— Donald Trump, remarks in an introductory video for Trump University
“None of our instructors at the live events were handpicked by Donald Trump.”
— Michael Sexton, Trump University’s top executive, in a deposition taken as part of a class-action suit, July 25, 2012
We are going to examine the facts behind three new ads attacking GOP presidential front-runner Donald Trump and his involvement with Trump University, which are being aired by the American Future Fund, a politically active nonprofit group that does not disclose its donors but backed Mitt Romney in the 2012 campaign.
But we first wanted to start with a video that Trump filmed to tout the program, in which he declared he was going to have the “best of the best” professors — “handpicked by me.” As you can see, the president of the “university” later conceded that that claim was false when questioned about the program under oath.
Given that a key feature of Trump’s presidential campaign is his pledge to hire the “best of the best” as president, the fraud allegations surrounding Trump University may stick in ways that other attacks have not. Trump has misleadingly claimed that he has won most of the lawsuits concerning the program — and on Feb. 27, he devoted a lengthy portion of a campaign speech to offer a defense, including suggesting that a Hispanic judge in one of the proceedings was biased against him.
In 2013, New York Attorney General Eric Schneiderman filed a $40 million fraud lawsuit against Trump and Trump University, alleging that Trump had defrauded more than 5,000 people through an unlicensed, illegal education institution. Two other class-action lawsuits have been filed against Trump by former students demanding their money back.
A Trump University internal playbook obtained by the Atlantic shows how the main goal of the instructors was to “sell, sell, sell,” as it declared on page 23. People were invited to a free introductory course, at which various tidbits of real estate secrets were offered, with the express goal of getting people to sign up for a three-day seminar costing $1,495. (The playbook set a “Minimum Sales Goal” of $72,500 per seminar, meaning that the speakers needed to persuade at least 50 people to sign up each time.)
Then, at the three-day seminar, the hook was set for a purported year-long mentorship program costing $35,000 (supposedly discounted from $49,000). That then led to even more sales pitches for even more products, such as a $3,500 bus tour of real estate properties. Schneiderman has alleged that Trump personally earned $5 million from the enterprise, although Trump has claimed the money was destined for charity.
Obviously, the claims still needed to be litigated, and Trump has vigorously denied he did anything wrong. But the stories told in the ads are backed up by signed affidavits of refund requests filed by the people featured in the ads. (We have embedded them at the end of this post.)
The people in the ads say they were contacted by American Future Fund in November and filmed the ads in December. The ads only began airing after the fraud allegations against Trump University were raised by Sen. Marco Rubio (R-Fla.) during the Feb. 25 GOP candidates’ debate.
Hope Hicks, spokeswoman for the Trump campaign, said she would provide a response to the ads, but we did not receive one. But Trump was questioned about the ads on Fox News Sunday on Feb. 28.
“I’ll tell you about the school. It had an A rating from the Better Business Bureau, and the people that I think you even have on there have given a great report card,” Trump said. “Ninety-eight percent of the people that took the courses, 98 percent approved [of] the courses. They thought they were terrific.” (Update, March 11: A New York Times investigation found that many students were pressured in giving positive ratings.)
Actually, the BBB rated Trump University a D-, its second lowest grade, according to a 2010 N.Y. Daily News article; similar reports appeared on CBS News in 2010, in the New York Times in 2011, and The Washington Post in 2011. (The D- rating in 2010 can also be found on the BBB website via the Wayback machine.) The state of Texas in 2010 ran the program out of the state after BBB was flooded with complaints. (Update, March 8: After Trump falsely again asserted Trump University had an “A” rating, the BBB disputed that in a statement. “Trump University does not currently have an A rating with BBB,” the group said, confirming that it had a D- before it started winding down and fewer complaints were received.)
Similarly, the Federal Trade Commission, in response to a Freedom of Information Act request, has disclosed 35 complaints that mirror the concerns made by the people in the ads. (As we have noted before, the “98 percent” approval claim generally is based on surveys after the free presentation. They were not anonymous, and people were encouraged to give positive ratings in hopes of receiving program discounts or a certificate of completion. It is not a credible figure.)
“It was all supposedly supervised by Donald Trump, run by Donald Trump. All of it was just a fake.”
— Sherri B. Simpson
Simpson, a lawyer, said she was bewitched by The Donald. In 2010, as real estate markets hit bottom after the Great Recession, she thought it would be “the perfect time” to buy real estate. She considered a variety of real-estate investing course and settled on what was then called Trump University.
“I chose it because of Trump,” she said in an interview. “He said he only hires the best, the best experts, the best advisers. I figure it would be the best — the best contacts, the best contracts. It was 100 percent based on his reputation.”
Simpson and her partner, Laure Marmontel, ended up paying a total of $38,525 for information they considered practically useless, such as videos that could be accessed or informational documents that were out of date or inaccurate. The mentorship was only three days, during which the “mentor” just spoke about his real estate exploits.
The instructor for the bus tour was hired at the last minute and did not appear to understand the goal of the tour — “a total lack of content and unfulfilled promises,” she said. Instead, most of the time was spent pitching yet another bus tour. “It was constant upsell, upsell,” she said.
She said that she had hoped to learn about how to finance real estate deals, and to access financing, but the program has no funding sources. “They told people to use credit cards,” she said.
The documents she submitted to the New York attorney general show how the $35,000 “Gold Elite” package was billed as being discounted 30 percent.
Interestingly, the promotional materials she submitted also include a letter from Trump claiming that two years before the economy crashed, he shocked people at a conference by warning they should not buy real estate. “I knew prices were through the roof and the only way they could go was down,” he wrote.
This reminds The Fact Checker about Trump’s false claims that he publicly opposed the Iraq war before it started, because we can find no evidence that Trump made such a statement about real estate in 2007 or 2008. But we did find a September 2005 Trump blog post using the Wayback machine on the Trump University website, saying the housing bubble would not burst:
With housing prices continuing to rise into the far reaches of the stratosphere, there’s a lot of talk about a housing bubble on the brink of bursting. Scared at the possibility, industry watchers have been preaching impending doom, warning house shoppers to be wary of the real estate market.As long as interest rates stay low and the dollar stays weak — which is an unfortunate situation, but it happens to be good for real estate — then there will be no burst in the current housing bubble.
In fact, as our colleagues Tom Hamburger and Michael Kranish documented, Trump in 2006 started Trump Mortgage — which closed shop in 2007.
“I was scammed because I believed in Donald Trump. He makes people believe practically anything.”
— Robert Guillo
Guillo has often been interviewed by reporters about his experience with Trump University, including by our colleague Emma Brown in her exposé about the program in September.
Besides the reputation of the Trump brand, Guillo in his affidavit said he was tricked by the use of the word “university” in the name of the program, mistakenly believing it had been approved by New York education authorities. (Under pressure, Trump later changed the name to Trump Entrepreneur Initiative.)
Guillo described how, at the $1,495 seminar, the “professors” pressed attendees to increase their credit lines right then and there so they could afford the higher-priced package. There were hints made that there would be great opportunities as part of an “in-the-know group” that would receive first dibs on Trump condos, which then could be flipped instantly for a profit. “That was a lie,” he said in an interview.
He said there were also promises of access to “hard-money lenders,” companies that lend based on collateral (such as the value of the property), not the ability to repay. But no such contacts were ever provided.
Guillo paid for his $35,000 Gold Elite membership on his American Express card so he did not need to increase his limit. But he said it was amazing to see the line of people waiting to use pay phones during the seminar to contact their credit card companies.
The Daily News published the “script” that the Trump University teachers gave to the attendees about how to raise their credit limits, including urging them to make misleading statements about their “projected income” from real estate transactions (but warning them not to mention that they were in the “real estate” business).
At the Gold Elite retreat, Guillo said, he quickly realized that he had been scammed. Much of the information provided could have easily been gathered from the Zillow website or the IRS. Moreover, attendees were frequently encouraged to sign up for even more programs, costing $5,000 to $9,000.
Guillo said he filled out positive program evaluations because he was encouraged to believe that that was the only way he could receive a certificate of completion for the courses he took. “The evaluations did not reflect my actual opinion of the courses,” he said in the affidavit.
“Trump is just a fraud, a misrepresentation, a BS artist”
— Kevin Scott
Scott says he fell for the Trump pitch in 2008 during the free seminar, hoping to earn extra money to pay off outstanding debts. And after paying the $1,495 for the three-day seminar, he followed the advice of the presenter to increase his credit-card limit so he could afford the $25,000 Gold Elite program. He says he was told he could pay off the loan quickly with the insight he would gain through a three-day mentorship. (He said he filled out a positive evaluation because he did not think the problems with the program were the fault of the mentor.)
Then things quickly went off the rails. The promised hard-money lenders did not exist. Instead, Scott found himself in a Catch-22: He could not get financing unless he had a deal with a seller. But he could not make a deal unless he had the financing in place. When he asked Trump University for help in bridging the gap, he was just told to work harder.
Because of the debts Scott accumulated — and Trump’s refusal to refund his money — he was forced to sublet his house and move into a studio apartment, he says.
The Pinocchio Test
All three victims in the ads tell a similar story of falling for the Trump brand name, and then discovering that they needed to keep paying more money to gain insight and expertise — which was not forthcoming. In other words, Trump University appears to have been a classic bait-and-switch operation, designed to lure people into paying increasing sums of money.
In the 2012 election-year debate about Mitt Romney’s management at Bain Capital, we warned repeatedly about campaign ads that may have stretched the facts about Romney’s involvement in particular deals that led to job losses. But this collection of super PAC ads avoids that obstacle, in part because Trump said he was involved and selected the “professors” — which was not the truth. As the university executive testified, none were chosen by Trump.
Moreover, Trump University is the subject of a fraud investigation by the New York attorney general and two class-action suits that are headed to trial. The accounts of these three alleged victims are backed up by many other similar accounts of woe — as well as by the court filings.
One could quibble that the travails of Trump University do not directly prove that Trump himself is a “BS artist,” as Scott claims. But our own experience in fact checking Trump during this campaign suggests he has little regard for factual accuracy.
We award these ads the coveted Geppetto Checkmark.
The Geppetto Checkmark
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