Legal

‘Trump U.’ Draws Unflattering Spotlight to the Candidate as Fraud Cases Move Forward

March 03, 2016

Dan Herrick, KPA, ZUMAPRESS.com, Newscom
In 2005 the real-estate mogul and TV star Donald Trump announced the launch of "Trump University." Eleven years later the front-running candidate for the Republican presidential nomination faces fraud lawsuits from former students and the New York attorney general.
About seven years ago Robert Guillo, 76, and his son, Alexander, walked into a Manhattan hotel and followed signs that read, "This way to success. This way to Trump University."

They sat down in a room, he recalled recently, with several hundred others and listened to an instructor describe how investing in real estate had brought him from rags to riches. As he flashed his Rolex watch, he told attendees that Donald Trump had hand-picked him to teach others to become successful investors. During the seminar, Mr. Guillo said, he was repeatedly urged to pay for future three-day retreats that promised to offer an inside look at Mr. Trump’s techniques.

By the end of the day, he was sold. He put $34,995 on his American Express card to join the Trump Gold Elite program. And though he did attend some three-day seminars, he said, the instructors never helped him buy properties, as they had promised, but instead focused on selling more seminars.

Mr. Guillo thought about hiring a lawyer to recover his money, but "frankly you can’t hire an attorney in New York to sue Donald Trump for $35,000," he said. "Impossible."

Courtesy Robert Guillo
Robert Guillo paid $35,000 to join the university’s Trump Gold Elite program, but he says he came away from it with little more than certificates like this one.
But in 2013, New York’s attorney general, Eric T. Schneiderman, did sue Mr. Trump’s for-profit company, asserting it had intentionally misled over 5,000 students into paying up to $35,000 for seminars and mentorship programs. By that point, "Trump University" — or the "Trump Entrepreneur Initiative," as it was renamed following a court ruling that declared it an unlicensed educational institution — was defunct.

The fraud lawsuit resurfaced this week, when a state appeals court unanimously denied a bid by Mr. Trump, the front-runner for the Republican presidential nomination, to throw out the litigation.

From 2005 to 2011, Trump University promised students that it would offer an inside look at Mr. Trump’s techniques on how to get rich in the real-estate business. But students like Mr. Guillo say that promise wasn’t fulfilled.

Mr. Trump also faces two class-action civil lawsuits in California. The lawsuits were filed separately by two former Trump University students, Art Cohen and Tarla Makaeff.

Mr. Trump could be called to testify in the California cases as early as this summer, but so far he has played down the litigation. "It’s a small deal. Very small," he said, according to the New York Daily News. He added that he planned to reopen the university when he won the New York case.

A spokeswoman for Donald Trump’s campaign did not reply to requests for comment.

‘It Really Wasn’t a University’

It’s hard to compare Mr. Trump’s "university" to any other for-profit education ventures. "It really wasn’t a university," said Kevin Kinser, an associate professor in the department of educational administration and policy studies at the University at Albany, part of the State University of New York. "These were just certificates and, because presumably they were backed by Trump, people thought they would have some value in the marketplace," he said.

Mr. Guillo, who spent most of his career working for law firms, said he knew there was a provision in the law that regulated companies that used the word "university" in their name. "Everything checked out," he said, leading him to think that Trump University, as it was known at the time, was "a bona fide university" regulated by the government.

“These were just certificates and, because presumably they were backed by Trump, people thought they would have some value in the marketplace.”
Mr. Guillo has a typical background in traditional higher education. He is a graduate of the City University of New York’s Baruch College, with a degree in business administration, and spent two years taking night classes at St. John’s University’s school of law. But at 69 years old at the time, he figured that a certificate program like Trump University would be a better way to learn what he wanted to know about the real-estate business.

In the lawsuit filed by Mr. Schneiderman, Trump University is described as a classic bait-and-switch, which attracted students with a free seminar that would act as a sales pitch for increasingly expensive seminars starting at $1,495 each. Several students, like Mr. Guillo, paid $35,000 for an elite mentorship program.

Because Trump University did not qualify for federal financial aid, students paid the thousands of dollars necessary to enroll in the programs out of their own pockets. As a result, the lawsuits are more similar to those facing fraudulent advertisers on late-night TV than those against for-profit higher-education companies, said Mr. Kinser.

Mr. Guillo said that, during lunch breaks at the seminars, students were encouraged to increase their credit-card limits and to apply for more credit cards so they would have more opportunities to purchase properties that weekend. However, the lawsuit says, Trump University officials asked students to do that so they would be able to afford pricier Trump University packages.

Prestige of Spokesman

Of course, central to the appeal of Trump University was Mr. Trump himself. As with all of his ventures, his name was spattered in all capital letters in promotions of his university. Advertisements and marketing materials included pictures of him and promises that he would personally teach students his techniques. In one ad, Mr. Trump was quoted as saying, "I can turn anyone into a successful real-estate investor, including you."

“I can turn anyone into a successful real-estate investor, including you.”
The Trump name enticed many students to open up their wallets. "I had some trust in the program because it was run by Donald Trump," said Nelly Cunningham, a former Trump University student, in an affidavit. She added that she had been led to believe by marketing materials that instructors were hand-picked by Mr. Trump. However, a former president of Trump University, Michael Sexton, admitted in testimony that "none of our instructors at the live events were hand-picked by Donald Trump."

Students were also promised that they would be personally trained by Mr. Trump and have their pictures taken with him. "It ended up being a cardboard cutout of Mr. Trump," wrote Kathleen Meese in her affidavit.

News-media attention to the lawsuits has provided ample fuel for Mr. Trump’s opponents on the campaign trail. A conservative group, the American Future Fund, has aired attack ads featuring Trump University "victim" stories, including one with Mr. Guillo.

While Mr. Guillo fiercely opposes Mr. Trump’s run for president, he said his son is a big fan. "I think he still thinks Donald Trump would be a good president," Mr. Guillo said, laughing. "It only cost him $1,495, and Dad paid a lot more."