Mixed Views On Whether $1 Taxi Medallion Sale Was Fraudulent

OCEAN CITY — The Mayor and City Council seized a taxi medallion this week and dished out a slap on the wrist for the proverbial egg that almost smattered their faces when two local cab companies tried to beat the system and transfer a taxi medallion for $1.

Yet, this week, there was still some murmurings about the exact point the medallion transfer between Classic and Century Taxi became what the Mayor and Council found to be fraudulent.

City Solicitor Guy Ayres said last week that there was nothing in the town’s ordinance that prohibited a medallion to be purchased by a second party. In this case, the council found that Ken Hovance, owner of Century Taxi, had essentially paid for the medallion that was acquired by Classic Taxi in the March 1 auction.

Ayres said last week, however, that when Hovance and Classic Taxi owners Ray Godman, and Christy Freeman signed the affidavit citing the sum of the transaction, their exchange became fraudulent.

“When they signed it that the total was for $1, it became fraudulent, because the money that actually changed hands between the two parties was $1501,” said Councilman Doug Cymek. “Obviously, the city should get the 25% of the transfer fee of the $1501, and that is where they tried to defraud the city. This wasn’t a situation of them finding a loophole in my eyes.”

Freeman’s attorney, David Gaskill, argued the timing of the transfer may have exposed a few of the shortcomings in the new ordinance.

“It is arguable that my client didn’t do anything more than expose a loophole in the way the ordinance was written,” said Gaskill. “It was written that you can’t transfer the medallion until the original $1,500 is paid, and my client did that, and then set the sale price for $1. It is not fraudulent to take an ordinance to the outer limits of the law.”

Gaskill pointed to income tax deductions as an example, and noted that if the IRS takes umbrage with a deduction that is listed, they simply make a person pay it back.

“If you take a deduction that the IRS doesn’t approve of, you simply cut them a check, but you know that everyone tries to get all the deductions they possibly can,” said Gaskill. “It is our privilege as citizens to try to push the limits of what we are allowed to do by law, but in the case of tax deductions, if they don’t approve of one, they don’t try to debar you or put you in jail.”

The Mayor and City Council will now bank medallion 130, and more than likely it will be sold at a much later date.

“There are some conversations about us sitting on it for awhile and seeing how the summer goes,” said Cymek, “but we did vote to have 175 taxis on the road, and I know there are some people that want to get a taxi on the road that don’t have medallions, so we’ll have to wait and see what the council decides to do with it.”

Gaskill did argue that if the transaction needed the council’s final approval, the town should have never approved and handed over medallion 130 to Hovance on March 25.

During Monday’s public hearing at City Hall, Cymek brought up a motion to begin debarment proceedings. However, it was also Cymek who pulled back his motion in hopes of getting some closure on the situation.

“I just wasn’t sure that it was worth the taxpayers to have to foot the bill for a proceeding that we can’t be sure we’d find out anything new in this situation, although I think it’s pretty obvious that they tried to defraud the city and beat the system,” Cymek said.

Councilman Jim Hall hinted he believes the intent for the $1 medallion sale was more than likely financial although it may have been thought of as cheeky when the scheme was created.

“I think their intent was to get out of paying the $375 transfer fee, but they didn’t get anything over on us.  Everyone is trying to be clever nowadays and beat the system, but our intent when we were making this law was to instill a minimum transfer fee and that unfortunately fell through the cracks, because we knew if there wasn’t a minimum transfer fee, something like this was going to happen,” Hall said.

Mayor Rick Meehan said had vocalized a desire for at least a $500 minimum transfer fee, and ironically, the council made that request a reality last week through emergency amendment to the ordinance in a unanimous vote.

In hindsight, council members have conceded that this situation, which Meehan called a debacle, would have been avoided if the transfer fee had made its way into the first draft of the ordinance.

“With any ordinance, all seven of us are spouting off things that we want put in there, and Guy [Ayres] is sitting there writing away, and over the years, we’ve missed a few things and we have to go back and fix it, but we do fix it,” said Hall.

As for the punishment, there are some on the council who would have liked the parties to go through a debarment proceeding, but for the short term, most would simply prefer that the situation be put to rest.

“In my personal opinion, I don’t think it was much of a punishment,” said Meehan. “I think there was an attempt to defraud the town and the taxpayers and I think it was done quite deliberately.”

Perhaps Ayres put it best last week when he said, “all of this over not wanting to pay $375 just boggles my mind.”