The case is building against Trump University, the eponymous and controversial real-estate school started by GOP front-runner Donald Trump. Expected to go to trial this summer, the school has already been forced to stop calling itself a university and might be forced to ‘fess up to fraud.
The timing of the controversy couldn’t be more inconvenient. Not only do fraud charges stain Trump’s character, but one of the California civil suits may take him off the campaign trail. The case is set for an August trial, with Trump listed as a witness.
So what is going on with Trump U? And what is the likely outcome?
Trump University begins as a 90-minute free seminar. Facilitators were urged to sign 20 percent of participants up for the next level of instruction, a three-day event that cost $1,495. The sales pitch promised attendees real-estate success based on the business lessons learned by Donald Trump himself. Once at the expensive three-day seminar, participants were told they need more training. Costs of additional seminars run upwards of $10,000. A “Gold Elite Package” sold for a whopping $35,000 and promised one-on-one mentorship throughout the participant’s first real-estate deal.
The company’s legal problems originated with the state of New York. In 2005, the New York State Education Department informed the school that it was operating illegally by calling itself a university. Despite agreements to follow specific guidelines — not holding live programming in New York and operating from a business address outside of the state — Trump University did not adhere to these standards. In 2010, the organization changed its name to Trump Entrepreneur Initiative.
While this may seem like an unimportant, bureaucratic legal tit for tat, Trump University used emblems and vocabulary that made it seem like an accredited institute of higher learning. This, the attorney general of New York argued, is misleading and ultimately fraudulent.
The official name was only the first of Trump University’s legal problems. The organization claims to have a 98 percent satisfaction rate. If the slew of angry online posts aimed at the company don’t indicate otherwise, the lawsuits surely do. Trump University currently faces a $40 million fraud action originating from the New York attorney general and two class-action lawsuits in California.
Donald Trump’s presence and influence, or lack thereof, is part of the problem. Students were promised Trump’s insider secrets, presumably developed and used by Trump himself and delivered by Trump’s handpicked experts. Conferences often featured large cardboard cutouts of the real-estate mogul and presenters hinted that he could walk in the door at any time.
As it turns out, the curriculum was developed by a “third party company that creates and develops materials for an array of motivational speakers and seminar and timeshare rental companies.” Trump’s experts were far from handpicked. Some had never worked in the real-estate industry. The closest students came to meeting Trump himself was photo ops with his cardboard cutout. Trump did personally approve each advertisement, however.
Trump University’s bait-and-switch sales tactics are also under attack.
Michael Sexton, former president of Trump University, would later admit that the three-day seminar did not teach students the things they needed to get started in real estate. The nearly $2,000 course was intended as “an opportunity for an individual to make the decision[:] Is real-estate investing something that I am actually going to pursue[?]” Nevertheless, speakers promoted the three-day seminar as “the last real-estate education that you will ever need for the rest of your life.” Unsurprisingly, students felt that they had shelled out a lot of money to attend what amounts to an extended sales pitch.
Whether Trump University ever followed through on their advertising promises also is in question.
An investigation by the Attorney General Office of New York found that students who purchased the Gold Elite Package met with their mentors for a three-day field training. The investigation found many mentors were unqualified or disappeared completed. The report does not specify whether this was a common problem or limited to several particularly terrible mentors. One thing is for sure — not everyone who signed up for the program received the attention and mentorship promised.
Trump maintains that the overwhelming majority of program attendees were more than satisfied with the program. Those who did not find success, he argues, often didn’t put in the effort required to succeed in the real-estate industry.
Stay tuned, the case could come to trial just after the Republican Convention in mid-July.
—Erin Wildermuth
Erin is a freelance writer, photographer and filmmaker. She is passionate about moving beyond party politics to identify pragmatic solutions to social, economic and political problems. Her writing has appeared in the Washington Times, the American Spectator, Doublethink and Scuba Diver Magazine. She spends her free time scuba diving, snowboarding and ravenously reading popular nonfiction. Erin holds a master’s degree in International Political Economy from the London School of Economics.
Sources:
http://abcnews.go.com/US/wireStory/judge-grants-womans-request-quit-trump-university-suit-37856270
http://www.politico.com/blogs/under-the-radar/2016/03/donald-trump-university-lawsuit-summer-220989
http://www.vox.com/2015/7/29/9067429/trump-university
http://www.huffingtonpost.com/2011/05/06/trump-university-scammed-customers_n_858587.html
http://online.wsj.com/public/resources/documents/trump.pdf
http://www.theatlantic.com/business/archive/2014/03/the-art-of-the-upsell-how-donald-trump-profits-from-free-seminars/284450/
http://www.nationalreview.com/corner/432010/trump-university-scam
http://www.huffingtonpost.com/2011/05/06/trump-university-scammed-customers_n_858587.html
http://www.cnn.com/2016/02/26/politics/donald-trump-university-fraud-trial-republican-debate