The Comprehensive Trump University Lawsuit Scandal Breakdown
Posted By Derek Johnson on March 7, 2016 at 12:48 pm
You may have heard in the past week or so that Donald Trump (R) is embroiled in a series of lawsuits from former customers and U.S. Attorneys General related to the operation of “Trump University.” The first lawsuit was filed back in 2012, but the issue is only now gaining traction in the media landscape as Trump has soared to frontrunner status in the Republican presidential primary.
Trump is currently litigating the matter in a San Diego court and as Texas Senator Ted Cruz (R) recently pointed out, he is listed as a witness and tentatively scheduled to give a closed-door deposition in July. Marco Rubio has gone one step further, flat out calling Trump “a con man” over Trump University and pointing to the overlaps between the (now defunct) for-profit venture and Trump’s presidential campaign.
Given Trump’s status as the odds-on favorite for the Republican nomination, an in-depth breakdown of the lawsuits (Cohen vs. Trump and Makaeff vs. Trump) and their implications are warranted. Here is a potential guide to the facts and allegations thus far.
It wasn’t a real university
It was a for-profit Limited Liability Company (LLC) that operated from 2005-2010. Trump University was neither licensed as a school nor accredited as an institution of higher learning. Nevertheless, “Trump U” was meant to emulate the feel of a legitimate higher education experience, with Trump’s resources, business secrets and insider knowledge about the real estate market as the core curriculum.
He is quoted in marketing materials comparing it to the Wharton Business School and promised that each instructor would be “handpicked” by him as a real estate expert schooled in the secrets of Donald Trump’s success. Marketing guidelines advised referring to employees as “faculty.”
By all accounts, the “students” who are alleging fraud thought they were getting a legitimate academic experience. A paragraph from the Cohen complaint alleges that Trump and former president Michael Sexton executed: “a scheme to make tens of millions of dollars by marketing Trump University as both: (1) a learning institution with which Donald Trump was so integrally involved that students would effectively be learning from him because, among other reasons, they would be learning his real estate secrets from instructors whom he had handpicked; and (2) an actual university with a faculty of professors and adjunct professors.”
Trump’s response to the complaint flatly denies this allegation, but acknowledges that Trump University was a for-profit venture.
Trump University moved its headquarters to avoid changing names
In 2010, the New York State Education Department wrote Trump a letter advising him that calling his company a “university” was misleading and that he should refund past customers and change the name or obtain a license to operate as an institution of higher learning.
In response, Trump moved the headquarters of Trump University from New York to Delaware and continued using the name until 2010, shortly before the company folded.
One-word denials, limited acknowledgement and personal ignorance
One of the major claims made by both plaintiff groups is that, through a series of deceptive marketing and sales pitches, Trump University promised intimate, personal involvement from Trump himself and led “students” to believe that his fingerprints were over every aspect of the operation. In a blog post for Trump University, he is quoted saying “I’m not just putting my name on this venture; I plan to be an active presence in the curricula.”
Trump’s response to both the Cohen and Makaeff complaints answer virtually all charges in three ways: one-word denials with no further details provided, acknowledgement of basic details (“Defendant admits he has done business in California”) and profession of personal ignorance on the part of Trump as to the specifics of any potential fraudulent activity.
Trump’s lawyers use this term over and over again: their client is “without knowledge or information sufficient to form a belief as to the truth of the allegations, and on that basis, denies those allegations.” It is used in direct or partial response to 30 claims alleged in the Cohen suit and 52 claims alleged in the Makaeff suit, many dealing with core claims of fraud.
The way Trump’s level of involvement is described in court filings starkly contrasts with what marketing materials told consumers. In multiple instances, Trump claims that he personally selected the professors and administrators and that he would be on-hand to answer questions. His personal involvement in the curriculum was the major selling point of the entire enterprise. In court, Trump’s lawyers have attempted to absolve him of wrongdoing by arguing that he wasn’t actually involved, even enough to know if the claims of the plaintiffs are accurate or not.
The “professors” were salespeople
A promotional video shows Trump emphasizing how integral his involvement was to the university’s brand:
“We’re going to have professors and adjunct professors that are absolutely terrific. Terrific people. Terrific brains. Successful. The best. We are going to have the best of the best. And, honestly, if you don’t learn from them, if you don’t learn from me, if you don’t learn from the people that we’re going to be putting forward – and these are all people that are handpicked by me – then, you’re just not gonna make it,” said Trump.
In reality, lawyers for Cohen and Makaeff claim that the instructors and mentors were not professors or even real estate experts, but rather “predominantly professional salespeople, hired for their ability to deliver a hard-sell sales presentation, and paid exclusively on commission based on the percent of sales they delivered.” There was also allegedly a “playbook” that scripted everything the instructors said or did, right down to what music to play and where to stand.
According to court documents, the actual content of Trump University was less an educational program and more a series of infomercials designed to get customers to invest increasingly large amounts of money on Trump University products.
Customers were first lured in by a free 90-minute workshop where they are promised the secrets of real estate investing in a three-day, $1500 seminar. At the seminar, attendees are asked to fill out detailed financial information forms and raise their credit limits for future real estate deals. By the end of the seminar, they were told by their instructors that Trump’s secrets could not be divulged in just three days and encouraged to use their increased credit to purchase the next level, a one-year mentorship package that cost an additional $10,000-$35,000. At no point, the plaintiffs claim were they actually taught real estate secrets or knowledge sufficient to confidently make real estate deals.
“The primary lesson Trump University teaches its students is how to spend more money by buying more Trump Seminars,” claimed Makaeff’s lawyers.
New York Attorney General Eric Schneiderman, who filed his own suit against Trump University in 2013, said in a press release that thousands of people “paid Donald Trump $40 million to teach them his hard sell tactics got a hard lesson in bait-and-switch.” He also claimed that an investigation into Trump University found that “Donald Trump did not handpick even a single instructor at these seminars and had little or no role in developing any of the Trump University curricula, or seminar content.”
Schneiderman’s suit is set to go forward after a federal appellate court unanimously ruled on Super Tuesday that there was cause for action.
The Better Business Bureau won’t reveal Trump University rating
Because Trump University is no longer an active business, the Better Business Bureau doesn’t have a rating listed for the company on its website. However, Politifact rated Trump’s claim on Meet The Press that Trump U received an “A” rating from the organization as “false.” Multiple press reports from 2010 and 2011 note that in the last year of the company’s existence, it received a “D-“ rating after receiving dozens of complaints.
Trump has claimed in different interviews that surveys taken of Trump University customers show a satisfaction rate between 95-98 percent. A website (www.98percentapproval.com) was created recently to tout these surveys and discredit claims of fraud. Lawyers for Cohen and Makaeff claim the surveys were conducted under false pretenses. It is not known whether Trump or his campaign created the site.
“Trump U” targeted senior citizens
Makaeff’s lawyers claim that Trump University salespeople targeted senior citizens, a group that is particularly susceptible to fraud. Lines like “the average savings of a 50-year old American is only $2,500. That isn’t wealth, that’s poverty” and ““how many times do you go into Walmart, and you’re greeted by a guy or gal who is 70+ years old – do you want to be doing that when you’re 70 years old?” were used to tap into the economic insecurity of the elderly.
Trump’s lawyers dispute this claim in their rebuttal with a one-word response: “Denied.”
Some have drawn parallels between Trump University and for-profit higher ed institutions also accused of fraud and deceptive marketing. In fact, that comparison may be unfair to the for-profit industry. Whatever flaws the systems may have, all for-profit universities that accept federal aid are accredited and licensed as institutions of higher learning. To do this, they have to follow certain educational and administrative standards that used to define a higher education institution.
Many critics complain that the standards used by accreditors are overly generous to the applicant and vague regarding quality. Still, Trump University did not meet even this low standard. While there is some overlap between the accusations against Trump University and those leveled in the Corinthian Colleges scandal, “Trump U” has more in common with the vast array of unaccredited vocational training companies, educational seminars and “micro-credential” programs that are hoping to get access to federal student aid in the near future.
While presidential candidates from Florida Senator Marco Rubio (R) to former Secretary of State Hillary Clinton (D) have advocated opening up accreditation to some of these smaller programs, one of the biggest obstacles preventing that from happening is widespread concern over the quality, value and return that customers get from using these products.
According to the Associated Press, plaintiff Tarla Makaeff wants to withdraw from the federal class-action lawsuit against Trump University, after six years of dealing with Trump’s legal team and the lawsuit. “Her lawyers said the Republican presidential front-runner and his team have put her “through the wringer” and made the prospect of a trial unbearable. A judge will consider the request Friday [March 11], four days before Florida and Ohio hold their primaries.”
On March 8, 2016, the Better Business Bureau released a statement on Trump Entrepreneur Initiative’s (formerly Trump University) rating with the organization. “Trump University does not currently have an A rating with BBB. The BBB Business Review for this company has continually been “No Rating” since September 2015. Prior to that, it fluctuated between D- and A+.”