In the fall of 2006, Chicago held an auction to sell taxi medallions, the permits that let people own and operate cabs. Hundreds of bids poured in, including some offering to pay much more than expected. The city raised millions of dollars. Officials declared the sale a success.
But there was something strange about the auction: None of the winning bidders lived in Chicago.
Almost all of them lived hundreds of miles away, in New York.
Over the next decade, New York taxi industry leaders — fleet owners, brokers and financiers — steadily seized control of Chicago’s medallion market and squeezed it for huge profits. Using tactics honed in New York, they made millions of dollars, but they ultimately helped to leave the industry in tatters and the lives of immigrant drivers on the edge of ruin.
New Yorkers used a similar playbook in several cities across the United States: They inflated medallion prices, provided high-risk loans to buyers and collected interest and fees before the bubbles burst and the markets collapsed. Medallion prices rose sevenfold in some places, soaring to $700,000 in Boston, $550,000 in Philadelphia, $400,000 in Miami and $250,000 in San Francisco.
But the most ambitious expansion targeted Chicago, home of the nation’s second-largest cab industry, a New York Times investigation found. New Yorkers eventually bought almost half the city’s medallions, records show.
Some adopted an especially aggressive approach, according to documents and interviews. First, they purchased medallions at bargain rates and established big fleets of cabs. Then, they pumped up medallion prices. Finally, they sold their medallions to their drivers and to rival fleet operators just before the collapse.
The incursion created extraordinary wealth for a small number of New Yorkers. One New Yorker’s network of companies bought $30 million worth of Chicago medallions and later sold them for $185 million. He purchased eight homes, including a house in one of the most elite neighborhoods in the Hamptons, records show. Another who made millions in both cities opened a polo club near his 10-acre estate in New Jersey.
“They used us to get rich,” said Demetrios Manolitsis, 52, a Chicago cabdriver from Greece.
Mr. Manolitsis, who started driving in 1992 and owned an extra medallion as an investment, said New Yorkers in Chicago convinced him to borrow money to buy 15 more medallions at the height of the bubble, when prices were skyrocketing and the asset seemed invincible. He is now buried in debt and on the brink of losing everything.
“They came in, they juiced up the medallion, a superficial value. We took out their loans, and we were wiped out,” Mr. Manolitsis said.
The average price of a Chicago medallion rose to nearly $400,000 before prices began plummeting in 2013. They had been selling for less than $50,000 in 2006, records show.
As New Yorkers transformed the medallion market, and prices increased, hundreds of locals joined the rush. More than 770 Illinois residents bought at least one medallion in that time period, according to an analysis of city records by The Times. Many were immigrant cabdrivers who could not speak English fluently and signed loans they could not afford, lured by the promise of easy wealth and a secure future.
Since the bubble burst, more than 200 of them have filed for bankruptcy, as have many others who bought medallions earlier and refinanced their original loans while prices were inflated, The Times found.
Today, a Chicago taxi medallion is worth $30,000, or less, and many owners have given up. Forty percent of the city’s cabs are currently not in operation.
Unlike in New York, where regulations and the density of the city core have partially shielded yellow cabs from the effects of competition from ride-hailing companies, the taxi industries in Chicago and other cities have been devastated by Uber and Lyft. But industry veterans said the reckless practices would have led to a crisis regardless.
“In retrospect, it should’ve set off alarm bells,” Michael Negron, who was a policy adviser to former Mayor Rahm Emanuel, said of the New Yorkers entering Chicago. “Outside investors were coming in to upend the industry, and everybody kind of missed it.”
The Times reported earlier this year that some New York taxi industry leaders used similar methods over more than a decade to make massive profits in that city. Government officials worsened the problems by exempting lenders from regulations and running advertisements promoting medallions as “better than the stock market.”
New York medallion prices climbed above $1 million before the bubble burst in late 2014, setting off an industrywide crisis.
In response to The Times’s previous reporting on New York, federal prosecutors in Manhattan and the state attorney general’s office have launched investigations. The city has arrested a notorious debt collector, waived $10 million in fees owed by medallion owners and strengthened regulations. A task force is now discussing additional remedies.
To untangle the Chicago story, The Times interviewed more than 150 taxi industry veterans; examined thousands of corporate filings to identify the buyer in every medallion sale since 2001; created a database of more than 100 medallion loans; and hired a technology company to analyze court records to determine who has filed for bankruptcy.
The New Yorkers who went to Chicago, and elsewhere, said in interviews that they followed every city’s rules and were never accused of breaking any laws. They said that as New York medallion prices rose, it made sense to pursue new opportunities.
[Tactics used to seize control of Chicago’s taxi medallion market were honed in New York. Watch Brian M. Rosenthal investigate for “The Weekly,” The Times’s TV show, on FX and Hulu.]
“It is customary for people involved in a successful business to look for logical places to grow the business,” said Bernard Block, a Chicago lawyer who helped New York taxi leaders come to his city. “This was really a very logical and normal progression.”
Some of the industry leaders defended their practices everywhere, including in New York. They said no one inflated medallion prices or issued risky loans. They said medallion buyers understood what they were doing and benefited from rising prices for years. They argued the taxi industry crashed only because of ride-hailing.
Others said they expanded outside New York to escape reckless practices there. Several noted Chicago medallion prices never came close to New York prices, which they said proved there was no wrongdoing in Chicago.
Michael Levine, the New Yorker whose companies made at least $155 million from medallion sales in Chicago, said he bought medallions there because New York prices became grossly inflated. He said he profited because he made the smart decision to buy low and sell high.
“It was a good business opportunity,” he said. “That’s all.”
A chance meeting in Moscow
The migration to Chicago began, in part, with a chance meeting in Russia.
In August 2001, Symon Garber, a New York fleet owner originally from Ukraine, was on vacation in Moscow when a friend introduced him to Patrick Daley, the son of then-Chicago Mayor Richard M. Daley.
The men talked about rugby, family and, according to the younger Mr. Daley, the taxi trade. The former mayor’s son said in an interview with The Times that he told Mr. Garber the little he knew of the Chicago market. Mr. Garber seemed intrigued, he added.
Mr. Garber, who declined to talk to The Times, has acknowledged befriending Mr. Daley. “Patrick is an excellent guy. Great drinker, knows how to hold his liquor,” he once told the Chicago Sun-Times.
At the time, the Chicago industry was dominated by a few operators who made money through fares, not financial maneuvers. Two fleets — run by members of the same family — controlled most of the medallions, and the permits were worth so little that the city periodically gave them away to drivers. There was a private market for those who could not wait for a city giveaway, but it was sleepy.
Still, within months of meeting Mr. Daley, records show Mr. Garber opened an office on the South Side of Chicago and started a fleet, Chicago Carriage Cab. He and a group of partners, mostly from New York, began buying medallions in private sales and lending to other buyers. They eventually bought about 800 of the city’s 7,000 taxi medallions.
Mr. Garber drew attention by publicly vowing to improve the experience of riding in a taxi and also by hiring powerful allies, including Gery Chico, the onetime chief of staff to Mr. Daley, the former mayor. The Sun-Times declared Mr. Garber “Chicago’s cab king.”
More quietly, Mr. Garber and his partners also began driving up medallion prices, according to five people who worked with Chicago Carriage Cab and an analysis of transaction records by The Times.
After buying hundreds of medallions from 2002 to 2005, the partners began the price inflation at the fall 2006 auction, The Times found. Mr. Garber and his partners won 20 of the 50 medallions at the auction because they offered to pay about $80,000 per permit, even though the median price on the private market that month was $51,000, records show.
By paying higher prices for a few medallions, they effectively raised the value of the many medallions they had already bought. Then, according to the former employees, they used the increased valuations to convince banks to lend them money.
After the auction, Mr. Garber and his partners expanded the strategy, records show.
In one instance, Mary Frances Wilkens, who bought a medallion at the 2006 auction through a company connected to Mr. Garber’s brother-in-law, sold the asset a few years later to a friend of Mr. Garber for $375,000, even though the median price during that month was $300,000, records show.
In another case, a company whose registered agent was Alexander Igolnikov, a Chicago Carriage co-owner, sold multiple medallions to a business partner for $150,000 each, even though the median price that month was $129,000.
In all, individuals associated with Chicago Carriage and Mr. Garber sold more than 100 medallions to other individuals associated with the company and him between 2006 and 2013, records show. The majority of sales were between one co-owner of the company and another; some sales were among members of Mr. Garber’s family.
There are legitimate reasons for friends and co-workers to sell assets to each other, especially if prices are rising and some want to cash out. But the transactions usually increased medallion values, even though the cabs hardly ever moved from their spots in the fleet.
“They knew there was no more money coming out of it. They just wanted the price to go up,” said Khaled Mahmoud, who managed medallions for several New Yorkers and worked with Chicago Carriage. “They knew exactly what they were doing.”
Six financial experts said in interviews the sales suggested an attempt to manipulate the medallion market. They said in a small market, a few transactions can have a big impact.
“It’s definitely suspicious,” said John M. Griffin, a finance professor at the University of Texas at Austin. “It’s indicative of manipulative wash-trading to artificially inflate prices.”
Ms. Wilkens, who also worked as a manager at the American Library Association and was convicted in 2013 of embezzling money from that group, did not respond to requests for comment. Mr. Igolnikov, who was convicted in 2015 in a scheme to use wrecked vehicles as cabs, declined to comment.
The rise in medallion values made millions for Mr. Garber and his partners, records show.
In 2009, Mr. Garber formed the International Polo Club of Colts Neck near his 10-acre estate in New Jersey. The next year, he purchased a condominium in a lavish building on Warren Street in TriBeCa for $8 million.
Mr. Garber did not respond to repeated requests for comment, including a detailed letter outlining this article’s findings.
As prices kept rising, other New Yorkers clamored to buy, pushing prices even higher.
Evgeny Freidman, a large New York fleet owner who has admitted to overpaying for medallions in New York to inflate their value, and Medallion Financial, a Manhattan company that lent to medallion buyers, each purchased more than 150 Chicago permits with partners, according to transaction records and financial disclosures.
At least 40 other New Yorkers bought Chicago taxi medallions, including Michael Cohen, President Trump’s former lawyer, records show.
“Medallions were gobbled up in almost a feeding frenzy,” said Roger Bottalla, who, along with his family, led a longstanding Chicago fleet that sold medallions to New Yorkers. “It became a house of cards. In my opinion, the whole industry became a speculative bubble.”
‘You feel like a failure’
Many of the New Yorkers who changed the Chicago taxi industry were not medallion buyers. They were the lenders who provided the money.
Before 2005, lending for taxi medallions in Chicago was not a big business. The cabdrivers and fleet operators who bought medallions outside of city giveaways often paid in cash, according to interviews and a review of buyer disclosures filed with the city in 2003 and 2004.
As prices rose, lenders flocked to Chicago. Three credit unions that had long provided loans to most New York medallion buyers all came, along with new players in the industry, including Actors Federal Credit Union from New York. So did bigger institutions such as Capital One. Medallion Financial, the Manhattan company, expanded its presence in Chicago.
By 2010, virtually every Chicago taxi medallion purchase was financed by a New York lender, according to the buyer disclosures.
Some of the credit unions and banks executed the same strategy they used to boost profits in New York, according to former staffers and a review of more than 100 Chicago medallion loans: They started lending more money to low-income cabdrivers, who were less likely to be able to repay the loan but more likely to pay high fees and interest rates, sometimes indefinitely.
“It was all about lending out as much money as possible, to increase the loan portfolios and bring in as much interest and fees as possible,” said Furqan Mohammed, a Chicago lawyer who has worked for both lenders and borrowers. “I think some of them didn’t really care whether the loan was repaid, frankly.”
Many cabdrivers were eager to borrow because they said they had been treated poorly by fleet bosses and that buying a medallion would give them control over their hours and an asset they could sell for a retirement nest egg.
Bague Atade Nanguit, 55, who immigrated to Chicago from Togo in the early 2000s, said he was making about $20,000 a year as a cabdriver when he bought a medallion in 2013. He said a broker convinced him to make the purchase by showing him data on medallion values in New York — which then exceeded $1 million — and suggesting Chicago would follow suit. Once values rose, the broker said, making loan payments would be easy.
Signature Bank and the broker lent Mr. Nanguit almost $400,000 without requiring a significant down payment, records show. But he said he had to pay thousands in fees and accept an 8 percent interest rate on one of his loans, which was above the typical bank loan rate, about 5 percent. He said he fell behind on his payments and gave up his medallion in the hope of escaping his loans. He now drives for Uber.
In an interview, Eric Howell, executive vice president of corporate and business development at Signature Bank, pointed to documents showing the bank lent Mr. Nanguit only $265,000 at a 5.5 percent interest rate. His other loan was handled by the broker without the bank’s knowledge, he said.
Mr. Howell said Signature Bank modified Mr. Nanguit’s loan after the bubble burst to reduce his payments, as it has for many medallion owners. He added the bank lent mostly to big fleet owners in Chicago, and he disputed the notion that the taxi industry crisis was caused by lending practices.
“It is well documented that the unregulated entry of Uber in Chicago, supported by Mayor Emanuel, was the principal cause of the medallion crisis in that city,” he said.
The broker worked for Mr. Levine, who declined to comment on this loan.
Every Chicago medallion loan reviewed by The Times had a balloon clause that required borrowers to repay everything in a few years, or face interest rates as high as 24 percent. That mandate almost always forced borrowers to extend the deals over and over, often at rates higher than the original terms, and with additional fees.
As in New York, many loans included other unusual provisions, such as penalties for repaying too early and so-called confessions of judgment, documents in which borrowers admitted to defaulting — even before taking out any money at all — and authorized the bank to do whatever it wanted to collect.
Veterans of the Chicago taxi industry said some New York lenders also aggressively encouraged medallion owners to refinance loans. Whenever values rose, some of the lenders called and urged borrowers to take out more money to buy a house or to put children through college, the industry veterans said.
John Henry Assabill, a 67-year-old immigrant from Ghana, said he won a free medallion for being one of Chicago’s best cabdrivers in 2004. After, he said, he got calls pushing him to use it as collateral to borrow money. Eventually, records show, he borrowed from Progressive Credit Union and Signature Bank to buy more medallions and more equipment.
He said he was ultimately talked into borrowing $675,000 and could not make the payments. In 2017, he went bankrupt.
Signature said it never encouraged any borrowers to refinance loans. Progressive has since been closed by the government; its longtime chief executive did not respond to requests for comment.
Chicago requires medallion buyers to have a lawyer. But city officials acknowledge that the lawyer often also represents the seller, lender or broker, and regulators do not have the ability to ensure that buyers’ interests are protected.
In a striking resemblance to the housing market bubble, the loose lending practices in the Chicago taxi industry helped cause medallion prices to rise rapidly.
Increasingly, drivers who bought medallions spent much of their income on loan payments. A 2009 University of Illinois study found that after paying expenses like gas and car insurance, Chicago medallion owner-drivers typically made about $2,200 in monthly revenue and spent about $1,500 of it on loan payments.
About 90 percent of Chicago’s owner-drivers were first-generation immigrants, and many did not speak English at home, according to surveys conducted by the city.
Among those trapped was Manuel Rosales.
Mr. Rosales came to Chicago from Guatemala in 1992, started driving a cab several years later and chose to buy a medallion for $305,000 in 2014. He said he sold his family’s home and emptied his savings for down payments on loans, mostly from Montauk Credit Union in New York.
He said he drove up to 14 hours every day and cut expenses but still struggled to make his $1,700 monthly payments. It got even harder after Uber arrived. Eventually, he filed for bankruptcy in an attempt to renegotiate his debt.
Montauk Credit Union has since been closed by the government. The loan is held by another credit union, which declined to comment.
“You feel like a failure,” Mr. Rosales, 45, said in an interview. “Like you’ve lost everything and you have nothing.”
The drastic increase in taxi medallion prices did not escape public notice in Chicago.
George Lutfallah, publisher of the Chicago Dispatcher, a trade publication, wrote articles in 2006, 2010 and 2012 criticizing inflated prices.
“Before you jump on the speculative bandwagon that has medallion prices going through the roof in the near future, take a step back and ask yourself what the price of a medallion should be,” Mr. Lutfallah wrote in his 2006 piece. “Why are prices going up?”
City officials also noticed the rising prices. But they did not criticize them. They celebrated.
Under Mr. Daley, the former mayor, the officials who regulated the Chicago taxi industry were focused on raising revenue through medallion sales, according to four former city employees. Officials sent memos praising the price increases, some of those employees said.
Since 2000, records show, the city has made more than $70 million by auctioning medallions and collecting taxes on private sales.
The city made medallion buyers disclose detailed information on their loans. If regulators had reviewed the data, they would have seen the rising interest rates and shrinking down payments and could have written new rules. But officials acknowledged to The Times that they never looked at the disclosures.
The Department of Business Affairs and Consumer Protection, the city agency that oversees the industry, said it could not find any record of the city taking disciplinary action against a medallion lender or broker related to medallion transactions.
“This is an industry where everything is regulated down to the smallest little thing on the car,” said Meg Lewis, of Afscme Council 31, a union that began representing Chicago cabdrivers after the bubble burst. “Yet the city allowed medallion prices to become artificially inflated and turned a real blind eye to what the implications were for small medallion owners.”
The current commissioner of the Department of Business Affairs and Consumer Protection, Rosa Escareno, who has been there since 2017, said in an interview it was the job of federal banking regulators, not the city, to police lending. A spokesman added later that the city never received any complaints about medallion lenders or brokers.
After being informed of The Times’s findings, the city released an additional statement: “While this activity seems concerning, the City of Chicago does not regulate lending practices in the private marketplace, set medallion transfer prices or restrict medallion sales based on the location of the purchaser,” the statement said. “Thousands of medallions changed hands during the years in question, and outside investors were not unusual or illegal.”
Mr. Daley, the mayor during most of the bubble, did not respond to requests for comment. Norma Reyes, the city’s top taxi industry regulator from 2003 to 2011, died several years ago.
Her successor, Rosemary Krimbel, acknowledged she was pressured by City Hall to focus on making money off medallions. But she also said she believed that city regulators and medallion lenders had acted appropriately.
“The borrowers signed the loans,” she said. “It’s kind of ‘buyer beware.’”
Loans for the ‘walking dead’
In the gritty New York cab industry, Michael Levine was one of the most respected players. His grandfather began one of the city’s first fleets, and industry lore held that his father consulted for “Taxi,” the sitcom made popular in the late 1970s. Mr. Levine inherited the family business in the 1990s, and he quickly became president of a fleet association and a frequently quoted spokesman for the industry.
“He was as interesting and legitimate of a person as you could get,” said Andrew Salkin, a former deputy commissioner of the New York City agency that regulates the taxicab industry. “I always thought he was above the riffraff.”
During the first four decades of his life, Mr. Levine has said, he visited Chicago only once.
But in 2005, after hearing about an opportunity from a friend, he made a play that changed the Chicago taxi industry.
Mr. Levine bought a controlling stake in Yellow Cab Chicago, the bigger of the two fleets that had historically dominated the market, and then expanded it. In all, he purchased more than 500 medallions, a fleet that operated hundreds of cabs for other owners and a company that provided loans to medallion owners.
To help run the empire, he eventually hired Ms. Reyes, Chicago’s former top taxi regulator.
The move set up two New Yorkers — Mr. Levine and Mr. Garber — as the biggest leaders in the Chicago taxi industry. But with the Yellow Cab brand, Mr. Levine was the most prominent.
“He bought half the industry and made one giant conglomerate,” said Michael Magallanez, who ran one of Mr. Levine’s garages from 2011 to 2013. “He was the most powerful person in the business.”
Behind the scenes, Mr. Levine and his business partner, Patton Corrigan, a Florida investor, helped push the Chicago taxi industry toward practices that increased medallion values, according to a review of loans from their lending company and interviews with dozens of industry veterans.
The company, Transit Funding Associates, issued at least 750 loans to medallion owners, according to a filing in a legal case. It had agreements that allowed it to use funding from Capital One and Signature Bank for the loans.
Transit Funding was widely seen as one of the most aggressive lenders in the city, according to the industry veterans. It rarely required borrowers to post large down payments, always used balloon clauses and often structured loans so that most of the monthly payments paid by its borrowers would go just toward interest, The Times’s review of loans found.
Two people who worked at Transit Funding during the bubble said they could not recall any loan applicant being denied. They added the company had extremely loose lending standards and charged interest rates they described as exorbitant.
“Transit Funding was the worst,” said Cometas Dilanjian, who worked at Yellow Cab before Mr. Levine and then formed his own company catering to owner-drivers, including some who got loans from Transit Funding. Under the lender’s standards, he said, “the walking dead were getting loans.”
In interviews, Mr. Levine, 56, acknowledged lenders in New York and Chicago were caught in a medallion bubble that he likened to the housing market crash. But he said he never intentionally inflated medallion prices, engaged in price speculation or issued reckless loans.
Mr. Levine and Mr. Corrigan owned dozens of interrelated businesses. From one entity alone, they each made about $100,000 a month in “management fees,” according to legal filings. But the increase in medallion values offered much greater profits.
As prices rose, Mr. Levine consistently promoted medallions publicly, even after ride-hailing entered Chicago in 2012. In one interview with the Chicago Dispatcher, in 2013, he predicted Uber would not affect medallion values at all.
But even as Mr. Levine was promoting medallions, he was cashing out.
Records show that before the market collapsed in late 2013 and 2014, Mr. Levine’s companies sold most of the Chicago medallions they had bought a few years earlier. The companies paid $30 million to buy 543 medallions between 2006 and 2008. They sold 529 medallions between 2012 and 2014, for a total of $185 million.
Mr. Levine said in interviews that he did not have any inside information indicating the market was about to crash before he sold medallions. One of his former top employees in Chicago, John Moberg, said he had advised Mr. Levine to sell after meeting Ms. Krimbel, then a new city commissioner, and determining she would not be an ally of the industry.
Mr. Levine was not the only major Chicago medallion owner to sell at elevated prices. Medallion Financial also sold some permits it owned in 2008 and 2009, reaping big profits, although it has held onto most of its medallions, according to city transaction records.
Transit Funding issued loans to many of the buyers of Mr. Levine’s medallions. In many cases, it did not require any down payment, records show. It also sold some loans to Capital One and Signature, leaving the banks partially on the hook for the losses that followed.
In 2015, Capital One sued Mr. Levine and Mr. Corrigan, claiming they owed the bank millions that they had borrowed in order to provide loans to medallion buyers. The bank said the men had tried to dodge creditors by transferring assets to family members. The parties reached a private settlement last summer.
Between 2009 and 2013, records show, Mr. Levine and his wife, Marjorie, bought at least eight different homes, including a $5.3 million house on Lily Pond Lane in East Hampton, N.Y., and a $7.2 million co-op on Central Park South previously owned by the family of the founder of DC Comics.
Mr. Levine said he did not see a conflict in his lending company providing loans to drivers, which in turn helped him sell off medallions.
When asked if he would respond to criticisms from his borrowers, he ended the conversation.
“I don’t really respond to things,” Mr. Levine said. “I tell the truth.”
‘Trying to hold on’
The Chicago taxi industry is now in the biggest financial crisis in its history.
Only about 4,300 of the city’s 7,000 cabs are currently in operation, according to the city, and the ones on the road are generating at least 20 percent less than before there was ride-hailing, according to an analysis of city data by The Times.
Mr. Lutfallah is closing the Chicago Dispatcher and looking for a new job. Many fleets are drowning in medallion debt. One association of owner-drivers recently laid off nearly half its staff.
“We’re just trying to hold on,” said the association’s owner, Shoib Hasan, an immigrant from Pakistan who has been in the business for 40 years.
Even some New York bankers and investors who bought Chicago taxi medallions have suffered large losses.
Many drivers who bought medallions have had them seized by their banks after falling behind on loan payments. Some now drive for Uber or Lyft.
Collins Badu, 35, an immigrant from Ghana, said he had been driving for Yellow Cab’s fleet for four years when his manager approached and asked if he wanted to become his own boss. He ultimately bought one of Mr. Levine’s medallions in August 2012, using his life savings and borrowing from family for fees and taxes on $330,000 in loans, in part from Transit Funding.
Mr. Badu, who lives in a small apartment in Rogers Park, said he drove his taxi 12 hours a day but still could never earn enough for his payments. Last year, he surrendered his medallion, hoping to escape, and he became a fleet driver again.
But he still owes his medallion lenders about $300,000. He is terrified he will get a notice saying they are suing him, and he will end up on the street.
Every day, he nervously checks his mailbox, hoping not to see any letters from New York.
Agustin Armendariz, Ellen Almer Durston and Derek M. Norman contributed reporting. Susan Beachy contributed research.