Charles Laffiteau's Bigger Picture
2018-06-15 13:05:23 -


  I found it interesting that a week after the FBI raid on the home and offices of Michael Cohen, US President Donald Trump’s personal lawyer, a business associate of Cohen’s in the New York taxi cab business – Evgeny Friedman, the so-called ‘Taxi King’ – agreed to a new plea deal that did not include prison time. 
  In March, two months before the raid on Cohen’s offices, the New York State Attorney General had only offered Friedman a plea deal that included two to four years in prison and restitution of $1m in return for his pleading guilty to stealing over $5m of Metropolitan Transit Authority (MTA) tax surcharges.
  Russian-American Friedman was a practicing attorney who took over his father’s taxi business and then set up limited liability corporations (LLCs) to either buy or lease other taxi medallions. For many years, owning a taxi medallion (equivalent to a taxi licence in Ireland) in New York City and Chicago was a very lucrative business, thanks to the rising demand for cab rides and limited supply of medallions. So Cohen and his then business partner Simon Garber also used LLCs to acquire medallions in those cities. However, thanks to ride-sharing services like Uber and Lyft, the value of a taxi medallion has plunged from $1m each in 2013 to less than $200,000 today.
  When the value of taxi medallions was rising between 1970 and 2013, lots of non-drivers like Cohen invested in medallions and leased them to people who wanted to drive a taxi for a living. Cohen and Friedman set up management agencies that would lease a medallion to three different drivers each day, so that the medallion was in use for 24 hours a day. Cohen and Friedman also used their medallions as collateral for millions of dollars in loans. But after Uber entered the market, the number of vehicles for hire in New York City has more than doubled from 50,000 in 2011 to over 130,000 now. As a result, the earnings of taxi drivers have also dropped by almost 40 per cent over the past seven years.
  Friedman’s troubles began in 2013 when he reached a settlement with the New York State Attorney for overcharging his drivers. He agreed to pay $750,000 in restitution and another $500,000 in fines, but was back in court two years later, accused of continuing to overcharge his drivers and failing to live up to the terms of the first agreement. Friedman settled that suit and paid an additional $250,000 fine in April 2016. Three months later, Friedman filed Chapter 11 bankruptcy for companies that owned 90 of his 900 medallions in order to prevent Citibank from foreclosing on them. However, Friedman eventually settled with Citibank by surrendering 46 of his medallions to the bank.
  Friedman was back in the crosshairs of the New York state prosecutors by the middle of last year, charged with four counts of criminal tax fraud and one count of grand larceny. The charges centred on the schemes Friedman and his chief financial officer used to avoid paying over $5m in taxes to the MTA. Each of the five felony counts also carried a sentence of from eight to 25 years in jail, so a plea deal that included two to six years would have been considered a pretty good offer, especially considering Friedman’s recent legal problems.
  The fact that New York offered Friedman a new deal with no jail time just a week after Cohen’s FBI raid demonstrates the level of co-operation that currently exists between state and federal prosecutors. But the new agreement also calls for the ‘Taxi King’ to assist government prosecutors in state and federal investigations. Since the Manhattan federal attorney’s elite public corruption unit is leading the investigation into Cohen’s business dealings, Trump’s advisors are now actually more worried about this investigation than Mueller’s Russia probe.
  Although Cohen claims Friedman only managed his taxi cab medallions and that he had no other business dealings with Cohen, New York’s federal prosecutors would have never offered that sweetened plea deal to Friedman unless he had information that they could use against Cohen. We already know that Cohen owes more than $280,000 in unpaid taxes linked to his taxi medallions. What we don’t know is how much other information Friedman has about Cohen’s business dealings that either New York’s federal prosecutors or Mueller’s investigators could one day use to bring charges against Cohen.
  As regards President Trump’s campaign staffers and their business associates ties to Russia, we know that Dutch lawyer Alex van der Zwaan has pleaded guilty to lying to the FBI about his dealings with Rick Gates, Paul Manafort’s longtime business partner, and one of Manafort’s Ukrainian partners. Van der Zwaan’s testimony and other evidence was then used to pressure Rick Gates into agreeing to co-operate with Mueller’s investigation and enter into his own plea deal. Gates is important because he remained with the Trump campaign after Manafort left, and also knows about all of Manafort’s secrets.
  On the other hand, while George Papadopoulos doesn’t have anything approaching the kind of ‘insider’ information that Rick Gates possesses, he can attest to Michael Flynn and other Trump campaign aides’ interest in talking with the Russians about US-Russia relations both before and after the presidential election. Those staffers included Trump campaign co-chairman Sam Clovis, deputy communications director Bryan Lanza and chief political strategist Stephen Bannon. Flynn in turn can testify that he met with the Russian ambassador at the direction of Jared Kushner.
  Even though only four men have made plea deals so far, you can be sure more are coming.
Charles Laffiteau is a US Republican from Dallas, Texas pursuing a career in public service. He previously lectured on Contemporary US Business & Society at DCU from 2009-2011 and pursued a PhD in Public Policy and Political Economy.



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