallion owners. Rainer says he’s given many drivers with few other options a way “to achieve the American dream.” If a cabbie can come up with the same down payment a bank would demand, says Rainer, his rates “are competitive with banks and other lending institutions.” As for other borrowers, “obviously, if there’s a higher risk, you want a higher return.”
One cabbie, who says he took out a high-interest loan from Tis We Own Ting several years ago, has a different view. “The reason why these companies exist is because sometimes your credit is bad, and you borrow money foolishly. I survived it, and I moved on. [But] people don’t realize what interest does. . .. It’s very, very easy to get into trouble.”
Another cabbie with a current loan from Rainer says he’s paying about 11 percent, compared to the 6.5 percent banks might typically charge now, or the 7.5 to 8 percent he might pay to Medallion Financial. Given the size of a medallion loan, adding a few percentage points to the interest rate can mean tens of thousands of dollars paid over the life of a loan.
There’ve always been lenders of last resort for medallions. There has also always been a need for them, as cabbies with bad credit struggle to get behind the wheels of their own cabs. The main difference now, of course, is that the sums involved are so much greater and the pit of debt that much deeper…”
Big Taxi Boss Robert Raimondi
Robert Raimondi, owner of the Tudor Garage in South Boston was the first and only bidder in the auction on January 21, 2015. Long before medallion prices cratered, a Mar 21, 2013 article in the Boston Business Journal titled: Boston’s taxi business: By the numbers, said the next biggest taxi owners after Eddie Tutunjian were Robert Raimondi and George Summers “who each own in the vicinity of 35-50 medallions.”
Eddie Tutunjian, the owner of Boston Cab, is by far the largest owner of Boston taxi medallions. He owns at least 372 and some say approximately 450. He owns 25% of the total of 1825 medallions in Boston. Between 2009 and 2014, Tutunjian was the highest volume buyer of Boston medallions.
At the auction, Raimondi told the group Eddie was really worried, however, Raimondi believed the problems with Uber and the new regulations of the week before would blow over.
Tutunjian was the subject of a Globe Spotlight series in March 2013 that led to a federal investigation. The sale of all his medallions has been frozen pending the investigation’s result.
Tutunjian also runs a hard money lending operation making loans at high interest rates to aspiring taxi owners through the company that bears his initials, EJT Management. He often persuades his own shift drivers to borrow money from him, ignoring their ability to pay him back.
Raimondi’s taxi businesses are associated with Anthony J. Ilacqua, Jr. and the late Anthony “Tony” Ilacqua, Sr. Raimondi’s wife is the daughter of Ilacqua, Sr. Most of their companies below are listed at addresses between 207 and 215 Tudor Street, South Boston, the location of the Tudor Garage.
The complexity of the ownership below is detailed in an intra-family lawsuit on 4/1/2008.
Companies owned by Raimondi and the two Ilacqua’s include:
- Applied Mechanical Technologies, Inc.
- Arrow Taxi, Inc.
- Bright Taxi, Inc.
- Dipper Taxi, Inc.
- Eleventh Street Taxi, Inc.
- Fourth Street Taxi, Inc.
- Legal Taxi, Inc.
- D.I. Taxi, Inc.
- Seventh St. Taxi, Inc.
- Sixth St. Taxi, Inc.
- South Boston Taxi, Inc.
- Star Taxi, Inc.
- Target Placement Services, Inc.
- A.S. Taxi Management, Inc.
- Taurus Taxi, Inc.
- Tone Taxi, Inc.
- A. Cab, Inc.
- TTC Dolphins Corp.
- Tudor Cab, Inc.
- Twelfth Street Taxi, Inc.
- VRI Taxi, Inc.
- Waterfront Taxi, Inc.
Before the auction started I asked Raimondi who the seller was. He said he didn’t know them. I asked him if the company’s name began with a “C”. Raimondi said he didn’t know. This was obviously not the truth, since Cummings and Raimondi have known each other for many, many years.
Why try to keep a secret from a stranger in the room?
Raimondi bid until reaching a maximum bid of $290,000. The next bid was from Concept Capital’s representative who immediately bid $350,000 and purchased the medallion from Alex Alcindor, the defaulting buyer.
I later discovered that in a private deal after the auction, Raimondi bought the medallion from James Cummings of Concept Capital for $350,000, the same amount Cummings paid in public.
What was the purpose of these transactions?
Any reader, correct me if I’m wrong.
The only reason a lien holder would push the final price up to par value of the mortgage, rather than seeking to win at the lowest possible bid, is to avoid a publicly reported transfer at a lower price than that desired by the Big Taxi Cartel.
The State of the Boston Medallion Market in 2015
I’ve been following the medallion market for the past eighteen months. Just before Uber’s impact, medallion prices peaked in New York, Chicago and Boston in spring 2014. At the height of the Boston medallion bubble from January 21, 2014 and May 29, 2014, 31 medallions sold for between $670,000 and $700,000.
At the height of the bubble on June 24, 2014, I published my post titled:
For 18 years, Mario Cuomo has been a board member at Medallion Financial (TAXI), financier of taxi medallions from New York, Chicago, Boston, Newark and Cambridge. There is a reason top tier banks avoid medallion loans.
An article on June 19 advises that the best way to bet on Uber’s success is to short TAXI
“…After peaking at $17.85 in November, Medallion shares lost about 1/3 of their value, a decline that has coincided with a rush of short sellers betting that the stock will keep falling…”
Why would these legendary Democrats dirty their hands in this industry?
Gentlemen: please stop lobbying for taxi medallion owners.
The number of sales dropped after July 2014, with prices dropping soon after. There was only one sale in August 2014 at $630,000.
The only sale in September at $500,000 was down 21% just 33 days later. The only sale in October was at $561,000.
The Boston market then froze between October 7, 2014 and the January 21, 2015 auction. No transfers were recorded for over three months.
Seven months later, on our January 15, 2015 report, Medallions Face Obsolescence, we went on record that Boston medallion street asking prices had fallen months before to $350,000 and were failing to attract buyers.
The market appeared to thaw with the unusual auction on January 21, 2015. During the interim, Uber won a public relations victory at Boston ride sharing hearings over New Year’s.
In addition, new Registry of Motor Vehicle (RMV) state-wide regulations issued in December 2014 and effective on January 16, 2015 permitted drivers who work with licensed ride sharing companies to use private vehicles to drive paying passengers.
Uber rightfully hailed this legalization as a victory.
Was it rational to have an auction ONLY ONE WEEK LATER that signaled a thaw in the Boston medallion market?
The market thawed if and only if, the dance between Raimondi and Cummings was a dance at arm’s length on January 21, 2015.
The Second Auction of the Year on February 4, 2015
The Big Taxi Cartel set up shop again.
The auction was held again at the law offices of Big Taxi attorney Peter Kline of Kline and Gordon
Michael Saperstein of PESCO was again the auctioneer.
Robert Raimondi was there again, but as an observer not a participant.
The small conference room held about eight — many spoke Russian to each other — again.
As during the January auction, Alec Raberov, Medallion Financial’s regional manager for Boston attended as just an observer not a participant and didn’t say much.
When Raberov walked in, he gave me a wave with a boisterous “Hi Gordon”. He still thought I was just a random Uber driver. This changed at the next auction later in the spring. In between, he found out I was a vigorous and relentlessly tenacious Medallion critic. He stopped making eye contact during the third auction I attended.
The advertisement for the February 4, 2015 auction listed three medallions for sale. However, medallion #724 was “withdrawn” before the auction. Maurice Dauphin is listed as the owner in public records. I have not identified the secured parties yet.
Note medallion owners almost always hold each or a handful of medallions in different corporations for insurance purposes. At a minimum Maurice Dauphin owns the four companies below.
- Dauphin Cab Inc.
- Dauphin Transportation, Inc.
- Doctor Cab, Inc.
- Allston Livery, Inc.
The other two for sale, medallion #869 and medallion #1595 were both owned by Remy Joseph, originally from Haiti.
Jocelyn Augustin, also originally from Haiti, said Remy Joseph was planning on attending, however was not there. Augustin was surprised he wasn’t there and said to me he didn’t know why. It certainly seemed unusual for the owner of two medallions saddled with $800,000 in debt didn’t attend his own auction. Maybe the result was a foregone conclusion.
The lender for both #869 and #1595 was Erminio “Eddie” Gargano a leading hard money lender at the same level as James Cummings and Eddie Tutunjian.
Gargano was immediately suspicious of why I was attending as an observer. Although he appeared to be known by most in the room, he was reluctant to give his name to me or two owner operators who didn’t know him. Augustin told me after the auction he was an owner operator with his one medallion financed by Gargano. Abdollah “Abbie” Hosseini, originally from Tabriz, Iran attended and said he also had a medallion financed by Gargano.
The auction for medallion #1595 began and ended very quickly. Michael Saperstein opened the bidding at $300,000. The first and only bidder, bid $325,000.
Gargano then bid $350,000. The auction for #1595 was over. Gargano bought the medallion, presumably for the outstanding amount owed to him by Remy Joseph.
Michael Saperstein again opened the bidding at $300,000 for medallion #869. The first and only bidder I’ll call “Mikael” due to the ongoing federal investigation of Eddie Tutunjian for the reason below. Mikael matched the $300,000.
Gargano immediately bid $350,000. These two were the only bidders. The bids went up rapidly by $10,000 increments. Mikael and Gargano obviously knew each other for many years. The two of them joked around as they bid against each other. Mikael got up to $420,000. Then Gargano bid $425,000. Along with most in the room, they both laughed as Gargano bought #869 for $425,000. Mikael didn’t seem to care that medallion #1595 just sold for $350,000 minutes before.
In the conference room after the auction, Raimondi recounted how his grandfather used to hang around in Dorchester with Saperstein’s father.
This is one small community of guys who’ve known each other for decades!
The group started telling Eddie Tutunjian stories. Raimondi said at the January auction “Eddie was worried”. At this auction he said, “Eddie’s really been running around doing his thing”. I have no idea what that means.
Mikael said despite the federal investigation, Eddie just keeps working like nothing’s happened. Mikael then said:
You know when Eddie first came to this country he had nothing…nothing. You know who first lent him money? I did. I’m the first one who lent him money.”
In the hallway afterwards one observer said he would buy a medallion for $200,000 all cash. I asked him why he wouldn’t finance the purchase. He said that absolutely no lenders were willing to give loans, so the market was completely frozen.
After learning about James Cummings in the January auction I asked Abbie Hosseini about him. He described Cummings “as a wild man who doesn’t play by the rules…. he lends money at 15% at least”.
Hosseini, Jocelyn Augustin, Radouane Bendriss originally from Morocco and I talked together about Uber’s impact. Hosseini said he was now driving for Uber to make ends meet!
With increasing Uber competition, Augustin said picking up street hails and waiting at airport/hotel cab stands wasn’t enough to justify paying anything for a medallion. He said that the airport is now a two-hour wait.
Augustin said not long ago between midnight and 2 am when Boston’s clubs let out, he’d do back to back rides from downtown to where the passengers lived as long as he wanted to. However now that Uber was all over downtown, he actually has to wait to get fares even on Friday and Saturday nights at 2 am. Bendriss agreed with everything Augustin said about the impact of Uber on owner operators. They both thought the pain would only get worse.
Jocelyn Augustin bought his medallion in 1989. However, like many drivers, he was persuaded by institutional and hard money lenders to refinance for higher balances multiple times. So he still owed Gargano a whole lot of principal— even after paying out a whole lot of interest.
Augustin was extremely angry and despondent about his ability to make his medallion loan payments as his passenger income has rapidly dropped down. He had no idea how to break the crushing cycle.
Augustin said no one could outbid Gargano when he’s the lender, since Gargano always bids a higher price than anyone else wanted to pay. Augustin said Gargano shouldn’t be able to bid on the medallion when he’s the lender.
Why are Gargano and Raimondi consistently outbidding others?
Why aren’t they bottom fishing, driving prices down?
Why are Gargano and Raimondi buying at all?
After the auction, Raimondi said: “I’d sell as many as anybody would buy”.
This didn’t make any sense. He just “bought” a medallion two weeks before!!
Unusual auctions continued into the spring with Medallion Financial’s transactions with the Theodat family. More on that to come.
Does Raimondi want to sell his medallions or double down and buy more?
If he wants to sell, then what was the purpose of the January “purchase”?
What are Raimondi, Gargano, Cummings and Medallion Financial doing while making these unusual transactions in 2015?