OUCH

08.26.13

8 Juicy Bits from New York State’s Lawsuit Against Donald Trump

The famed real estate mogul operated a higher education enterprise that allegedly didn’t provide much in the way of useful instruction.

Everyone’s favorite billionaire-mogul-turned-educator Donald Trump is being sued (PDF) by the New York Attorney General’s Office for a cool $40 million. Why? The state alleges that one of his enterprises, Trump University—in reality an unlicensed real estate academy for budding investors—misled some 5,000 students about the quality and nature of the “courses” it offered. Billed as master classes in real estate investing, Trump University’s offerings didn’t live up to the standards of Trump’s alma mater, the University of Pennsylvania’s Wharton School. But the tuition sure did. Three days of classes at Trump U cost nearly $1500 and some students are saying they’ve been hit with over $20,000 in credit card debt for taking classes at the so-called University without learning much of anything or landing a job after. Trump’s lawyer has denied the allegations and a spokeswoman for the Trump Organization pointed us to a website with testimonials from students defending the school. Trump himself hinted that President Obama may have had a role in bringing the suit against him. Here are the juiciest bits from the criminal complaint filed against Trump University.

Trump University Wasn’t Really an Actual University

Licenses? We don’t need any stinking licenses. Trump University wasn’t really a university at all! The New York State Education Department (NYSED) notified the Trump University leadership that the use of the term “university” violated state law—since the entire program was unlicensed.

According to the complaint, NYSED contacted Trump University President Michael Sexton by phone, email, and in person, starting in 2005, reminding him that the University needed to be licensed before it could have offices in New York or offer instruction in New York. Sexton responded that the university would set up a new LLC in Delaware and merge that new company with the existing New York LLC to avoid problems. In 2010, the enterprise dropped the name “University” from its name. But the complaint alleges that Trump University was headquartered at the Trump Organization’s offices on Wall Street, and that at least fifty classes were given in New York—all without the necessary charter or license.

The Free Class was Worth What Students Paid for It

Trump University’s students were allegedly lured into the program with the offer of a free (!) 90-minute seminar, introducing students to Trump’s real estate tips and strategies. One advertisement signed by Donald Trump promoting the free class read: “Come to my free class! In just 90 minutes, my hand-picked instructors will share my techniques, which took my entire career to develop. Then just copy exactly what I’ve done and get rich.” Voila!

The theme song to Trump’s show The Apprentice, “For the Love of Money” by the O’Jays, was allegedly routinely played at the beginning and end of classes. Trump would also appear in videos played at the beginning of the courses.

Classes often began with the promise of a “special” or “surprise” guest who never materialized. As consolation, students were encouraged to take photos with a life-size photograph of Trump.

The More Expensive Classes Weren’t

It Costs Money to Make Money. The complaint alleges that the seminar was actually little more than a “sales pitch for a 3-day seminar costing $1,495,” which was called at least four different names: “Fast Track to Foreclosure Investing,” “Profit from Real Estate Investing,” “The Apprenticeship Program,” and “Real Estate Investor Blueprint.” During the 3-day seminar, the complaint alleges, instructors would often encourage students to contact their banks to increase the borrowing limits on their credit cards.

The 3-day seminar was in turn an “upsell,” the complaint alleges, for so-called Trump Elite classes, which started at $10,000 and ending at $35,000 for year-long mentorship programs. Former students allege those mentorship programs consisted of little else but an occasional phone call.

Instructors Gave out Things that Resembled Diplomas

Even though Trump University was never licensed, instructors allegedly claimed that a Trump University degree was “a bit of a college degree.” Special Trump University seals were used on school materials and diploma-like Certificates of Accomplishment were doled out to people who finished their courses.

The Instructors Barely Resembled Teachers

Trump University’s instructors claimed to be “hand-picked” by Trump himself. The complaint says this was universally false, as Trump had no role in selecting teachers. “Many instructors came to Trump University from jobs having little to do with real estate investments,” the complaint reads, “and some came to Trump University shortly after their real estate investing caused them to go into bankruptcy.” Instructors’ benefits and 401(k)s were managed by the Trump Organization, which also organized contracts for the instructors’ Blackberrys.

Some instructors allegedly told students that they had access to lists of “hard money lenders.” The complaint claims that the list was actually a photocopied page from an issue of the Scotsman Guide, a publicly available magazine covering the mortgage-lending industry.

But Were Schooled on How to Sell Classes Aggressively

Always Be Closing. Instructors were given copies of the “Trump University Playbook,” which encouraged instructors to tell their students “we need longer than 3 days!” One page read, “even one coordinator giving them the impression that 3 days is enough can hurt sales.” Instructors were asked to review profile sheets filled out by students listing their liquid assets, allegedly to see who could pay for the university’s programs.

Trump Is Coming…Maybe!

According to students, Trump University instructors would often hint that Trump himself might swing by one of the 3-day seminars, claiming that he “is going to be in town,” “often drops by,” “might show up” or had just left. Classes often began with the promise of a “special” or “surprise” guest who never materialized. As consolation, students were encouraged to take photos with a life-size photograph of Trump.

Although Trump didn’t have much of a day-to-day role in his University, the complaint claims that he holds 92 percent of its equity stake through two of his “closely held corporations,” DJT University Member LLC and DJT University Managing Member LLC.

Students Rang up Big Debts

You’re mired! Some students complained that they were saddled with upwards of $20,000 in credit card debt after participating in Trump University’s programs. The complaint alleges that students were “routinely refused refunds,” and instead would often be offered an extra phone call with an assigned mentor. When the university fell into financial trouble in late 2009, it was allowed to keep its offices at the Trump Organization’s Wall Street HQ without paying rent. In 2010, the Trump Organization stopped using the word “university” in its name. Still, the complaint claims Trump University brought in $40 million in revenue, and enrolled over 5,000 people, including over 600 New Yorkers.