In June 2009, Richard and Shelly Hewson paid the Trump Entrepreneur Initiative, an educational venture owned by businessman and now–presidential candidate Donald Trump, $21,490 for classes that promised to teach them how to flip homes for profit. They ponied up the high price “because we had faith in Donald Trump,” Richard wrote in a January 2015 affidavit. “We thought that if this was his program, we would be learning to do real estate deals from his people who knew his techniques.”
What did the New Jersey couple get for shelling out more than $20,000 to a business bearing the famous Trump name? An instructor took them on a field trip to see dilapidated homes in rough Philadelphia neighborhoods, never bothering to explain how to reliably find properties to sell for a profit.
“We realized that Trump was not teaching us how to find these needles in a haystack,” Richard Hewson’s affidavit says. “We concluded that we had paid over $20,000 for nothing, based on our belief in Donald Trump and the promises made at the [organization’s] free seminar and three-day workshop.”
“We never tried to get our money back because at that point we thought the whole thing was a scam and that we would not be able to fight Donald Trump,” Hewson wrote.
Now Trump is fighting more than a dozen other candidates for the Republican presidential nomination, making his pitch on his business record and the respect it’s garnered him from millions of voters. But will his image as a peerless, productive entrepreneur suffer because of allegations that one of his businesses — one that promised to help ordinary Americans achieve success like his — amounted to a scam?
A class-action lawsuit in California and an ongoing civil suit brought by New York allege that Trump University defrauded up to 5,000 students.
The Hewsons are not alone: A class-action lawsuit in California and an ongoing civil suit brought by New York State allege that the now-defunct Trump University, later known as the Trump Entrepreneur Institute, defrauded up to 5,000 students, who paid as much as $35,000 to learn Trump’s real-estate investment strategies and techniques.
The venture was, as Trump enterprises go, not especially large — the New York complaint alleges Trump University earned about $40 million in revenue between 2005 and 2011. It’s just one of many businesses whose main selling point is Trump’s brand, a successful synthesis of prestige and up-by-your-bootstraps American entrepreneurship, quite at odds with the picture that recipients of a Trump education paint.
Last October, a New York trial court ruled that Trump University and Donald Trump personally were liable for restitution for all students who had taken the course since May 2010, “because it was operating illegally without a state license,” according to the attorney general’s office.
Trump representatives claim “there’s no merit to these allegations whatsoever.” Alan Garten, executive vice president and general counsel for the Trump Organization, says former students brought suit “completely [out of] a financial motivation.”
The courses, he says, were “done in a first-class manner, and the materials were high-quality and first-rate.”
#related#According to the lawsuits, Trump University aggressively marketed a 90-minute free seminar that would reveal Trump’s real-estate investing secrets. “My hand-picked instructors will share my techniques, which took my entire career to develop,” said one mass mailer bearing Trump’s signature and offering two free VIP tickets to the event.
At the seminar, sales representatives were waiting, reportedly tasked with persuading attendees to pay an additional $1,495 for a three-day conference (which the Hewsons signed up for) that would provide “the last real-estate education you will ever need for the rest of your life.” According to New York State’s complaint, “Trump University speakers repeatedly insinuated that Donald Trump would appear at the three-day seminar, claiming that he ‘is going to be in town’ or ‘often drops by’ and ‘might show up’ or had just left.”
But instead of getting a personal lesson from Trump, both cases claim, those who signed up got to take a picture with a cardboard cutout of him — and then, the “faculty” allegedly subjected them to another sales pitch, aimed at persuading attendees to sign up for a $34,995 “Gold Elite Program,” which they said would include special training, mentorship, and access to alternative financing sources for real-estate deals.
Using high-pressure techniques, the complainants allege, salesmen tried to pressure attendees into charging the $34,995 to their credit cards.
The complainants allege salesmen tried to pressure attendees into charging the $34,995 to their credit cards.
“Trump University even provided handouts with scripted talking points for students to use in their phone calls with credit-card companies, explicitly encouraging people to falsify their current income, ‘add[ing] projected income from our future real estate venture[s],’ and to deceive credit card companies by declaring income streams from corporate entities that had not been created, with the script telling students: ‘If they ask you to prove income, inform them that it will be too much trouble to put all the paperwork together,’” New York State’s complaint says.
Garten says: “There was no high-pressure sales techniques — that’s crazy. . . . Were there efforts to sell the course? Yes. . . . We think it provides people with real benefits. [But] no one was compelled or coerced to do that. It’s laughable. People can make their own decision.”
New York State alleges that some students wiped out their savings or went heavily into debt to cover the cost of the courses, which seem to have rarely delivered on the lofty promises.
The New York suit, led by Democratic attorney general Eric Schneiderman, says many of the so-called faculty “came to Trump University from jobs having little to do with real estate investments, and some came to Trump University shortly after their real-estate investing caused them to go into bankruptcy.” (Garten says the course materials were “prepared by leaders in the field,” including Ivy League professors.)
Trump’s camp points to surveys conducted by attendees that reportedly show a 98 percent approval rating, but New York State alleged that some students felt pressured by their teachers to provide high rankings or were asked to rate the course before they had even completed it.
National Review did find some former students who said they were satisfied with their Trump University experience.
“It gave me the guidelines and knowledge to enter real-estate investment, and it was helpful for me,” says Jorge Carlos Guillen, a realtor in Virginia and Maryland. “For me, it was not a scam. I paid $10,000 for it, and I got that money back pretty quickly.”
Mark Gordon, owner of MG Real Estate Solutions and Mark Gordon Properties Inc., says he paid for the whole $34,995 class and was satisfied: “Helpful would be an understatement.”
“You pay your money and take your chances, and you’d better go into these kinds of things with your eyes wide open,” Gordon says. “I don’t think [Trump is] a scam artist, and I don’t have a beef with this. Some people are very unhappy, and I get that: They spent a lot of money. [But] there was never any implied guarantee that you take their training and you’re going to make millions. I never got that.”
New York State has alleged that Trump’s for-profit educational company operated there between 2005 and 2011 despite repeated warnings from the state’s education department that it’s illegal to run an unchartered, unlicensed university. The state court has not yet determined how much restitution Trump University will have to pay. The trial court authorized Trump’s legal team to depose each of the estimated 5,000 consumers potentially eligible for money.
The Trump Organization maintains that it was upfront about what the school was. “At no time did we ever represent that it was a certified institution,” Garten says. “It’s not like we were operating in the dark. We were open and notorious. We advertised it quite extensively. People knew exactly what we were doing, including the [state] department of education, and they were fine with it.”
#related#In October, New York State supreme-court justice Cynthia S. Kern decided that that Trump had violated state education law, writing, “It is undisputed that Mr. Trump never complied with licensing requirements.” Because of the statute of limitations, the state could not seek restitution throughout the entire time Trump operated without a license, just from 2010 onward.
The ongoing lawsuits against Trump University may prove uncomfortable for Donald Trump as he embarks on a presidential campaign. Many of his businesses, like Trump University, derive their success from his brand, and yet other Trump business practices — such as his unsuccessful casinos in New Jersey’s Atlantic City and his firms’ alleged hiring of illegal immigrants on construction projects — have come under scrutiny, too. A number of Trump ventures have gone bankrupt in spectacular fashion, and even his net worth has been a matter of controversy: In a recent press release, Trump claimed his worth to be $10 billion, but Forbes magazine has pegged it at just $4 billion.
The press release was prompted by Trump’s filing financial-disclosure forms with the Federal Election Commission, which is required for participation for the first Republican presidential debate, on August 6. There’s more news forthcoming, though, thanks to the Trump U lawsuits: A California federal judge ruled earlier this month that Trump has to testify on August 10 about both his net worth and his earnings from the real-estate classes.
— Jillian Kay Melchior writes for National Review as a Thomas L. Rhodes Fellow for the Franklin Center.