IRS agents raid Boston Cab headquarters

Law enforcement officers removed boxes of material from the Boston Cab Co. garage.Matthew J. Lee/Globe staff/Boston Globe

Internal Revenue Service agents executed a federal search warrant Friday at the headquarters of Boston Cab, the largest taxi company in the city and the focus of a recent Globe Spotlight Team investigation that found widespread exploitation in the industry.

The agents, who were accompanied by Boston and Cambridge police officers and agents from the US Secret Service and the US Department of Housing and Urban Development's Office of Inspector General, descended on the Kilmarnock Street garage around 3 p.m.

The IRS agents entered the garage with guns drawn, according to a cabbie who witnessed the raid. "Hands up," the driver heard them say. Authorities were later seen leaving with cardboard boxes.

Jessica Crocker, an IRS agent and spokeswoman for the agency's Boston office, said the IRS was "conducting a court-authorized operation" but referred all other questions to the office of US Attorney Carmen M. Ortiz.

A spokeswoman for Ortiz said that the US District Court search warrant was sealed and that prosecutors were not releasing any information.

Boston Cab is owned by Edward J. Tutunjian, a Jordanian-born multimillionaire who entered the cab business in Boston in the 1960s and now owns 372 taxi medallions. The king of Boston's taxi industry, he owns about one in five of the city's 1,825 medallions, each worth approximately $600,000.

Boston Cab owner Edward J. Tutunjian talked with federal agents during Friday’s raid at his company’s Fenway garage.Matthew J. Lee/Globe staff/Boston Globe

Tutunjian's business empire includes parking lots and garages, Back Bay apartment buildings, a business making loans at high-interest rates to aspiring taxi owners, and several vineyards in Chile. All told, his businesses are worth about a quarter-billion dollars.

A three-part Spotlight Team series in March and April documented that many taxi drivers pay Tutunjian's staff small bribes to get keys to Boston Cab vehicles that they lease for about $100 per 12-hour shift. Drivers are pressured to buy gasoline at above-market prices from Tutunjian's gas pump, and are often told to cover phantom shortfalls that they cannot dispute because they do not get receipts.

The Spotlight Team also reported that federal authorities had begun investigating operations at Boston Cab last year, but the precise contours of the investigation are unclear. Boston Police Commissioner Edward F. Davis told the Globe that he had alerted federal authorities about potential criminal activities at the Kilmarnock Street garage and they opened an inquiry.

"This is part of that ongoing investigation,'' Boston police spokeswoman Cheryl Fiandaca said Friday.

EJT Management, the eponymous company that oversees Tutunjian's taxi companies, said in a statement Friday that in response to the series of articles, it has hired the law firm of Bingham McCutchen to "conduct an independent review of internal operations, including the specific practices challenged in the Globe Spotlight series."

The review is not complete, the statement said, but initial findings "suggest that allegations concerning garage operations at EJT Management are largely unsubstantiated, and that the company's practices were consistent with the law.''

The company also said that EJT "will fully cooperate with all authorities in responding to any and all requests for information."

Tutunjian was present as law enforcement officials gathered records Friday, but the 63-year-old Belmont resident declined to be interviewed. "We're not going to talk at all," said his lawyer, Mark E. Robinson, who was also at the garage.

A cabbie at the garage told a Globe photographer that the IRS agents, upon entering the mammoth space, drew their guns and instructed everyone inside to put their hands up.

News that authorities had entered the offices of the cab company near Fenway Park came near shift change for the drivers. Drivers typically begin their routine at 4 or 5 p.m., or 4 or 5 a.m.

The drivers for Boston Cab, like others throughout the city, are deemed "independent contractors" by the Police Department's hackney unit, which is supposed to regulate the industry. But a class-action suit by cabbies filed in Suffolk Superior Court has said the system violates state wage laws, and that some drivers earn less than minimum wage.

The Globe Spotlight Team found that even if Tutunjian obeyed the city's taxi regulations, his business would remain highly profitable. In 2000, his cab operation boasted an enviable 42 percent "net operating profit" margin, according to a 2001 internal memorandum by Sovereign Bank.

In 2004, Tutunjian reported to the IRS income of about $30,000 per medallion, or taxi license. But leasing prices and estimates from the Police Department's hackney unit on how often taxis are in service suggest that each medallion should have earned several thousand dollars more during that year.

In a statement to the Globe earlier this year, Tutunjian declined to discuss his tax returns, except to note that they are prepared by an independent accounting firm in compliance with the law.

In response to the Globe series, Mayor Thomas M. Menino ordered a sweeping review of the taxi industry, and a lopsided system of hackney regulation that comes down hard on taxi drivers but not on fleet owners.

On Friday, the city disclosed that it has tentatively tapped Nelson\Nygaard Consulting Associates Inc. in Boston to examine its taxi operations, according to a copy of the letter sent to the company's chief operating officer, Paul Jewel. The city put out bids for a consultant to complete a study in two to three months. The contract is expected to exceed $25,000.

Nelson\Nygaard, which specializes in transit and transportation planning for small and large transit agencies, has worked with organizations across the country, including the MBTA.

Donna Blythe-Shaw, an organizer for the United Steelworkers and the Boston Taxi Drivers Association's representative, said Friday's raid had alarmed a number of drivers who wonder whether their livelihoods will be affected.

"Boston Cab Dispatch sent out a message saying, 'Don't come back to the garage,' '' Blythe-Shaw said. "So drivers are wondering: 'What do I do?' Do they take their cabs home or do they keep driving? They don't know what to do.''

One longtime driver for Boston Cab said they have been left in the dark about how to proceed.

The driver, who spoke on the condition of anonymity, said he was supposed to return his cab to the Kilmarnock Street garage at 4 p.m. — but the garage was blocked off by yellow police tape.

"I don't know what to do,'' the driver said Friday evening. "Right now I'm driving. And of course I'm worried about my job.''