NYC taxi medallion dynasty faces shareholder revolt over SEC fraud claims

A big shareholder in a New York City taxi medallion lender is trying to oust the father-son duo at the helm of the company days after the Securities and Exchange Commission accused the firm of secretly paying for favorable news stories. 

Medallion Financial, a $145 million lender founded by Alvin Murstein and currently led by his son Andrew, was accused of fraud in an SEC complaint filed last Wednesday.

As the rise of Uber and Lyft decimated the taxi industry, the younger Murstein sought to boost Medallion Financial’s sagging share price by hiring media strategists to write at least 50 flattering articles about his company for sites like Seeking Alpha and HuffPost under fake names without disclosing that they were being paid, according to the SEC. 

Medallion Financial has denied wrongdoing, but its shares have tanked roughly 32 percent since the SEC filed its complaint last week. Now, at least one big investor is pushing for a change of leadership of the company.

KORR Value — a New York-based activist investor led by Kenneth Orr — published a scathing letter on Monday calling the SEC’s suit “alarming” and slamming the company’s “lackluster corporate governance.” The firm, which holds a 5.6 percent stake in Medallion Financial, is calling on both Mursteins to immediately step down from the company’s board without pay until the SEC’s suit is resolved. 

KORR is also pushing for other changes at the company, including selling off its taxi medallion portfolio and potentially other assets, laying off “non-essential staff” and upping share buybacks. 

Medallion Financial went public in 1996 and made massive profits from medallion loans before Uber and Lyft disrupted the industry. Alvin and Andrew Murstein personally took in more than $42 million from 2002 to 2014, according to the New York Times. The company used its profits to buy up professional lacrosse and NASCAR teams — and Andrew Murstein reportedly even hired Nicki Minaj to perform at his son’s bar mitzvah in 2015.

The alleged fraud scheme, which the SEC says occurred from 2014 to 2017, was an apparent attempt to keep the good times rolling.

In a statement to The Post on Monday, a Medallion spokesman said the company is “committed to enhancing shareholder value and regularly reviews its strategic objectives to ensure the Company is meeting this goal.”

“The SEC’s attempt to mischaracterize Medallion’s good-faith efforts defies logic when the SEC does not even allege that the Company’s actions had any market impact whatsoever on the price of Medallion stock and Mr. Murstein has never sold a single share of Medallion stock,” the statement said. “We intend to vigorously defend against the SEC’s unfounded charges and are confident we will be completely vindicated.”

The SEC is seeking permanent injunctions, disgorgement plus prejudgment interest, and civil penalties against Medallion Financial, Andrew Murstein and Lawrence Meyers — a California PR man who was allegedly paid $65,000 to write some of the fraudulent posts.

In addition, the SEC wants Andrew Murstein, 57, to be barred from serving as an officer or director of any public company. 

Murstein has denied paying for positive media coverage when confronted by a Post reporter in 2016, according to the SEC’s complaint. Shortly afterward, Murstein allegedly inked an agreement with the contractor who had written some of the articles, paying her $15,000 in “hush money” to “falsely affirm” that she was never ordered to write articles about Medallion Financial under a fake name, according to the SEC. 

KORR wants to replace both Mursteins — who collectively own about 15 percent of the company — with two alternative director candidates, Philip Scala and Andrew Fox. Scala is a former FBI agent who would help navigate the SEC probe, while Fox is an entrepreneur who would help pivot Medallion Financial away from the flagging medallion business, KORR said. 

The activist investor is seeking to rally other disgruntled shareholders for a potential proxy battle ahead of the company’s annual meeting, which is typically held over the summer. KORR also wants a third board member —  David Rudnick, Andrew Murstein’s father-in-law — to step down.