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`SUPRENEE COURT OF THE STATE OF NEWVYORK
`COUNTY OF KINGS
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` '28th Street Management et al.,
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`Plaintiffs,
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`—against—
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`Index No. 514542/15
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`New York State Department of Tax and Finance and the New York
`City Taxi and Limousine Commission,
`SUPPLEMENTAL
`AFFIRMATION OF
`DAVID DEMETER Defendants.
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`DAVID DEMETER, an attorney admitted to practice in the courts of the State of New
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`York, affirms under penalty of perjury pursuant to CPLR 2106: _
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`1.
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`I am a Director in the Office of Counsel of defendant New York State Department
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`of Taxation and Finance (“DTF”) in the above-captioned matter. I submit this supplemental
`affirmation, pursuant-to Uniform Civil Rules ofThe Supreme and County Courts § 202.28(b) in
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`further support—of DTE’smotion to dismiss this action—and iii—opposition to plaintiffs’ motion to
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`amend the Complaint, in order to advise the Court of information recently obtained that is material
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`'to this case.
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`2.
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`This affirmation supplements the information I previously provided to the Court.
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`eel Demeter Affirmation in Support of the Order to Show Cause, filed October 31, 2016 (Dkt. No.
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`5)(“10/31 / 16 Demeter Aff”); Demeter Affirmation in Support of DTF’s Motion to Dismiss, filed
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`December 20, 2016 (Dkt. No. 14) (“12/20/16 Demeter Aff.”); Demeter Affirmation in Opposition
`to the Plaintiffs’ Motion to Amhnd the Complaint, filed March 7, 2017 (Dkt. No. 34) (“3/7/17
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`Demeter Aff”).
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`3.
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`Since March 7, 2017, when DTF submitted papers in opposition to plaintiffs’ motion
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`to amend their Complaint as futile and in further support of DTF’s pending motion to dismiss,
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`there have been a number of significant developments in the facts underlying this case that affect the
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`allegations of the Complaint and the pending motions, and may render certain of plaintiffs claims
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`wholly or partially moot. As described herein, some of these developments include: TLC’s public
`confirmation that Mr. Freidman is no longer authorized to represent other medallion holders, which
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`include numerous plaintiffs in this action; Mr. Freidman’s commencement of a civil lawsuit in New
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`York County alleging that his former accountants have his tax records and are the ones responsible
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`for his failure to timely pay his taxes; the suspension of Mr. Freidman’s law license; and, most
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`importantly, Mr. Freidman’s arrest and indictment on charges of tax fraud and grand larceny with
`respect to the same taxes at issue in this action. Plaintiffs have notably failed to apprise the Court of
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`these developments, and acCordingly this supplemental affirmation is submitted pursuant to
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`Uniform Civil Rules of The Supreme and County Courts § 202.28(b) as part of DTF’s
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`continuing duty to notify the Court of such issues.
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`Mr. Freidman is Not Authorized To Represent Hundreds of the Plaintiffs
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`4.
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`At the inception of this case in 2015, Mr. Freidman averred that he was the
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`“authorized representative of Plaintiffs,” which the Complaint alleges consist of 426 “entities and
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`business corporations that own, operate and‘deal with various New York City Taxi medallions and
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`are licensed to operate or deal with” such medallions by the defendant New York City Taxi and
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`limousine Commission (“TLC”). E Complaint c" 6 and Verification.1 Although no plaintiff other
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`1 Among other issues, although the Complaint alleges that the plaintiffs are all corporations or “entities,” at least some of
`the plaintiffs appear to be natural persons. This is only one of the many pleading deficiencies stemming from the
`Complaint’5 failure to supply more than a single paragraph to describe the 426 plaintiffs in this action, such as, e.g., the
`failure to differentiate between entities which Mr. Freidman owns or controls, and the entities for which he claims to act
`as an authorized representative. This pleading deficiency, which prejudices defendants’ ability to meaningfully respond
`to the Complaint, is sufficient reason, on its own, to dismiss the Complaint for failure to meet the pleading requirements
`of CPLR 3013. It is well established that where the allegations ofthe complaint are insufficient to discern the real party
`/in interest, the complaintis defective Me Shoppe AgoEd me Corner 1. Carl,80 Misc. 2d 717, 718—19, (Sup. Ct.
`/Richmond Cty 1975) (“is clear that a complaint must allege that the plaintiffis the real party in interest.
`.or the
`complaintis fatally defective.”); Gm Earms Q9_r,p.1. Bartomeg,50 Misc. 2d 1073,1077 (Sup. Ct. Westches‘ter Cty
`2 of 63
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`2
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`than Mr. Freidman verified the Complaint, Mr. Freidman and his attorneys have alleged throughout
`this action that they are authorized torepresent these alleged plaintiffs, in which Mr. Freidman
`seeks, purportedly on their behalf, sensitive, confidential tax records and information. Although this
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`issue was raised repeatedly in my previous affirmations, during the nearly two years that this .
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`litigation has been pending neither Mr. Freidman nor his attorneys have supplied any evidence that
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`they are actually authorized to represent any of the plaintiffs in this action or to seek disclosure of
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`their tax information.
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`5.
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`As explained previously (m Dkt. No. 13),under the Tax Law, taxicab medallion
`
`owners are permitted to designate an “agent” “by employment, contract, or otherwise,” to act. on
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`their behalf with respect to their medallion before the TLC, “in accordance with the TLC’s rules.”
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`Tax Law § 1280. This includes employing an agent to calculate, submit returns, and pay the 50 cents
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`per ride tax-imposed by Tax Law Article 29-A. 1A Taxicab owners remain liable for this tax, and
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`“[i]f the taxicab owner has designated an agent, then the agent shall be jointly liable with the taxicab
`
`owner.” fi§ 1283(a) and (b). “Even if the TLC has specified that the taxicab owner’s agent cannot
`operate as an agent, that agent shall be jointly liable with'the taxicabowner if the. agent has acted for.
`
`the taxicab owner.” I_d. “Every person liable for the tax imposed by this article shall file a return
`quarterly with the commissioner.” I_d.§ 1284.
`i
`i
`6.
`On information and belief, many, if not most,’ of the purported plaintiffs in this
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`action have not only never authorized this action, but may actually be unaware that this action is
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`pending, or that Mr. Freidman and his attorneys are purporting to represent them and/or act in their
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`1965). Moreover, Mr. Freidman’s failure to provide any specific information about plaintiffs renders the Complaint
`defective as well. Ne Dimen i n
`l
`‘ n In .
`.
`e (1
`st
`Consul
`ts
`L . 28 A.D.3d 260, 260-61 ‘
`(1st Dep't 2006) (“The complaint is too vague and confusing to have apprised defendant [] sufficiently of the
`occurrences plaintiff [] intended to prove and the material elements of each cause of action (CPLR 3013).”).
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`behalf. In addition, as shown below, Mr. Freidman is no longer authorized to serve as the agent for
`any entity that he does not own before the TLC as defined by Article 29-A ofthe Tax Law. In many
`instances, Mr. Freidman’s interests may actually be adverse to the purported plaintiffs, as Mr:
`
`Freidman has regularly failed to file tax returns or pay taxes on their behalfs, for which they would
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`nonetheless be held liable under Tax Law § 1283. S_ee_, gg” Danielle Furfaro, Medallion Owners Say
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`‘Taxi King’ Ran Dm’ Business, New York Post, Nov. 3, 2015, attached hereto as Exhibit 1
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`(“Medallion owners say Freidman’s firms didn’t regularly forward to the state the 50-cents-per-ride
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`MTA surcharge drivers collect from riders. It took years, until state authorities issued warrants
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`against them, that they realized something was amiss, they say”).
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`7.
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`Despite the filing of my affirmations raising this issue in October and again in
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`December, plaintiffs failed to address it at all until February 21, 2017, when Mr. Freidman admitted
`in this litigation, for the first time, that he is not authorized to represent at least 100 ofthe purported
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`plaintiffs. Freidman Mot. Amend Aff. ‘lfil 3-5 (Dkt. No. 28). However, neither Mr. Freidman nor
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`his attorney has given an explanation why they continued to purport to represent these plaintiffs for
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`M in this litigation after their authorization to represent these plaintiffs before the TLC was
`terminated, or whether they ever had authorization at any time from any of these plaintiffs to bring a
`lawsuit on their behalf.
`I_d. In any event, as I indicated in the 3/7/17 Demeter Aff., the Complaint
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`still contains hundreds of additional plaintiffs that Mr. Freidman is not actually authorized to
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`represent.
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`8.
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`On April 6, 2017, it was publically reported that “Freidman will no longer be allowed
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`to manage the more than 800 medallions he’s controlled for the past several years, the Taxi and
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`Limousine Commission ruled this week.” _S_e_e_ Danielle Furfaro, Taxi King No Longer Allowed to
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`- Manage Hundreds of Medallions, New York Post, April. 6, 2017, attached hereto as Exhibit 2. TLC
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`4
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`spokesman Allan Fromberg stated that “[w]e have notified all the medallions that were in the
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`management of those companies that they would need. to be managed by others.” It was further
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`reported that Mr. Freidman’s “licenses expired and the TLC declined to renew them because of his
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`controversial past with the agency” and that “Freidman, who has been in a downward spiral of
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`arrests and lawsuits for the past two years, has angered the drivers and medallions owners by not
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`paying the state and the city millions of dollars in surcharges, leaving them on the hook for the
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`money.” I_d.
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`9.
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`Despite my identification of the continuing existence of this serious issue in March,
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`and TLC’s April public announcement regarding this issue, Mr. Freidman and his attorneys have
`again failed, to this day, to take any action to notify the Court of their lack of authorization to
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`represent these plaintiffs, withdraw from the purported representation of these plaintiffs, or supply
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`any documentation of authority to represent any plaintiff in this action.
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`10.
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`It is well established that while authorization to represent a party before the Court is ‘
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`generally presumed, where facts are presented placing such authority in question, it mustbe shown
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`that authorization actually exists. Stewart v. Hilton, 27 Misc. 239, 239—40 (Sup. Ct. Spec. Term
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`1899) (“The defendant now moves that the court compel the plaintiffs attorneys to produce written
`evidence of their authority to commence such action, file such evidence in court, and serve a copy
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`thereof on defendant's attorneys This motion is authorized .
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`.
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`. and should be granted, and the
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`proceedings of the plaintiff should be stayed until such evidence is produced.’7); 3B CWody-Wait
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`2d § 26:7 (“the right to appear as attorney for a party depends upon a grant of authority to that
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`effect from the party”).
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`Mr. Freidman Failed to Notify the Court or the Parties of a New Civil Action Aillegmg' an
`Alternative Theory For His lFaiiure to Pay His Taxes
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`11.
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`In addition, without notifying any of the parties or this Court, on May 18, 2017, Mr.
`
`Freidman commenced, m g, a civil action in New York County against his former accountants,
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`Getzel Schiff & Pesce, LLP (“Getzel Accounting Firm”) _Sge Brian Koenig, Embattled NYC Taxi
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`Mogg Sues Accountants For Malpractice, Law360, May 22, 2017, attached hereto as Exhibit 3. E
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`11$ Index No. 154619/2017, Dkt. No. 1 (“NY County Complaint”), attached hereto as Exhibit 4.
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`In that action, Mr. Freidman alleges a completely new theory to explain his failure to timely pay his
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`taxes: that the Getzel Accounting ‘Firm was the entity “responsible for. .
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`. preparing tax returns for
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`each of the entities that he owns and/or manages, analyzing complex financial documents relating to
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`the debts of each of those entities, and preparing detailed financial statements, balance sheets, and
`statements of cash flow for each of those entities,” and that they “failed to file tax returns for
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`[Freidman] and his affiliated entities [and] refused to return any and all tax returns, reports, or other
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`documents in [the Getzel Accounting Firm’s] possession, custody and control that reflects or related
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`to Plaintiff and his business operations.” I_d. ("1] 10-17. These allegations — which have never been
`mentioned in this action — run directly contrary to Mr. Freidman’s allegations here that he has
`
`complied with his tax obligations.
`
`12.
`
`The Getzel Accounting Firm, through its counsel, has moved to dismiss that action,
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`stating, inter &, it was Freidman himself who failed to “adequately and timely maintain the books
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`and records of said companies,” that the accounting relationship ended because Freidman owed his
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`former accountants nearly a million dollars in unpaid bills, and that “[Freidman] and his entities
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`repeatedly refused to follow tax guidance provided by the Getzel defendants, which put the Getzel
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`defendants in potentially compromising positions [and] has brought this frivolous action in order to
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`financially assist himself as it relates to his currently pending civil and criminal legal battles. In our
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`estimation, the case is borderline extortion. Plaintiff should not be allowed to get away with this
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`conduct.” A true and correct copy of the affidavit ofJeffrey Getzel, dated July 10, 2017, is attached
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`hereto as Exhibit 5. m Getzel Affidavit ‘IHI 8-15. Mr. Freidman has provided no explanation to the
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`parties or the Court why he failed to notify them of this action, which is related to the same subject
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`matter as the instant lawsuit.
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`Mr. Freidman’s Indictment and Arrest in Albany County For Tax Fraud and Grand Larceny
`
`13.
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`I Most significantly, on June 7, 2017, Mr. Freidman was arrested and indicted “on
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`charges that he and a business partner stole over $5 million dollars that should have been paid to
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`New York State. The authorities said the money was taken from a 50 cent state surcharge on taxi
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`rides in the New York metropolitan area.” By Sarah Maslin Nir, ‘Taxi King’ Is Charged with
`
`Stealing $5 Million in State Fees, New York Times,June 7, 2017, attached hereto as Exhibit 6.
`
`14.
`These charges included four counts of first degree tax fraud and one count of first
`degree grand larceny, all felonies. As stated in a press release issued by the New York Attorney
`
`General’s Criminal Enforcement and Financial Crimes Bureau:
`
`tMr. Freidman] controlled over 800 medallion taxicabs between 2012 and 2015.
`During this three-year period, these taxicabs provided millions of rides to millions of New
`York City passengers. The vast majority of those rides were subject to a 50 cent New York
`State Tax known as the “M1"A Tax,” which was automatically collected from passengers as
`part of their fare. Instead of remitting that tax to the New York State Department of
`Taxation and Finance as required by law, Freidman, together with Taxiclub Management
`CFO Andreea Dumitru, allegedly orchestrated a scheme to withhold that money by
`improperly filing returns, failing to file returns, failing to remit the tax on filed returns and by
`filing falsified returns which underreported the true number of taxable rides. Through this
`scheme, Freidman and Dumitru withheld nearly $5 million in taxes from the State of New
`York that had been collected from passengers.
`.
`~
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`15.
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`The press release further states that “[t]his case was the result of a joint investigation
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`by the New York State Attorney General’s Office and the Department of Taxation and Finance.
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`7
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`Additionally, the Attorney General’s Taxpayer Protection Bureau is conducting an ongoing parallel
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`civil investigation into Mr. Freidman’s conduct,” and attaches a copy of the indictment. A true and
`correct copy of the Press Release and Indictment are attached hereto as Exhibit 7 and 8,
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`respectively.2
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`16.
`The criminal charges now pending against Mr. Freidman relate directly to the subject
`matter of the instant action: Mr. Freidman’s tax liability with respect to the 50 cent per ride tax
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`imposed under Tax Law Article 29-A. In this civil action, Mr. Freidman, without any legal basis,
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`seeks reliefin the form of disclosure of confidential tax records relating to the Article 29—A taxes he.
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`personally owes or for which he is jointly and severally liable. And in the criminal action, he has
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`been indicted for “orchestrat[ing] a scheme to withhold” these very same taxes.
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`17.
`
`“[T]he civil disclosure rules were not intended for the purpose of enabling criminal
`
`defendants to use civil disclosure to obtain records to frustrate pending or threatened investigations
`
`nor to use that information to construct a defense to impede a prosecution.” Demoya v. Sinha, 29
`
`Misc. 3d 1228(A), (Sup. Ct. Queens Cty 2010), ci_t1ng Matter ofFink v. Letkowitz, 47 N.Y.2d 567,
`
`572 (1979); Pittari v. Pirro, 258 A.D.2d 202, 207 (2d Dep’t l999) (“[d]uring the course of a criminal
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`action, it is not within the authorized powers of the courts to compel disclosure which is not
`
`provided for in CPL article 24.0 .
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`.
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`. and attempts to do so generally warrant issuance of a writ of
`
`prohibition”).
`
`18.
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`Considerations of judicial economy and the public interest in efficient use of judicial
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`resources also militate for dismissal of this action, since issues common to both cases can be
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`efficiently resolved in the criminal proceeding, which may narrow, eliminate or moot the issues to be
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`2Both the attached press release and indictment are publicly available and on the Internet. & https://ag.ny.gov/press-
`release/ag—schneiderman—and-acting-tax—commissioner-manion-announce-indictment—taxi—king;
`https://ag.ny.gov/sites/default/files/albany_county_-_£reidman_and_dumitru.pdf.
`8 of 63
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`determined in the civil case, and prevent waste of judicial resources. C_f. United States v. Mellon
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`Bank, 545 F.2d 869, 873 (3d Cir. 1976) (‘fresolution of the criminal case may moot, clarify or
`
`otherwise affect various contentions in the civil case”).
`
`19.
`
`Accordingly, in addition to the fatal jurisdictional deficiencies and lack of any
`
`cognizable cause of action in this case, previously identified by DTF in its motion to dismiss and in
`
`its opposition to plaintiffs’ motion to amend the Complaint, the recent developments detailed herein
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`give greater context to the men'tless nature of this action, and provide additional, independent
`
`grounds for its dismissal. 3
`
`3 In addition to the recent developments set forth herein, Mr. Freidman has also recently been involved in additional,
`undisclosed court proceedings, including a separate criminal action against him in New York County and a proceeding
`resulting in the suspension of his law license by the Appellate Division On April 11, 2017, it was reported that Mr.
`Freidman appeared pro se in New York County Supreme Court before Judge Judy Kim to defend himself against
`I
`criminal charges that “he threatened to kill his former business partner’s entire family” Danielle’Furfaro, mm
`WM, New York Post, April. 11, 2017, attached hereto as Exhibit 9.
`On July 13, 2017, the Appellate Division, First Department, issued an order suspending Mr. Freidman’s license to
`practice law, citing the fact that “his failure to cooperate with the Committee's investigation threatens the public
`interest.”W’ 2017 NY Slip Op 05690 (July 13, 2017), attached hereto as Exhibit 10.
`9 of 63
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`WHEREFORE, DTF Despcctfully requests that the Court deny plaintifi‘s’ motion to amend
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`the Complaint, dismiss the Complaint and any additional reliefthat the Court deems just and proper.
`
`Dated: New York, New York
`August 1, 2017
`
`Qqua
`
`
`
`David] Demeter
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`Exhibit-it IL
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`Medallion owners say ‘taxi king' ran dirty business | New York Post
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`Medallion owners say taxn king ran dirty busmess
`
`I
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`‘
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`I
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`I
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`’
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`I
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`I
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`By Danielle Furfaro and Carl Campanile
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`November 3. 2015 | 1:04am
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` m G
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`ene Freidman
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`Yellow-cab medallion owners say embattled “taxi king” Gene Freidman got them into a jam by keeping thousands of SO-cent surcharges
`that should have been sent to the MTA.
`
`“I told the Taxi [and] Limousine Commission he’s not clean in running his business,” said angry medallion owner Galina Kaminker.
`
`Freidman controls some 900 taxi medallions. He also manages the business of other medallion owners by hiring drivers, collecting receipts
`and paying bills.
`
`But medallion owners say Freidman’s firms didn’t regularly forward to the state the 50-cents-per—ride MTA surcharge drivers collect from
`riders. It took years. until state authorities issued warrants against them, that they realized something was amiss, they say.
`
`They’re demanding that the TLC not renew Freidman’s license to operate as a management agent.
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`Freidman declined to comment.
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`Taxi King no longer allowed to manage hundreds of medallions | New York Post
`
`METRO EXCLUSIVE
`
`Taxi Kingno longer allowed to manage hundreds
`of medallions
`By Danielle Furfaro
`
`'
`
`April 6, 2017 | 8:14pm
`
`
`
`“Taxi king” Gene Freidman is now the court jester of the cab industry.
`
`Freidman will no longer be allowed to manage the more than 800 medallions he’s controlled for the past several years, the Taxi and
`Limousine Commission ruled this week.
`
`“We have notified all the medallions that were in the management of those companies that they would need to be managed by others," said
`TLC spokesman Allan Fromberg.
`
`The Russian-born mogul's licenses expired and the TLC declined to renew them because of his controversial past with the agency.
`Freidman, who has been in a downward spiral of arrests and lawsuits for the past two years, has angered the drivers and medallions owners
`15 of 63
`by not paying the state and the city millions of dollars in surcharges, leaving them on the hook for the money.
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`“He has given the industry a bad name.” said a taxi medallion agent who’s known Freidman for years. “Mr. Freidman for years has flouted
`regulations and been allowed to get away with it.”
`
`Taxi King no longer allowed to marage hundreds of medallions | New York Post
`
`Late last year, a bankruptcyjudge ruled that Freidman had to turn over 46 of the medallions he owned to to pay debtors. He still owns about
`r
`150 medallions, sources say.
`
`FILED UNDER GENE FIRElDMAN, TAXI AND LIMOUSINE COMMISSION, TAXI MEDALLIONS, IL_C
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`Embattled NYC Taxi Mogul Sues Accountants For Malpractice - Law360
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`Embattled NYC Taxi Mogul Sues Accountants For Malpractice- Law360
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`Embattled NYC Taxi Mogul Sues Accountants For
`Malpractice
`
`By Bryan Koenig
`
`Law360, Washington (May 22, 2017, 2:32 PM EDT) -- A New York City taxi mogul who’s been accused of
`trying to duck his creditors has gone on the offensive with a state court lawsuit accusing his accountants of
`failing their basic responsibilities and sharing information — some sensitive, some false — with third parties.
`Representing himself through a law fu’m that bears his name, Evgeny Freidman accused accounting firm Getzel
`Schiff & Pesce LLP and CPA Jeffrey Getzel on Thursday of suddenly shirking their responsibilities after years
`of maintaining a “harmonious working relationship” in which the accountants effectively served as the chief
`financial officers for many of Freidman’s businesses.
`
`“Among other misconduct and ignorance of the fiduciary duties owed to plaintifi‘,.defendants: (i) failed to
`perform the basic functions required of a certified public accountant; (ii) failed to file tax returns for plaintiff and
`his affiliated entities — a function of the parties’ relationship that was expressly requested by plaintiff,”
`Freidman said, and “(iii) refused to return any and all tax returns, reports, or other documents in defendants’
`possession, custody and control that reflects or related to plaintiff and his business operations.”
`
`Freidman says he needs those documents and returns, and their sole possession by the accounting firm makes
`Getzel Schiff the only one that can fulfill needed business responsibilities that include filing tax returns and
`responding to financial information requests from “approved parties.” To that end, the complaint, while short on
`details, is seeking an order to compel the accounting firm to fulfill its purported obligations, in addition to
`compensatory, punitive and other damages and costs.
`
`Additionally, Freidman alleged that Getzel Schiff’s failure to live up to its obligations has made it “impossible”
`for Freidman or his businesses to comply with their taxobligations.
`
`The accounting firm declined to cement and Freidman did not immediately respond to a press inquiry
`
`The complaint from Evgeny Freidman & Associates PC includes counts for alleged professional malpractice,
`negligence, breached fiduciary responsibilities, business relations interference, fraud and conspiracy. Among
`other things, Freidman says the accountants shared information with others they weren’t supposed to.
`
`The complaint singles out Jeffrey Getzel for having allegedly shared Freidman’s “confidential personal and
`19 of 63
`business records and information with third parties” without his permission.
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`Embattled NYC Taxi Mogul Sues Accountants For Malpracfice- Law360
`
`“During the course of the accountant/client relationship between plaintiff and defendants — in or about 2016 —
`defendants provided false and misleading information to, inter alia, banks, credit institutions, plaintiff’s former
`business partners, and other individuals and entities,” Freidman said. “Defendants provided such false and
`misleading information to those third parties for the sole purpose of harming plaintiff and his business interests.”
`
`The complaint offered few additional details, but Freidman’s list of individuals who’d be interested in his
`information is not a short one. Last April, a Philadelphia-based taxi company in which Freidman owns a 50
`percent stake accused him of piltering at least SLQ million from its accounts as part of a bid to hide assets from
`his creditors.
`
`A few months before that, in January of 2016, a New York bankruptcy judge found that Freidman, whose
`travails have been regulme featured in New York’s tabloids, had illegally transferred $60 million in real estate
`into four offshore trusts to keep assets out of the hands of creditors. Freidman had previously put four of his
`New York taxi car management companies into Chapter 11 protection, after Citibank sued to recover $40
`million in loans in March 2015. The bankruptcy judge gave Citibank the authority to go after Friedman’s
`offshore trusts.
`
`Freidman is represented by himself.
`
`Counsel information for Getzel Schiff was not available Monday.
`
`The case is Evgeny Freidman v. Getzel Schiff & Pesce LLP et al., case number 154619/2017, in the Supreme
`Court of the State of New York, County of New York.
`
`--Additional reporting by Dan Packel. Editing by Jack Karp.
`
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