For-Profit Schools: Trump University

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The Federal lawsuit alleging that Donald Trump has “knowingly participated in a scheme to defraud” (Eder) students of Trump University, the now defunct, for-profit, unaccredited institution, will go to trial pursuant to a decision made by Judge Gonzalo P. Curiel, on Tuesday, August 2, 2016. Attorneys for Trump had filed a motion to dismiss the fraud case. The case is among three cases being levied against the Republican presidential candidate (Vercammen and Lim). There has likely been even greater attention brought to the case since Trump has made racist comments about the judge. Curiel, who is from Indiana, has been accused by Trump as potentially basing his decisions against the candidate due to his Mexican heritage, suggesting that because Trump is strong on immigration, particularly with respect to Mexicans (because Trump wants to build a wall on the Mexican border), that he will not get a fair trial. Curiel held that the former University attendees had identified genuine questions about the institution, which became defunct in 2010 after running for five years (Eder).  

Students allege that they were tricked out of their money, with some packages as high as $35,000, as a result of high-pressure marketing methods and fraudulent claims about the information they would learn (Eder). Trump University provided courses on subjects like real estate, entrepreneurship, asset management and wealth creation. News agencies attempted to secure video of his deposition in the case, but Curiel denied their request citing that transcripts were both accurate and sufficient. In their efforts to shut the case down, lawyers for Trump argued that evidence that Trump had engaged in a fraudulent scheme intentionally had not been established. In coming to his decision, Curiel cited the fact that Trump had not “handpicked” (Eder) instructors and mentored them, as stated in the marketing materials. There was a clear question about Trump’s assertion that he was “integral[ly] involve[d]” (Eder) in the program, and this statement was misleading. The judge ordered that sealed documents be released which incorporated testimony from prior managers who referred to Trump University as “a ‘lie’ and a ‘scheme’” (Eder). There are three lawsuits against the for-profit institution, two of which are class-action suits in California, and a third brought by New York State’s Attorney General Eric T. Schneiderman.

The Trump Legal Moonwalk

Michael Sexton met with Trump about his idea to create a real estate training program where he would pay Trump a fee to use his name (Brill). However, Trump wanted to be the principal in the business, so he became the 92% owner, by way of two of his personally owned LLCs. In addition, Donald, Ivanka, one of his sons, and his chief financial officer of the Trump Organization were the only authorized signatories on the educational institution’s checking account. In their efforts to get Trump, the individual, dismissed from the case, his lawyers tried to say that he was “completely absent” (Brill) from the functions of the academic institution, and did not own its stock. Based on this contradictory evidence that seemed to overwhelmingly support the position of the plaintiffs, Curiel ruled against dismissing Trump as an individual (Brill).

The legal moonwalking performed by Trump’s attorneys had to do with the fact that in order to get Donald removed from the case they had to say that he had nothing to do with the company (Brill). Yet, this very argument, in effect, supports the plaintiffs’ argument that he defrauded them, by appearing personally in commercials, in marketing material, making use of his name and stating that he had hand-picked the faculty and taught them his specific real estate secrets to his success. Since the suit names him personally, his reason for now wanting to distance himself and moonwalk his way from the University, is that his personal assets are exposed to being subjected to damages awards. 

The History of Trump University

Trump University launched in 2005 (Tuttle). When the school started he stated, “if I had a choice of making lots of money or imparting lots of knowledge, I think I’d be as happy to impart knowledge as to make money” (Tomkiw). At first the company provided online only education, but eventually added in-person instruction courses to their lineup. Real estate investing was the initial focal point of the institution. On its benefits, Trump described, “I can turn anyone into a successful real estate investor, including you” (Cassidy).  Potential students were often invited to attend an initial seminar in a hotel ballroom ("Trump University 2010 Playbook"). The students were then encouraged to take additional courses, which were priced starting at $1495 to as much as $35,000 for their Trump University Gold Elite program. The Trump Elite Gold package offered, a 3 day in-person field coaching, a creative financing retreat, and a wealth preservation retreat, among other things ("Trump University 2010 Playbook"). Seven thousand six hundred and eleven offerings were sold to their customers. Six thousand of the offerings were for a program that lasted three days, at a cost of $1,500. One thousand offerings were sold for prices from $10,000 to $35,000. Trump declared that the program had received a 98% satisfaction rate, yet, many prior students state that program employees insisted that positive reviews be provided so that they could get their completion certificates. In the institution’s television commercials, Trump stressed that he had handpicked the instructors. Michael Sexton, his partner, stated that Trump had agreed to the ads, signed off on them, and never requested that they be changed. The name Trump University was eventually revised and became The Trump Entrepreneur Initiative in 2010 prior to closing its doors (Tuttle).

Not too long after the University began, the New York State Education Department (NYSED) advised Trump University that the company was violating state statutes, in that it was operating without a NYSED license (Swann). Yet, the warnings were ignored, until the company changed its name in 2010. In 2013, Republican Florida Attorney General Pam Bondi, was considering whether to press forward with a fraud case against both Trump University and Trump Institute (Webb). Bondi spoke with Trump on the phone and solicited a donation to And Justice for All, an organization that was supporting her reelection efforts (Graham). The Trump Foundation issued a $25,000 check to the non-profit and four days later, Bondi dropped the investigation. In another questionable “error” Trump’s charitable organization did not report the contribution to the IRS, as well. In another “error,” as a non-profit, the foundation may not make political donations (Webb). As a result of the illegal action, the IRS required Trump’s charitable organization to pay a $2,500 penalty. The issues here are many, first the concept of pay to play with Bondi, next is the illegal contribution from his foundation, and next is the fact that Trump has made public proclamations, reported by all of the major news reporting agencies that, “as a businessman and a very substantial donor to very important people, when you give, they do whatever the hell you want them to do, as a businessman, I need that” (Wells and Chemi). Trump, who apparently does not care about how illegal this sounds, repeated this illegality in the early days of the GOP primary. As suspected, though, he has since started his moonwalking soft shoe and singing Billie Jean again, since that time.

In the Trump University for-profit pay for play scandal, though, there is more (Wells and Chemi). Citizens for Responsibility and Ethics in Washington, a watchdog group, has submitted notification to the IRS that Trump was in violation of another donation rule – you cannot make a donation for the benefit of the leader. And, in another matter, The Huffington Post reported that the $25,000 donation was not all that Bondi received. His family issued checks to her and then held a fundraiser at Mar-a-Lago, charging her less than the normal rate for hosting an event, including less than the rate given to his own campaign.

A Bait and Switch Scam

 In 2013, New York State’s Attorney General Eric T. Schneiderman filed a civil lawsuit alleging that Trump University was not even eligible to be called a university (Schneiderman). The attorney general went on to describe what a snake oil salesman was, a person who sells fake snake oil and asserts that the “oil,” which is really a combination of “turpentine, beef fat and red pepper,” cures “all pain and lameness” (Schneiderman). The attorney general used this corollary to label and define Donald Trump and his University. He said, “Donald Trump was basically doing the same thing with Trump University — swindling desperate people with phony promises” (Schneiderman). Ronald Schnackenberg, who was employed by Trump as a salesman at Trump University, and worked in his office at 40 Wall Street, said in an affidavit unsealed in one of the two California lawsuits: while Trump University claimed it wanted to help consumers make money in real estate, in fact Trump University was only interested in selling every person the most expensive seminars they possibly could . . . based upon my personal experience and employment, I believe that Trump University was a fraudulent scheme, and that it preyed upon the elderly and uneducated to separate them from their money (Cassidy).

The fact that Trump is trying to exclude himself from this and other cases makes total sense. Who would want to be saddled with accusations of being nothing more than a snake oil salesman and a business man who uses financial incentives to wield undue influence on politicians and elected officials, while the Republican candidate for the presidency?

So what was the bait? Trump University was not a university, despite stating that it offered, “graduate programs, post graduate programs, doctorate programs” (Cassidy). In order to become a university in New York, the university must obtain a state charter. The next portion of the bait were the free seminars offered by Trump. Once a person arrived at the seminar (the switch) they were pressured to buy a $1,500 to $35,000 real estate investment program offered by his “handpicked” instructors. He said that he would teach you all of his real estate tricks of the trade. He further stated that he could turn anyone into a real estate success story. But the students who paid the money and took the courses disagreed. The Trump University Playbook for salesman was later discovered.

This bait and switch was laid out in the Trump University Playbook (“Playbook”), which provided step-to-step directions to Trump University instructors on what to tell students during the seminars. . . . Trump University instructors and staff were given detailed guidance as to how to build rapport and approach consumers one-on-one to encourage further purchases. Trump University representatives were explicitly instructed to push the highest priced Elite programs. Even when students hesitated to purchase the expensive programs, Trump representatives were provided stock responses to encourage purchases, including encouraging students to go into debt to pay for the Elite programs (Cassidy).

For example, the Trump University Playbook specifically instructed salesmen to play on people’s emotions and fears: act[] on a person's inherent need to possess something before it is gone. . . . One of the prime human motivations to take action is the fear of loss. A properly crafted Take Away sale is crafted around that emotion ("Trump University 2010 Playbook").

Works Cited

Brill, Steven. "What the Legal Battle Over Trump University Reveals About Its Founder." Time.com. Time, Inc. 5 November 2015. Web. 11 September 2016. <http://time.com/4101290/what-the-legal-battle-over-trump-university-reveals-about-its-founder/>.

Cassidy, John. "Trump University: It’s Worse Than You Think." The New Yorker. Conde Nast. 2 June 2016. Web. 11 September 2016.  <http://www.newyorker.com/news/john-cassidy/trump-university-the-scandal-that-wont-go-away>.

Eder, Steve. "Federal Judge Allows Suit Against Trump University to Proceed." The New York Times. The New York Times Company. 2 August 2016. Web. 11 September 2016. <http://www.nytimes.com/2016/08/03/us/politics/trump-university-case.html?rref=collection%2Ftimestopic%2FFor-Profit%20Schools&action=click&contentCollection=timestopics&region=stream&module=stream_unit&version=latest&contentPlacement=8&pgtype=collection>.

Graham, David A. "The Many Scandals of Donald Trump: A Cheat Sheet." The Atlantic. The Atlantic Monthly Group. 7 September 2016. Web. 11 September 2016. <http://www.theatlantic.com/politics/archive/2016/09/donald-trump-scandals/474726/>.

Schneiderman, Eric. "How Trump University ran the scam: Attorney General Eric Schneiderman explains why he's prosecuting Donald Trump's real estate 'education' operation for fraud." New York Daily News. NYDailyNews.com. 9 June 2016. Web. 11 September 2016. <http://www.nydailynews.com/opinion/eric-schneiderman-trump-university-ran-scam-article-1.2666389>.

Swann, Ben. "Reality Check: The Truth About Trump University — Was it a Scam?" Truth in Media. 9 March 2016. Web. 11 September 2016. <http://truthinmedia.com/reality-check-trump-university-scam/>.

Tomkiw, Lydia. "Trump ‘University’ Instructors, Documents Reveal Sales Push To Max Out Credit Cards." International Business Times. IBT Media, Inc.  4 June 2016. Web. 11 September 2016. <http://www.ibtimes.com/trump-university-instructors-documents-reveal-sales-push-max-out-credit-cards-2378110>.

"Trump University 2010 Playbook." Politico. Politico, LLC. 2010. Web. 11 September 2016. <http://static.politico.com/25/88/783a0dca43a0a898f3973da0086f/trump-university-playbook.pdf>.

Tuttle, Ian. "Yes, Trump University Was a Massive Scam." National Review. 26 February 2016. Web. 11 September 2016. <http://www.nationalreview.com/corner/432010/trump-university-scam>.

Vercammen, Paul and Lim, Naomi. "Judge Curiel denies Trump U motion to dismiss case." CNN. Turner Broadcasting System, Inc. 23 July 2016. Web. 11 September 2016. <http://www.cnn.com/2016/07/22/politics/judge-curiel-denies-trump-u-motion/>.

Webb, Rene. "The Trump Foundation IRS Penalty Raises More Questions." Modern Liberals. 1 September 2016. Web. 11 September 2016. <http://modernliberals.com/trump-foundation-irs-penalty-raises-questions/>.

Wells, Nicholas and Chemi, Eric. "Donald Trump is right: Paying politicians pays." CNBC. CNBC, LLC. 17 September 2015. Web. 11 September 2016. <http://www.cnbc.com/2015/09/17/donald-trump-is-right-paying-politicians-pays.html>.