Uber is the “nastiest, most morally corrupt company ever”
Gene
Freidman’s got a new hairdo. For as long as the New York tabloids have been
taking photos of him, which is to say a while, Freidman has worn his hair in a
ponytail. It is, along with the Euro scarves and Bono sunglasses, something of
a trademark. Today, though, sitting in a courtroom in Lower Manhattan, he’s
opted for a close crop. “Just, you know, this new beginning of getting f---ing
divorced, you know?” he explains. “So I was like, f--- it, let me get a
haircut.”
A new
beginning would be nice. On this late June afternoon, Freidman, 44, is in New
York City criminal court to defend himself against charges that he harassed and
attempted to assault his soon-to-be-ex-wife, Sandra. There are also related
allegations concerning some forged signatures and a smashed watch. Oh, and his
taxicab empire is faltering.
Freidman
doesn’t seem overly stressed. He’s wearing a blue pinstripe suit and
monogrammed cuffs. He gives off a whiff of cigarette. He denies the forgery
claim, the assault claim, and every other claim lobbed at him today. “Listen,
listen, listen,” he says during a break in the proceedings. “I’m not worried
about it. If you read the papers, right, and you see what’s going on, I might
as well already be dead.”
According
to the city, the Taxi King controls 860 cabs (Freidman says he actually
operates more than 1,100). That’s more than anyone else in town. Factor in the
hundreds of vehicles he has in Chicago, New Orleans, and Philadelphia, and he’s
almost certainly the most powerful taxi mogul in the country. Freidman makes
money by leasing the cabs to drivers on a daily or weekly basis.
To own a
cab in New York, you need a medallion—a metal shield displayed on the vehicle’s
hood—and there are a fixed number issued by the New York City Taxi &
Limousine Commission (TLC). Until very recently, medallions were a good thing
to have a lot of. In 1947, you could buy one for $2,500. In 2013, after a
half-century of steady appreciation, including a near-exponential period in the
2000s, they were going for $1.32 million.
Then came
Uber. Since the arrival of the car-by-app service, valued at about $50 billion,
taxi ridership is down, daily receipts have declined, and drivers are idling—or
going to work for Uber. Add it up, and desperate medallion sellers are trying
to fob off their little tin ornaments for as little as $650,000.
This has
had a profound effect on Freidman, whose net worth appears to be in free fall.
In March, Citibank moved to foreclose on 90 of his medallions, claiming it was
owed $31.5 million in unpaid loans. Later, he settled with Citibank on half of
the medallions, but 22 of Freidman’s companies owning the other half filed for
bankruptcy. (Freidman, like many taxi owners, stashes his medallions in two- or
three-taxi “mini-fleet” corporations. He likes to give them colorful names:
Vodka Taxi, Butterfly Taxi, Pinot Noir Taxi, and many others.) By early July, a
judge was ordering him to fork over $8 million in delinquent payments to
Capital One.
Then four
of his companies landed on New York state’s tax deadbeat list, not far behind
convicted cigarette smuggler and No. 1 delinquent Salah Morshed. Finally, in
August, Freidman reversed course and admitted to pushing his estranged
25-year-old wife into a wall. He avoided jail time but was ordered to have no
contact with Sandra for two years.
He’s a
man under siege, he says. “What was that movie with Jim Carrey where he was
trapped in that world?” he asks, referring to The Truman Show. “There’s a point
where you say, you know what, they ripped a hole through the window, my little
dog caught a bullet, like f--- you. I’m gonna pick up guns, and I’m gonna
defend myself.”
There are
13,587 yellow cabs in New York City. That’s not many more than there were when
the modern taxi industry was born almost 80 years ago. During the Depression,
thousands of jobless men became taxi drivers. As a result, the number of cabs
ballooned, and suddenly there weren’t enough passengers to scoop up. The
industry became as hopelessly unprofitable as any other. So in 1937 the city
created the medallion system that remains in place today. Until 1996, the
number of medallions in circulation remained exactly 11,787.
Because
the system artificially depressed supply, taxi drivers stayed busy and
medallions became more valuable. Which explains why cab ownership often equaled
middle-class stability for men like Naum Freidman. In the mid-1970s, Freidman
moved his wife and 5-year-old son from the Soviet Union to Jackson Heights,
Queens, eventually becoming a cab driver and presiding over a 55-car garage.
“For $25, you could get a hack license without going to school,” says Gene,
relating his father’s story. “Before that, there was a movie theater; that was
the first job he got, cleaning toilets. I mean, you know, it’s almost from a
book.”
At 8 a.m.
on the Fourth of July, we meet at Harry Cipriani in the Sherry-Netherland, a
stately Central Park hotel where rooms go for $450 a night. The spot is
Freidman’s choice. He eats a monochromatic breakfast of cottage cheese and
oatmeal. We’re the only customers here. The contrast between his lifestyle and
his father’s is not lost on him.
Whatever
threats the green cab or the Taxi of Tomorrow pose to Freidman, they pale
beside Uber. The service made its debut in New York in 2011, but it wasn’t
until 2014 that Uber really began to poach yellow cab customers by lowering
prices and expanding its fleet, from 7,000 to 16,000. (That number has since
grown to more than 20,000.) Freidman, though, swears he welcomes the competitive
pressure. “We live in a world of survival and preservation, right?” he says,
rattling off his own app-based aspirations. “Uber’s not a problem. Uber is
pushing me, right? How can I get you someplace cheaper, quicker, more
efficiently?”
Still, not
long after Citibank sued, Freidman began agitating for a bailout, arguing that
if his medallions teetered, so would the rest of New York’s. Creditors seemed
eager for a bailout, too. In April, he convened a nerve-soothing session for
about 100 financiers and taxi industry pooh-bahs over beef and salmon at the
New York Athletic Club. Ydanis Rodríguez, a city councilman, attended. “We
should explore the possibility to pay restitution for those who value in that
investment,” Rodríguez said at the meeting. “That’s what I have expressed to
the mayor.”
Bill de
Blasio, who replaced Bloomberg in 2014, was poised to be Big Taxi’s champion.
Like a handful of other cab moguls, Freidman was one of de Blasio’s major
bundlers, raising $50,000 for his 2013 mayoral campaign. (Overall, de Blasio
netted roughly 10 times that from the taxi industry.) De Blasio, in turn,
emerged as a fierce opponent of the green cabs and the Taxi of Tomorrow.
Considering green cabs were designed to serve the poorer neighborhoods de Blasio
purported to represent, his opposition seemed hypocritical to many. (De Blasio
didn’t respond to a request for comment for this article.)
Not long
after the luncheon at the Athletic Club, Rodríguez introduced a de
Blasio-backed bill to cap the number of Uber vehicles on the road. In theory,
the limit was meant to allow for a controlled environmental impact study about
Uber’s effect on congestion. It also appeared to serve another purpose. “I
believe New York City has to study why the prices of the medallions have gone
down in the last couple years,” Rodríguez later told me. “We need to be sure
the value of the medallions didn’t go down because a particular sector of the
industry came without following the same rules and regulations.”
When I
asked Bradley Tusk, an Uber consultant (and Bloomberg’s 2009 mayoral campaign
manager), about the bill in early July, he all but conceded defeat. “The mayor,
the speaker, the chairman of the committee,” he said, rattling off the cap’s
backers. “I think it probably will pass.”
But it
didn’t. Uber’s July lobbying and advertising blitz was exhaustive—the company
spent an estimated $3 million on media buys—and the administration eventually
settled for a fairly toothless compromise in which Uber would send the city a
bunch of data and succumb to a study. “We met with council members and we met
with leaders,” says Ethan Gerber, who with Freidman runs a trade group called
the Greater New York Taxi Association. “But you know, wherever you go, there
are five lobbying firms who have been there before you.”
Matt
Wing, an Uber spokesman who once worked for de Blasio, says it’s hard to take
these charges seriously. “Gene Freidman and millionaire medallion owners gave
politicians campaign contributions to influence government policies. When the
cap was put forward by the taxi industry and then picked up by the same
politicians, we were compelled to respond,” he says.
The day
the cap was defeated, 22 of Freidman’s companies, owning 46 medallions, filed
for bankruptcy. It was, he said, “a power move.”
“Every day that I wake up, you know, I’m like, this is great,” Freidman marvels. “You know, I live on Park Avenue, got a bunch of, like, Ferraris that I drive. I have a house in the south of France. I can have breakfast, like, at Cipriani. And it’s like, you know, pinch me. Is this real? I’m fresh off the boat!”
Freidman attended the Bronx High School of Science and Skidmore College, where he says he partied a lot and “got kicked out for a semester for overexcessive parking tickets.” He then went to the Cardozo School of Law at Yeshiva University. Post-law degree, Freidman worked for Sam Zell as a financier in Yeltsin-era Russia, eventually returning home in 1996, taking control of his father’s fleet and applying his newfound investment savvy to the “retarded”—his word—taxi industry.
Freidman began buying up his many medallions amid frequent industry clashes with taxi bogeyman Rudolph Giuliani. But it was Giuliani’s successor, Mayor Michael Bloomberg, who truly began to threaten yellow cab hegemony. (Bloomberg LP, which owns Bloomberg Businessweek, is run by Mike Bloomberg. The company also is an investor in the venture capital firm Andreessen Horowitz, which invests in the ride-sharing service Lyft.)
Freidman’s first big fight with Bloomberg occurred in 2005, when he sued the city to introduce hybrid vehicles to the fleet. Later that year, the hybrids hit the road.
Seven years later came Bloomberg’s introduction of green cabs designed primarily to reach the underserved outer boroughs. Prohibited from picking up customers in Manhattan’s central business district, they were nonetheless despised by the yellow cab industry. Freidman sued, contending the new law allowing green cabs was unconstitutional. The courts ultimately disagreed.
Around the same time, the mayor announced a plan to replace the entire fleet with the Nissan “Taxi of Tomorrow.” Freidman again sued, claiming, among other things, that the Nissan was neither wheelchair-accessible nor a hybrid. “He’s pretty bold, and he’s got some guts to go against the Establishment,” says Matt Daus, TLC chairman from 2001 to 2010.
In May 2013, Freidman told the New York Post he had innocently approached the mayor during a New York Knicks game at Madison Square Garden to discuss the Taxi of Tomorrow, at which point, according to him, Bloomberg responded, “Come January 1st, when I’m out of office, I’m going to destroy your f---ing industry.” Through a spokeswoman, Rebecca Carriero, Bloomberg declined to comment on the alleged incident.
That year, Freidman sued the city again—and this time, Bloomberg personally—claiming that Bloomberg, in retaliation for Freidman’s opposition to Taxi of Tomorrow, “imposed one illegal directive after another upon the taxi industry in what became nothing short of a vendetta.” In litigation, Freidman contends the vendetta includes attorney general scrutiny and the Citibank foreclosure.
“I’m an immigrant to this country,” Freidman says, when I ask him about his beef with the former mayor. “I don’t get things shoved up my ass. This is why I came here. You know, I’m an attorney. There’s a thing called due process.” (In case the taxi thing falls through, Freidman is licensed to practice law in New York and New Jersey.) For good measure, he adds that Bloomberg has a “known popcorn addiction” and was eating a lot of it that night at the Garden. Bloomberg’s three-word response: “No argument there.”
All this helps explain why Freidman’s PR guy, Ronn Torossian, didn’t want his client to talk to Bloomberg Businessweek. “Gene did this against my advice as I am convinced ur gonna f--- him,” Torossian wrote in an e-mail from Freidman’s second home, in Saint-Jean-Cap-Ferrat, along the French Riviera. Freidman and Torossian later stopped working together, but they say they’re still friends.
Whatever threats the green cab or the Taxi of Tomorrow pose to Freidman, they pale beside Uber. The service made its debut in New York in 2011, but it wasn’t until 2014 that Uber really began to poach yellow cab customers by lowering prices and expanding its fleet, from 7,000 to 16,000. (That number has since grown to more than 20,000.) Freidman, though, swears he welcomes the competitive pressure. “We live in a world of survival and preservation, right?” he says, rattling off his own app-based aspirations. “Uber’s not a problem. Uber is pushing me, right? How can I get you someplace cheaper, quicker, more efficiently?”
Still, not long after Citibank sued, Freidman began agitating for a bailout, arguing that if his medallions teetered, so would the rest of New York’s. Creditors seemed eager for a bailout, too. In April, he convened a nerve-soothing session for about 100 financiers and taxi industry pooh-bahs over beef and salmon at the New York Athletic Club. Ydanis Rodríguez, a city councilman, attended. “We should explore the possibility to pay restitution for those who value in that investment,” Rodríguez said at the meeting. “That’s what I have expressed to the mayor.”
Bill de Blasio, who replaced Bloomberg in 2014, was poised to be Big Taxi’s champion. Like a handful of other cab moguls, Freidman was one of de Blasio’s major bundlers, raising $50,000 for his 2013 mayoral campaign. (Overall, de Blasio netted roughly 10 times that from the taxi industry.) De Blasio, in turn, emerged as a fierce opponent of the green cabs and the Taxi of Tomorrow. Considering green cabs were designed to serve the poorer neighborhoods de Blasio purported to represent, his opposition seemed hypocritical to many. (De Blasio didn’t respond to a request for comment for this article.)
Not long after the luncheon at the Athletic Club, Rodríguez introduced a de Blasio-backed bill to cap the number of Uber vehicles on the road. In theory, the limit was meant to allow for a controlled environmental impact study about Uber’s effect on congestion. It also appeared to serve another purpose. “I believe New York City has to study why the prices of the medallions have gone down in the last couple years,” Rodríguez later told me. “We need to be sure the value of the medallions didn’t go down because a particular sector of the industry came without following the same rules and regulations.”
When I asked Bradley Tusk, an Uber consultant (and Bloomberg’s 2009 mayoral campaign manager), about the bill in early July, he all but conceded defeat. “The mayor, the speaker, the chairman of the committee,” he said, rattling off the cap’s backers. “I think it probably will pass.”
But it didn’t. Uber’s July lobbying and advertising blitz was exhaustive—the company spent an estimated $3 million on media buys—and the administration eventually settled for a fairly toothless compromise in which Uber would send the city a bunch of data and succumb to a study. “We met with council members and we met with leaders,” says Ethan Gerber, who with Freidman runs a trade group called the Greater New York Taxi Association. “But you know, wherever you go, there are five lobbying firms who have been there before you.”
Matt Wing, an Uber spokesman who once worked for de Blasio, says it’s hard to take these charges seriously. “Gene Freidman and millionaire medallion owners gave politicians campaign contributions to influence government policies. When the cap was put forward by the taxi industry and then picked up by the same politicians, we were compelled to respond,” he says.
The day the cap was defeated, 22 of Freidman’s companies, owning 46 medallions, filed for bankruptcy. It was, he said, “a power move.”
After breakfast, Freidman walks two blocks east to his temporary digs at Trump Park Avenue on 59th Street. (Sandra is occupying the $4.8 million master residence six blocks north.) After he retrieves a Chihuahua named Harry from upstairs—he signs his e-mails “Yes I Am a Dog Lover” or “adopt-a-pet.com”—the plan is to hop into his Ferrari and zip over to one of his several garages in Queens. Not that he wants that written: “Honestly, I would love the piece not to be about ‘We had breakfast at Cipriani, then we walked over to his Park Avenue apartment, then we got into his Ferrari.’ ”
Are Freidman’s business troubles explained by disruption of the yellow cab industry? Uber’s upending of the taxi market is the single biggest factor that explains the drop in ridership and medallion values, as well as the rise in frozen credit and loan delinquencies. But almost every taxi industry player I’ve spoken to has been intent on distinguishing Freidman from the rest of the medallion owners. “He is 100 percent not representative,” says Tweeps Phillips, the executive director of another trade group, the Committee for Taxi Safety. “Gene is an issue all unto himself. His issues are his making.”
What they’re getting at is this: If Uber is chiefly responsible for driving down the price of taxi medallions, Freidman played a big role in driving it up in the first place. Allow him to explain his strategy: “I’d go to an auction, I’d run up the price of a medallion, then I’d run to my bankers and say, ‘Look how high the medallions priced! Let me borrow against my portfolio.’ And they let me do that.”
Freidman says his father is the kind of fellow who believes “your houses and your cars have to be paid off.” His philosophy has been the opposite. According to the Citibank bankruptcy filing, Freidman’s companies owe roughly $750,000 on each Citibank medallion. That’s fine if you’re regularly outperforming the country’s major stock indexes, as medallions had been for decades. It’s less ideal when medallion prices drop to around, say, $750,000.
There are parallels between the medallion bubble and the housing bubble of the mid-2000s: way-easy credit, credulous borrowing, everybody in debt. Freidman, in asking for a bailout from the city, even compared himself to too-big-to-fail American International Group. But he’ll take the comparison only so far. Ask him about the lawsuits and the missed payments, and he’ll tell you Citibank, Uber, and Capital One are in bed together. (He just sued Capital One, citing a credit card promotion it struck with Uber.) The self-made Freidman, by contrast, is forever outer-borough, forever scrappy.
“Maybe this is the wrong visual, this is where Ronn is kicking me under the table,” he says, before pressing on with his second firearm metaphor of the day. (Torossian, alas, is not around.) “Like, there’s a guy in Appalachia, no shirt, hasn’t had a shirt all winter, right? He’s got a mullet. A mullet. A mullet. Right? He’s married to two of his first cousins, right? But he’s got a gun in his hands. And he’s born with a gun in his hands. I’m that guy.”
The underdog narrative, however, clashes not only with Freidman’s overleveraged market position but also with the iffy relationship he has with his own drivers. “He’s definitely been the worst player,” says Bhairavi Desai, head of the New York Taxi Workers Alliance. “He was irresponsible with the drivers, and he was fiscally irresponsible with the medallion management.” In 2013, Freidman settled a lawsuit filed by New York state in which he agreed to pay back his drivers $750,000 in overcharges. This summer, Attorney General Eric Schneiderman sued him again, claiming Freidman hadn’t fully compensated his drivers yet. (About the first Schneiderman lawsuit, Freidman says he never admitted wrongdoing. About the second, he says it was a matter of not properly entering numbers into a spreadsheet.)
The garages in Queens aren’t scoring a ton of venture money these days. But the bulk of cabs aren’t mom and pop operations, either. Fifty-eight percent of New York City’s cabs are owned by corporate entities such as Freidman’s. Just a third are owned by the people who drive them. As a result, most taxi drivers and Uber drivers find themselves in the same boat—working as independent contractors, logging brutal hours.
The irony, Desai says, is that between labor disputes and contempt for municipal regulation, Freidman isn’t so different from his rival, Uber Chief Executive Officer Travis Kalanick. “They’re very similar,” she says. “That’s the story you should write.”
Dead taxi meters in Freidman’s Long Island City garage.
If the consensus is that Freidman is a phenomenon unto himself and not necessarily a harbinger of industry doom, might the yellow cab survive its battle with Uber? Ex-TLC Chairman Daus is bullish. “To the extent that the media is reporting so much about him,” Daus says, “you could argue that the way he’s perceived … does have an impact.” Skittish bankers read the paper, liquidity dries up, and taxicab Armageddon becomes a self-fulfilling prophecy.
Daus does concede some grim statistics. From June 2013 to June 2015, monthly New York City Uber ridership increased tenfold, to 3.5 million. Over the same period, monthly taxi pickups dipped from 14 million to 12 million. Still, Daus says, average tips and fares are up. More significantly, New York City medallion transactions over the last year have taken place mostly among friends and family members, rather than on the open market. “This is the primary reason for the reported price decline, and it is artificial,” Daus wrote in the April issue of Taxi Insider.
The Taxi King, for his part, can be a little schizoid when it comes to apocalypse talk. On the one hand, Kalanick is his “best friend,” his silent partner in the relentless pursuit of innovation. On the other, Uber is the “nastiest, most morally corrupt company ever.” One moment, Freidman wants a bailout; the next, he’s articulating a convincing case that Uber’s dominance isn’t guaranteed, either. “I make money,” he points out. “They lose money.” (According to Bloomberg News, Uber is generating an operating loss of $470 million, vs. revenue of $415 million. “These are substantially old numbers that do not reflect business activities today,” says Uber’s Wing, declining to provide other numbers.) Medallions may be falling in value, but they’re still generating steady income for their owners.
After 30 minutes or so of traffic-free Independence Day driving—first to his Manhattan offices, not far from Uber’s new Hudson Yards headquarters, then to Queens—we pull up to Freidman’s main garage. Observed ephemera: a framed Shaq jersey, a Larry Johnson bobblehead, and a snow globe with a middle finger in it.
After counting a bunch of cash, Freidman settles into a chair and concedes that Uber has some worrisome advantages over the yellow cab: They’re allowed to hike fares at will and aren’t subject to wheelchair accessibility rules. “I stopped going to City Council,” he sighs. “They have made themselves irrelevant.” Freidman says he’s working on bringing an e-hail app to his New York cabs, but so far it’s a rival taxi mogul who’s gotten there first.
And then there’s the matter of personality, which he’s working on as well. “If anything is wrong, it’s the fact that I need to cool it,” he says. “I can’t be such an arrogant prick.”
If the consensus is that Freidman is a phenomenon unto himself and not necessarily a harbinger of industry doom, might the yellow cab survive its battle with Uber? Ex-TLC Chairman Daus is bullish. “To the extent that the media is reporting so much about him,” Daus says, “you could argue that the way he’s perceived … does have an impact.” Skittish bankers read the paper, liquidity dries up, and taxicab Armageddon becomes a self-fulfilling prophecy.
Daus does concede some grim statistics. From June 2013 to June 2015, monthly New York City Uber ridership increased tenfold, to 3.5 million. Over the same period, monthly taxi pickups dipped from 14 million to 12 million. Still, Daus says, average tips and fares are up. More significantly, New York City medallion transactions over the last year have taken place mostly among friends and family members, rather than on the open market. “This is the primary reason for the reported price decline, and it is artificial,” Daus wrote in the April issue of Taxi Insider.
The Taxi King, for his part, can be a little schizoid when it comes to apocalypse talk. On the one hand, Kalanick is his “best friend,” his silent partner in the relentless pursuit of innovation. On the other, Uber is the “nastiest, most morally corrupt company ever.” One moment, Freidman wants a bailout; the next, he’s articulating a convincing case that Uber’s dominance isn’t guaranteed, either. “I make money,” he points out. “They lose money.” (According to Bloomberg News, Uber is generating an operating loss of $470 million, vs. revenue of $415 million. “These are substantially old numbers that do not reflect business activities today,” says Uber’s Wing, declining to provide other numbers.) Medallions may be falling in value, but they’re still generating steady income for their owners.
After 30 minutes or so of traffic-free Independence Day driving—first to his Manhattan offices, not far from Uber’s new Hudson Yards headquarters, then to Queens—we pull up to Freidman’s main garage. Observed ephemera: a framed Shaq jersey, a Larry Johnson bobblehead, and a snow globe with a middle finger in it.
After counting a bunch of cash, Freidman settles into a chair and concedes that Uber has some worrisome advantages over the yellow cab: They’re allowed to hike fares at will and aren’t subject to wheelchair accessibility rules. “I stopped going to City Council,” he sighs. “They have made themselves irrelevant.” Freidman says he’s working on bringing an e-hail app to his New York cabs, but so far it’s a rival taxi mogul who’s gotten there first.
And then there’s the matter of personality, which he’s working on as well. “If anything is wrong, it’s the fact that I need to cool it,” he says. “I can’t be such an arrogant prick.”
