December 14, 2016
In the last few days I’ve begun organizing small medallion owners with the goal of presenting definitive proof to the Attorney General’s Office of predatory lending, securities fraud and banking regulatory violations involving the Boston taxi medallion industry. I’m working with Glenn Kaplan, Chief of the Insurance & Financial Services Division to schedule a meeting.
Many people not familiar with Boston are reading this letter, so I’m including links to give them insight into this struggle.
I’m asking owners to unify behind a Deferment Plan to cease and defer all your principal and interest payments through at least January 1, 2018 and to then negotiate as a united group with lenders to restructure or cancel all of your medallion debt.
I’m honestly overwhelmed with the task at hand now that I’ve ripped off this scab. I should have been more prepared, but I’m not.
I have a proposal into one of the most talented, progressive and union-friendly public affairs firms in the country, however I need your help now to create a united front that is disciplined and focused.
I also want to share with you that my colleague, Donna Blythe-Shaw will be helping to create success. Donna is the former organizer of the Boston Taxi Drivers Association (BTDA), a United Steelworkers (USW) affiliate. Donna and I have worked on the feasibility of creating a taxi driver coop in Boston.
I also discussed your situation with Senator Warren this past Sunday at a special service called Out of Many, One: An Interfaith Call for Dignity and Diligence. An overflow cheering crowd of 2,600 gathered at the Islamic Society of Boston Cultural Center in Roxbury to emphasize the importance of remaining united through adversity, rather than being driven apart by it.
Senator Warren is not only the leading advocate in the fight against predatory lenders. She goes after ALL enemies of economic justice whether or not they’re Republicans or Democrats.
This struggle against people stealing from hard-working Americans is not about being pro-capitalist or anti-capitalist. It must not be divided by party, ethnicity, religion or all of the other wedges used to divide us through November 2016.
Big Taxi fleet owners, lenders and their cronies have tried to divide Boston’s 30,000 for-hire drivers. Taxi, Uber and Lyft drivers can unite behind shared interests.
As was the case in the audience of 2,600 at the Out of Many, One rally, for-hire drivers include Haitian Catholics, Hindus from India, Somali and Pakistani Muslims, Russian Jews, evangelicals from Brazil and people of all the other backgrounds with whom we share our neighborhoods.
Across the country in 2017 we will fight bigotry in all its forms, yet transcend identity politics to unify behind the banner of economic justice.
Jeremiah Montgomery-Thompson, Regional Director for Senator Warren will support us by connecting with those in the Boston community most effective at working to achieve our victory. Among other successful roles Jeremiah was the campaign manager for Ayanna Pressley, re-elected in 2015 for her fourth term as an at-large Boston city councilor.
The Big Taxi Cartel has controlled the taxi industry for their own benefit, not for the benefit of the thousands of industry stakeholders. Often known as “the fleets”, Big Taxi medallion owners in Boston only include the 18 individuals who own 10 or more medallions. They are only 2% of all Boston medallion owners. In their public relations and lobbying efforts they’ve cleverly used you as a front to promote their own interests.
- 450 owner operators work 12 hours a day struggling behind the wheel to make medallion payments. Unless reversed, your New American Dream is dying.
- 250 owners of small taxi businesses with less than 10 medallions each operate under crippling negative cash flow. You are now effectively working for the Big Taxi lenders.
- 6,800 licensed shift drivers in Boston make less than a $15 living wage under horrible working conditions. They are your natural allies in the fight against Big Taxi.
Along with Greater Boston’s 20,000 Uber and Lyft drivers, for-hire drivers in Boston are 30,000 strong. Uber and Lyft drivers are not forced to pay for taxi medallions. However along with taxi drivers, all for-hire drivers will gain from a portable benefits program organized by a progressive national union.
Hackney supports the goals of Big Taxi. Although within the Boston Police Department, Hackney remains as much of a rogue division as when run by Mark Cohen, Eddie Tutunjian’s crony.
After the Globe Spotlight investigation in 2013 both men are being brought to justice. It’s very important to note that our current Police Commissioner William Evans has consistently been given false information by Hackney. With 3,000 employees, he manages the most progressive and effective police force of any major American city. Hackney is a small aberration in our excellent police force. I suspect Commissioner Evans would support wholesale reform of taxi regulation through an executive order from Mayor Walsh to immediately transfer responsibilities to the obviously more logical Transportation Department.
I’ve spent the past nine months forcing Hackney to provide me with the information necessary to prove predatory lending. This information is required to be publicly available, yet is concealed by Hackney for the benefit of Big Taxi medallion owners and lenders.
Daniel Koh, Mayor Walsh’s Chief of Staff, has been extremely helpful in breaking through the logjam at Hackney for my Freedom of Information requests and as always, has consistently been on the side of economic justice in this battle.
I’m writing to you to assist in this investigation by providing as much information as possible to the Attorney General and other state and federal agencies. Please contact me to talk or you can send me information using your name or anonymously using my mailing address below.
You know more than you might realize. If you’ve borrowed any money secured by medallions since January 1, 1996, it would be very helpful to have a record of your interaction with lenders over the entire time you’ve owned a medallion. Any information you have about dealings with lenders by any other medallion owners is also valuable even if just based on conversations. The Attorney General’s investigators will determine accuracy and relevance.
I realize a lot of what I’m writing about isn’t easy to understand. It’s actually taken me three years to unearth and understand what has happened. I will be happy to answer any questions you or someone you trust asks me.
The 18 Big Taxi fleet owners have already made enough money. They’re on their own. How they deal with their lenders is not your concern.
Some of you are among the 450 owner operators of Boston taxis who only own one medallion and drive your own taxi. Some of you are among the 250 owners of small taxi businesses.
However, all 700 of you owe millions of dollars you can never pay to publicly owned companies, privately held banks, credit unions and hard money lenders.
Due to Uber competition, you have no hope of ever paying back these massively underwater loans. Underwater because the amount you owe is so much higher than any price you could receive, if any, if you tried to sell.
In almost all cases you’ve given personal financial guarantees to lenders. Many of you have liquidated your savings accounts, drained your retirement nest eggs and mortgaged your homes at a 100% loan-to-value (LTV) ratio and beyond to make your payments. In cases where equity is available, lenders are increasingly attaching liens on your properties.
I can’t make promises, however, I’ve specifically asked the Attorney General’s Office to allow all of you to stop making your loan payments without retaliation from lenders until at least January 1, 2018 as the predatory lending investigation unfolds.
Honestly, this will be difficult to achieve, yet with enough of us making this demand, victory will be increasingly possible.
I’ve explained to the Attorney General’s Office and the media you are overwhelmingly foreign born people of color with homes in low income neighborhoods. Due to the imbalance in bargaining power, lenders can intimidate you into making crushing medallion payments even in cases in which post-Uber passenger income is less than your monthly debt service. Once again, if we unite together our bargaining power against lenders will surge.
I must be honest with you. Since August 21, 2013 I’ve given over 3,500 rides driving for Uber and Lyft. I’ve met many of you while testifying at hearings in Boston and Cambridge. I understand how strongly you feel about Uber. Yet although I remain an advocate, I also know how much you’ve been devastated by Uber’s destruction of the medallion taxi business.
I also recently secured my Boston Hackney Driver License #22344. I now advocate for all taxi, Uber, Lyft and drivers.
I’ve been working since August 2013 on Uber’s impact on the taxi medallion industry focused on New York, Chicago and Boston researching:
- Predatory lending to small medallion owners
- Bank fraud due to false reporting of loan asset values on balance sheets
- Securities fraud by publicly held companies also due to false asset values
- Provision of portable benefits to the 30,000 Uber, Lyft and taxi drivers of Greater Boston working with a leading, progressive union
Underwriting all refinanced and all newly originated loans since early 2015 has been based on inflationary appraisals of medallion values. Absence of publicly available information from Hackney is necessary to levitate these values. Hackney has also hidden the horrible health of the industry. As of February 2016, Boston taxi revenue has plunged 47% from pre-Uber levels. As of today, Hackney refuses to release passenger revenue and trip numbers to avoid proving the continuing and relentless drop in monthly revenue from March through November 2016.
Despite this precipitous drop in passenger revenue per medallion and artificially levitated medallion prices, lenders fail to use ability-to-pay as an underwriting guideline. They’ll just force you to pay.
Concealing medallion transfer prices by Hackney has allowed lenders to induce many of you to sign new loans and roll over existing loans for amounts as much as double the values established by arm’s length medallion transfers from one owner to another. An arm’s length transaction is a sale or other transfer in which the buyer and seller act independently and have no relationship to each other. This allows the market to ensure that both parties in the deal are acting in their own self-interest and are not subject to any pressure or duress from the other party. It also assures third parties there is no collusion between the buyer and seller.
During the 19 months between March 10, 2015 and September 30, 2016 there were a total of 35 transfers recorded by Hackney. The overwhelming majority were crony transfers. Only 4 transfers appear to be arm’s length:
The average value for the period was $154,000. At best, the value of Boston medallions has dropped by a minimum of 78% from the spring 2014 peak of $700,000 reached just before the bubble burst. Also keep in mind with your help, the cause of the bubble, who benefited and who was victimized will be determined by law enforcement.
Out of 1,825 total medallions, there were only these 4 arm’s length transfers over the six months ending September 30, 2016. Many, many of you would easily sell your medallions for $150,000 if you could. Yet the market clearing transfer price would be impossible to predict even if only ten medallions were offered at auction without a reserve price or a credit bid from a lender.
If you’ve been to auctions, you’ve seen almost all transfer deals made by credit bidding. Credit bidding is a lender’s right to control the sale of the medallion they hold as collateral for the loan. The lender is allowed to bid the amount of the total debt it is owed as a credit bid. If the lender doesn’t offer a credit bid, then in a distressed market, a cash bid from an arm’s length buyer would secure the ownership of the medallion at a much, much lower price.
I’ve been to several Boston medallion auctions over the past two years and I’ve watched this over and over again.
There are two reasons lenders have done so much credit bidding in Boston. One is to illegally use the transfer amount to inflate the value of the balance sheets they present to regulators and investors in the case of a public company.
The second reason is to trap you into taking on a loan to buy a new medallion or refinancing an existing medallion loan as your full principal balloon comes due after your three or five-year term ends. Hundreds of Boston medallion owners and thousands of medallion owners in New York and Chicago have been victims of these practices. At the peak value during the spring 2014 medallion bubble the combined market value of all 22,000 medallions in the three cities was $20 billion, with $7.5 billion in loans outstanding. As of September 30, 2016, at best the total value of all medallions has dropped from $20 billion to $6.6 billion.
As a whole the combined portfolio of medallion loans held by lenders is therefore underwater. Any attempt to sell even a fraction of medallions or loans held would completely crater the market. Like in real estate markets a decade ago, medallion lenders work together using the technique of extend-and-pretend.
Here is just one predatory lending example out of many. You might know the victims personally.
On July 14, 2016 Medallion #208 was sold to Watson Labatte (as Watsmaelle Taxi, Inc.) by Commerce Bank for $380,000. Labatte made a deposit of $1 which was refunded to him at closing. Commerce provided an interest only loan for $380,000 with a balloon payment for the full $380,000 due on June 14, 2019 with an interest rate of 3.25%. Over the three-year term, Labatte is obligated to pay a total of $37,000 for a loan made at a loan to value (LTV) ratio of 247% of the arm’s length value of $154,000.
Commerce owned the medallion due to a loan default by Jean O. Pharel and Marie Lucie Doricent, (as C & B Transport, Inc.), borrowers with a loan from Commerce made on March 6, 2013.
Commerce purchased the medallion from Pharel and Doricent with a credit bid at auction for the amount owed on the loan independent of any comparable arm’s length prices. The credit bid was made at auction well above a market price that would have been established through legitimate price discovery.
Commerce Bank wins in three ways that benefit themselves and other cronies who control the medallion market they collude with.
Commerce did their part to avoid a public foreclosure record in the list of transfer values legally required to be publicly disclosed by Hackney. They also avoided establishing a documented drop in prices of comparable assets requiring them to drastically “mark-to-market” the values of the medallion loan portfolios on their balance sheets.
Lying to financial regulators is against the law and immoral.
Commerce also did their part within the pocket-size syndicate of Boston medallion lenders because avoiding a documented drop in comparable prices allows them to trick borrowers into refinanced and new loans based on prices way, way above prices established in a free market without colluding lenders, auctioneers and attorneys.
Lying to borrowers is against the law and immoral.
I look forward to working with all of you to punish those responsible for stealing your money.
It will be very difficult, however I hope we can claw back some of the money stolen over the past twenty years and pay it back to those of you who are victims of these medallion lenders.
In solidarity, Gordon
70 Perry Street #2
Brookline, MA 02446