New York Attorney General Barbara D. Underwood and Acting Commissioner of Taxation and Finance Nonie Manion have announced that New York’s so-called “Taxi King” has pleaded guilty to tax fraud. Evgeny “Gene” Freidman, a Russian immigrant, pleaded guilty to a single count of criminal tax fraud, agreeing that he failed to remit $5 million in MTA surcharge taxes between 2012 and 2015.
“Today, the ‘Taxi King’ admitted that he built his empire by stealing from New Yorkers,” said Attorney General Underwood. “Freidman pocketed money that should have provided much-needed investment in our transit system—and he’ll now have to pay back every cent. Our office will continue to hold accountable those who cheat the system.”
In 2017, the Attorney General’s office filed an indictment charging Freidman and his codefendant and reported business partner, Andreea Dumitru, with four counts of criminal tax fraud in the first degree and one count of grand larceny in the first degree.
You can read the original indictment, which downloads as a pdf, here.
Prior to the indictment, the tax dispute involving Freidman had been characterized as a civil dispute. That’s not unusual in the tax world. When taxes may be owed, a taxpayer generally receives an assessment or request for an exam. Sometimes the inquiry grows, but remains civil; the move to criminal charges typically occurs when conduct is considered willful or if the amount involved represents a significant underpayment.
According to court documents, Freidman’s taxi company, TaxiclubManagement, Inc., managed four taxicab medallion management agencies in the state of New York. As a result of his influence in the taxi business, Freidman also owned or managed a fleet of over 260 medallion taxicabs and leased hundreds of additional medallions from other owners.
Some of those medallions were owned by Michael Cohen, President Trump’s personal attorney. According to the New York Times, Freidman was “Cohen’s partner in the taxi business for years.” The pair was so close that Cohen reportedly managed Freidman’s cabs after city regulators barred the Taxi King from managing his taxi medallions last year.
The purpose of a taxi medallion is to regulate—and in many cases, limit–the number of taxis allowed to operate inside a particular border. The name refers to the metal plate that’s physically affixed to cabs, and in some areas, like New York and Philadelphia, taxis may not operate without them. That makes them extremely valuable. Depending on the location, a single medallion could be worth hundreds of thousands of dollars.
As part of the cost of a taxi ride, most passengers pay a 50 cent state tax, called the MTA tax. The tax is automatically included with the fare. As with sales tax, those who are in charge of collecting the tax are also responsible for reporting and delivering the tax to the proper authorities.
The indictment alleged that instead of paying the tax over to the state for rides taken in cabs that Freidman managed, he and Dumitru pocketed the money. To cover their actions, the pair allegedly filed bogus returns or failed to file tax returns, and underreported the number of taxi rides to the state. The state claimed that by deceiving the tax authorities, Freidman and Dumitru were able to sock away nearly $5 million that had been collected from passengers.
As part of his plea, Freidman admitted that he received MTA taxes from passengers and intentionally failed to pay those taxes to the state. Within 30 days of his plea, Freidman must pay restitution in the amount of $500,000. Prior to sentencing, he must pay an additional $500,000 restitution and agree to cover all MTA tax liabilities owed from January 1, 2012, through December 31, 2015.
Under the terms of the agreement, Freidman will not go to prison so long as he pays what he owes and otherwise completes the terms of his plea. The Attorney General declared that his sentence will be adjourned, meaning that he will be on supervised release while he makes restitution. If Freidman satisfies the terms of the agreement, he will be sentenced to probation.
Some media outlets are reporting that the plea agreement requires Freidman to cooperate in an ongoing investigation, prompting allegations that Freidman may turn on Cohen. However, the Attorney General’s office has not confirmed any such requirement as part of the plea.
Freidman’s lawyer did not immediately respond to an email seeking comment.
The charges against Andreea Dumitru remain pending.