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Trump University

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Trump Entrepreneur Initiative
Privately held, unaccredited
Industry For Profit Education
Predecessor Trump University (name changed to The Trump Entrepreneur Initiative in June 2010)[1]
Founded 2004 (incorporated)
May 23, 2005; 11 years ago (2005-05-23) (launched)[2]
Founder Donald Trump
Headquarters New York City, U.S
Website trumpinitiative.com
(registration required)

Trump University LLC (formerly the Trump Wealth Institute; later named Trump Entrepreneur Initiative LLC) was an American for-profit education company that ran a real estate training program from 2005 until 2010. (A separate organization, Trump Institute, was licensed by Trump University but not owned by the Trump Organization.) After multiple lawsuits, it is now defunct. It was founded by Donald Trump and his associates, Michael Sexton and Jonathan Spitalny, in 2004. The company offered courses in real estate, asset management, entrepreneurship, and wealth creation.[3]

The organization was not an accredited university or college. It did not confer college credit, grant degrees, or grade its students.[4] In 2011, the company became the subject of an inquiry by the New York Attorney General's office for illegal business practices that resulted in a lawsuit filed in 2013.

Trump University was also the subject of two class action lawsuits in federal court. The lawsuits centered around allegations that Trump University defrauded its students by using misleading marketing practices and engaging in aggressive sales tactics. The company and the lawsuits against it received renewed interest due to Trump's candidacy in the 2016 presidential election. Trump settled all three lawsuits in November 2016, after being elected to the presidency; he agreed to pay a total of $25 million.[5]

History

Michael Sexton created a business plan for a real-estate training program and presented it to Donald Trump looking to pay Trump a flat fee for the use of his name. Trump instead decided he wanted to be the principal owner.[6]

Trump University was incorporated in 2004 by Trump, Sexton, and Spitalny, as a New York limited liability company.[7] Donald Trump owned 93% of the company.[8] On May 23, 2005, Trump University formally launched its education program.[2] At the opening presentation, Trump said: "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".[9] The company's original business plan focused on online education, but quickly expanded to include live, in-person instruction as well. The focus of the instruction was real estate investing, with Trump claiming in advertisements, "I can turn anyone into a successful real estate investor, including you."[10] Typically the instruction began with an introductory seminar in rented space such as a hotel ballroom. At the introductory seminar, students were urged to sign up for additional classes, ranging from $1495 seminars to a $35,000 "Gold Elite" program.[10] Records produced indicate 7611 tickets in total were sold to customers attending courses.[11] Approximately 6000 of these tickets were for a $1,500 3-day course and 1000 tickets were for silver, gold or elite mentored courses ranging in price from $10,000 to $35,000.[12][11]

Trump claimed that students gave 98% favorable reviews to the program.[13] But according to some former students, Trump University employees pressured students to offer favorable reviews, told them they had to fill out the forms in order to obtain graduation certificates, and did not undertake procedures often used to ensure that surveys were filled out objectively.[14]

In an infomercial, Trump said he "handpicked" Trump University's instructors. He testified in a 2012 deposition, however, that he never selected the instructors for the program.[15] According to Michael Sexton, Trump signed off on the school's advertisements.[16] For a time in 2008 it used the name Trump Wealth Institute.[17] In June 2010, "Trump University" changed its name to "The Trump Entrepreneur Initiative."[1] It largely ceased operations in 2010.[9]

The Trump Institute was a separate business. It was licensed by Trump University, but Trump University did not own any part of it.[18] It was owned and operated by Irene and Mike Milin of Boca Raton, Florida.[19] It offered real estate seminars from 2006 to 2009, at which point the licensing agreement expired and was not renewed.[18] Trump himself was not involved in the operation of the Trump Institute, but he recorded a broadcast infomercial promoting it.[20]

Allegations of impropriety and lawsuits

External video
Donald Trump by Gage Skidmore 2.jpg
Is Trump University a fraud?, 5:28, CNN, September 29, 2015
Trump faces lawsuits from former Trump University students, 5:47, CBS This Morning, September 24, 2015
Prosecutor: Trump lawsuit no stunt, 3:55, CNN, August 26, 2013
Trump, Rubio spar over lawsuit against Trump University, 4:53, Fox News Channel, March 3, 2016

Three lawsuits were filed asserting that Trump University engaged in a variety of illegal business practices, ranging from false claims to racketeering. Two were federal class-action lawsuits: one against Trump University and its managers, including Donald Trump, and one against Donald Trump personally. A third case was filed in New York State court.[21]

New York v. Trump Entrepreneur Initiative LLC

In 2005, the New York State Department of Education sent Trump, Sexton, and Trump University a letter saying that they were violating state law by using the word "university" when in fact Trump University was not actually chartered as one and did not have the required license to offer live instruction or training.[7] Although Sexton promised that the organization would stop instructing students in New York State, the New York Attorney General alleged that such instruction continued.[7] A "former 16-year Counsel and Deputy Commissioner of the New York State Education Department (SED)" stated in "an affidavit in support of Trump" that she could not remember "a single instance during [her] 16-year tenure as General Counsel" in which anyone "was fined, asked to pay restitution to students or assessed a civil penalty for identifying itself as a 'university.'"[22]

A March 2010 letter sent by the Deputy Commissioner for Higher Education, Joseph Frey, to Trump stated: "Use of the word 'university' by your corporation is misleading and violates New York Education Law and the Rules of the Board of Regents."[7][23] In June 2010, "Trump University" changed its name to "The Trump Entrepreneur Initiative."[1]

On August 24, 2013, the State of New York filed a $40 million civil suit against Trump University alleging illegal business practices and false claims made by the company.[24][25] Donald Trump denied the allegations, claiming the school had a 98% approval rating, and said New York Attorney General Eric Schneiderman was "a political hack looking to get publicity".[26] Trump filed a complaint alleging that the state Attorney General's investigation was accompanied by a campaign donation shakedown; the complaint was investigated by a New York ethics board and dismissed in August 2015.[27] Because of strict confidentiality laws, it is unknown whether the complaint was dismissed because Trump's claims were untrue, or because Schneiderman's alleged actions did not contravene any ethical rules.[28]

Schneiderman described Trump University as a bait-and-switch scheme and pointed to the fact that the organization was not a university.[29] He accused Trump of misleading more than 5,000 people to pay up to $35,000 to learn his real estate investment techniques.[30]

In October 2014, a New York judge found Trump personally liable for operating the company without the required business license.[30]

Lawsuits in federal court

Low v. Trump University, LLC

Tarla Makaeff, who paid nearly $60,000 to Trump University in 2008, brought a class action lawsuit against Trump University on April 30, 2010, in U.S. District Court for Southern California.[31][32] The suit, Makaeff v. Trump University, LLC, sought refunds for Makaeff and other former clients of Trump University, as well as punitive damages for breach of contract, fraud, negligent misrepresentation and bad faith. It did not originally name Donald Trump as a defendant,[33] but did so in a later amended complaint.[34] In February 2014, U.S. District Court Judge Gonzalo P. Curiel denied recognition to the nationwide class the plaintiffs had requested and recognized the suit as class-action on the part of Trump University clients in three states – California, Florida, and New York – based on specific alleged violations of the consumer protection laws of those states. He also narrowed the case to five of the plaintiffs' original fourteen charges.[35]

On May 26, 2010, Trump University filed a counterclaim alleging Makaeff had made defamatory statements about Trump University, "including many completely spurious accusations of actual crimes", that had caused Trump University losses of more than $1 million. On June 30, 2010, Makaeff countered that Trump University's defamation claim was an attempt to intimidate her, known as a SLAPP suit (a strategic lawsuit against public participation), and that because Trump University is a "public figure" the defamation claim required proof that she "acted with actual malice" when speaking and writing about Trump University. By invoking California's anti-SLAPP statute, Makaeff triggered procedures that speeded consideration of the defamation claim without further discovery.[36]

On August 23, 2010, U.S. District Judge Irma E. Gonzalez ruled that Trump University was not a public figure, did not need to show malice on Makaeff's part, and could proceed with its defamation claim. Makaeff appealed to the Ninth Circuit Court of Appeals, where a three-judge panel ruled unanimously on April 17, 2013, that Trump University is a "limited-purpose public figure" and that Trump University must demonstrate malice on Makaeff's part to establish defamation; it returned the case to the district court to consider the defamation claim against that standard.[37][a] After additional briefing, U.S. District Judge Gonzalo P. Curiel ruled in Makaeff's favor on June 16, 2014, and dismissed the defamation claim.[39] Makaeff then, at the court's invitation, presented evidence of her legal costs and fees in connection with the defamation litigation. She asked for $1.3 million, and on April 20, 2015 Curiel ordered Trump University to reimburse Makaeff $798,000 in legal fees and costs.[40]

In November 2015, the district court ruled on Trump's motion for summary judgment. In a 44-page opinion, the court denied Trump's motion for summary judgment on most of the claims, finding that there was a genuine issue of fact on plaintiffs' claims of deceptive practices and misrepresentation in advertisements in violation of California, Florida, and New York consumer protection and business law and therefore letting these claims proceed to trial. The court did grant summary judgment in Trump's favor on plaintiffs' request for an injunction, because Trump University stopped enrolling students in July 2010 and no longer sells the same seminars or other program.[41]

On March 21, 2016, over objections from the attorneys for Trump University, Curiel allowed Makaeff to withdraw as the lead plaintiff,[b] naming Sonny Low[c] in her stead, resulting in the case title Low v. Trump University, LLC.[43]

Cohen v. Trump

On October 18, 2013, California businessman Art Cohen filed a civil lawsuit, Art Cohen v. Donald J. Trump, in U.S. District Court for Southern California, as a class action on behalf of consumers throughout the United States who purchased services known as "Live Events" from Trump University after January 1, 2007. It alleged violations of the RICO statute, essentially a scheme to defraud. It accused Trump of misrepresenting Trump University "to make tens of millions of dollars" while actually delivering "neither Donald Trump nor a university."[44] The suit named Donald Trump as the sole defendant and sought restitution as well as damages, including punitive and treble damages.[45]

In an order dated October 24, 2014, U.S. District Judge Gonzalo P. Curiel certified the class proposed by the plaintiff and ruled that Cohen had presented enough evidence to allow the lawsuit to proceed.[46][44] Alan Garten, general counsel for the Trump Organization, said that Trump University would appeal Curiel's ruling, which he said showed a "manifest disregard for the law". In October 2015, Garten also said that Trump would ask Curiel to recuse himself because of his "animosity toward Mr. Trump and his views".[47] However, Trump's lawyers never filed any motion to recuse, and according to legal experts such a motion would lack legal merit and possibly be considered frivolous.[48][49]

In May 2016, Curiel set the trial on the suit to begin November 28, 2016, after the U.S. presidential election, with jury selection several weeks earlier.[50]

In August 2016, the district court denied Trump's motion for summary judgment, ruling that there was sufficient evidence against Trump for the case to go to a jury.[51][52]

On November 10, 2016, Curiel denied a request by Trump to delay the trial until after his inauguration as president of the United States of America.[53] At the same time Curiel urged the parties in the lawsuits to work toward a settlement, and both sides agreed to accept an offer from U.S. District Judge Jeffrey T. Miller to facilitate such talks.[54]

Public release of court documents

On May 27, 2016, Curiel granted a request by The Washington Post for public release of certain documents that had been filed in the case. He noted they were "routine" and many already publicly available.[55][56] The released information included "playbooks" documenting instructions for employees to use a hard-sell approach, as well as depositions in which former employees said that Trump University had defrauded or lied to its students.[8][57][58][59]

On August 2, 2016, the court denied a request by The Washington Post and other media organizations for the public release of hours of videotaped testimony from Trump's two depositions in Cohen, taken in November 2015 and January 2016.[51] Transcripts of those depositions had already been released, showing "that Trump repeatedly indicated that he had never met instructors at Trump University, despite advertisements for the program indicating that its staff had been handpicked by the real estate mogul." Trump's attorneys had opposed the requests to release the videotapes.[51] Curiel ruled that there was a legitimate public interest in the content of the deposition, but that interest was satisfied via public release of the transcripts. The judge also noted that if the videos were publicly released, it was "nigh-inevitable" that the footage would be used in news accounts and political ads, which might prejudice the jury pool pre-trial.[51]

Trump's comments about Curiel

During primary campaign speeches, Trump repeatedly called the judge a "hater" and described him as "Spanish" or "Mexican"[60] (Curiel was born in Indiana to parents who had immigrated to the U.S. from Mexico).[61] Trump also said that Curiel should recuse himself, although his attorneys say they do not plan to ask for the judge to be removed from the case.[62][63][64] Curiel's only comment was to write in a procedural ruling that Trump has "placed the integrity of these court proceedings at issue".[56][65] Trump's references to Curiel's ethnicity, as well as his comments that "someone ought to look into" the judge, alarmed legal experts, who expressed concern about the effects of the comments on judicial independence.[66][67]

On June 7, 2016, Trump issued a lengthy statement saying that his criticism of the judge had been "misconstrued" and that his concerns about Curiel's impartiality were not based upon ethnicity alone, but also upon rulings in the case.[68][69]

Settlement

On November 18, 2016 it was reported that Trump agreed to pay $25 million to settle the two class-action lawsuits and the New York suit. The settlement was reached ten days before the San Diego class action was scheduled to go to trial. Of the $25 million, $21 million will go to the participants in the class-action suits, $3 million will go to New Yorkers not covered by the class-action suits, and a penalty of up to $1 million will be assessed by the state of New York for running an unlicensed university.[70] The plaintiff's attorneys agreed to forgo their fees and work pro bono so as to maximize the amount that will go to the approximately 7,000 former Trump University students who are part of the case.[71] The settlement also specifies that Trump, who had previously vowed he would never settle, does not admit to any wrongdoing.[72] The settlement was brokered by U.S. District Judge Jeffrey T. Miller, who offered his services to the parties on November 10 at Curiel's request.[73]

New York Attorney General Eric Schneiderman stated that the settlement and payment by Trump "is a stunning reversal by Donald Trump and a major victory for the over 6,000 victims of his fraudulent university."[74] Trump himself said he settled "for a small fraction of the potential award" because he was too busy as president-elect to take it to trial. He added, "The ONLY bad thing about winning the Presidency is that I did not have the time to go through a long but winning trial on Trump U. Too bad!"[75]

Other investigations

In 2010, the office of Texas Attorney General Greg Abbott investigated Trump University. No lawsuit was brought, but after exchanging communications with investigators that included requests from the investigators for customer lists and internal documents, Trump University closed its operations in the state. These had included newspaper advertising, free presentations, and three-day seminars.[76]

The office of Florida Attorney General Pam Bondi announced in September 2013 that it was considering joining a New York lawsuit against Trump University.[77][78] Four days later, the Donald J. Trump Foundation donated $25,000 to "And Justice for All," a 527 group supporting Bondi's re-election campaign. Following this, Bondi declined to join New York in the lawsuit. According to a Bondi spokesman, Bondi had personally solicited the donation from Trump several weeks before her office announced it was considering joining the lawsuit.[78][79][80] In March 2016, Citizens for Responsibility and Ethics in Washington (CREW) filed a complaint with the IRS about the potentially illegal donation.[81][82] In September 2016 it was reported that the donation violated laws against political contributions from nonprofit organizations, and that Donald Trump had reimbursed the foundation from his own money and paid the IRS a $2,500 excise tax as a penalty.[83] Trump denied that the donation was connected to the Trump University lawsuit, saying that it was for Bondi's performance as attorney general.[84]

Issue in the 2016 presidential election campaign

During the Republican presidential primaries of 2016, opponents of Trump's candidacy used Trump University to criticise him. Mitt Romney said in early March: "Donald Trump is a phony, a fraud. His promises are as worthless as a degree from Trump University."[85][86] Senators Ted Cruz and Marco Rubio raised the subject during televised debates in February and March.[87][88] One debate moderator, Megyn Kelly of Fox News, pursued the issue at length.[88][89] Trump responded that Trump University was "a small business" and student evaluations were overwhelmingly positive. He said lawsuits were a routine part of business and that he wins most of them. Of one of the class action suits he said: "It's something I could have settled many times. I could settle it right now for very little money, but I don't want to do it out of principle."[87] Hillary Clinton used the Trump University allegations against Trump in speeches and campaign ads.[90]

In popular culture

Trump University was the subject of a week-long series in the comic strip Doonesbury, in June 2005.[91][92]

Trump University was also the butt of jokes in the 10-minute, pro-Clinton Will and Grace mini-episode released in September 2016, created to get out the vote.[93] In it, Karen says she sent her Latina maid, Rosario, to college. Turns out, Rosario's course of study was "Dusting".[94][95]

See also

Notes

  1. ^ The Ninth Circuit noted: "As the recent Ponzi-scheme scandals involving onetime financial luminaries like Bernard Madoff and Allen Stanford demonstrate, victims of con artists often sing the praises of their victimizers until the moment they realize they have been fleeced."[38]
  2. ^ Makaeff sought to withdraw for financial and health reasons and her attorneys cited the emotional affect of public exposure: "She's now been derided and called out by name on the campaign trail, on Twitter and on the GOP stage." Attorneys for Trump University objected that Makaeff's deposition was central to their defense: "She is the centerpiece to this litigation."[42]
  3. ^ According a document filed in the case, as of September 26, 2012, Sonny Low was a "71-year old senior citizen ... [who] retired in 2005 as a U.S. Foreign Service Officer who served our country for 34 years".[34]

References

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