An Education in Trumping

by Brendan O’Connor


On Tuesday, the Appellate Division of New York State’s Supreme Court ruled that Attorney General Eric Schneiderman’s suit against Donald Trump, a New York real estate developer and the frontrunner for the Republican presidential nomination, and the institution formerly known as “Trump University” could proceed, dismissing arguments from Trump’s lawyers that the statute of limitations for the attorney general’s claim had run out. “We look forward to demonstrating in a court of law that Donald Trump and his sham for-profit college defrauded more than 5,000 consumers out of millions of dollars,” Schneiderman said in a statement.

Trump University, incorporated as a limited liability corporation in 2004 and headquartered at 40 Wall Street (known as the Trump Building), claimed to offer students the opportunity to learn the secrets of real-estate investment from its namesake’s “handpicked experts.” One advertisement, inviting prospective students to a free, ninety-minute seminar, attributed a quote to Trump: “I can turn anyone into a successful real estate investor, including you.” A direct mail solicitation proclaimed, “In just 90 minutes, my hand-picked instructors will share my techniques, which took my entire career to develop.” It continued, “Then just copy exactly what I’ve done and get rich.” By 2013, however — a few years after “Trump University” had changed its name to the “Trump Entrepreneur Initiative” — the New York attorney general filed a lawsuit against Trump, claiming that the free seminar was nothing more than a “bait and switch.” Trump University, Schneiderman said, had defrauded hundreds of New Yorkers and thousands of Americans of some $40 million.

According to court documents, the New York State Department of Education sent Trump, Trump University, and University president Michael Sexton letters as early as May 27th, 2005, notifying them that they were violating the state’s education laws by using the word “university” without actually having a university charter (and also because they were not actually licensed to teach students). An SED official informed Sexton that they could solve this problem by moving the business organization outside of New York, and not holding any more physical seminars or classes in the state. In email correspondence, Sexton told the official that Trump University would comply with regulations, merging the New York LLC with one incorporated in Delaware, but they never did. In a deposition, Sexton described this as “an oversight,” and something that he and Trump “forgot” about.

In March 2010, the SED sent Trump University another letter demanding its compliance, and in May, five years after the first letter, Trump University changed its name to the Trump Entrepreneur Initiative. The attorney general claims that the organization continued to operate out of 40 Wall Street (“one of the few buildings in Manhattan that Trump actually owns,” Vanity Fair quipped) during this time, and that it conducted “at least fifty live programs in New York between 2006 and 2011” even though it did not have a license to do so.

Despite having had “significant involvement with both the operation and overall business strategy of Trump University,” according to a response to one set of government interrogatories, Donald Trump himself rarely, if ever, made in-person appearances at any of the Trump University events. In a video that played during the free seminar, however, he invited students to invest more fully in his program, “We’re going to have professors that are absolutely terrific — terrific people, terrific brains, successful, the best.” In fact, he made it kind of a dare: “Honestly, if you don’t learn from [the instructors], if you don’t learn from me, if you don’t learn from the people that we’re going to be putting forward, and these are all people that are handpicked by me, then you’re just not going to make it in terms of the world of success.” However, the attorney general argues, those people were not handpicked by Trump at all. Indeed, in response to another interrogatory, Trump’s lawyers conceded that he “may not have vetted every mentor, instructor and speaker, but he did convey his thoughts and insight into the types of people he wanted teaching the course and those insights and ideas were followed by other individuals responsible for selecting the teachers.”

The phony lawsuit against Trump U could have been easily settled by me but I want to go to court. 98% approval rating by students. Easy win

— Donald J. Trump (@realDonaldTrump) March 3, 2016

The ninety-minute seminar, it turned out, was actually just an upsell for another seminar, this one three days long, which cost $1,495, and which would supposedly constitute “the last real estate education you will ever need for the rest of your life.” That is excepting, of course, the three “Trump Elite Packages” that followed: the $9,995 Bronze Elite program; the $19,495 Silver Elite program; and the $34,995 Gold Elite program. If prospective students expressed concern about being able to afford the more expensive programs, the attorney general alleges, they were encouraged to call their banks to request an increase of their credit cards’ borrowing limits. Instructors, some of whom were presented as “Donald Trump’s personal real estate coaches,” frequently insinuated that Trump himself was likely to make an appearance during the three-day seminar. Instead, students got the chance to take a photograph with a life-size cutout photo of the billionaire developer. Students were also told that the “university” was a philanthropic endeavor, but according to the AG, Trump made about $5 million from Trump University.

Even by Donald Trump’s fluctuating standards, this is not very much money: In 2012, 40 Wall Street, the landmarked building Trump University was headquartered in, was valued at around $400 million. Built in 1930, 40 Wall Street — then known as the Bank of Manhattan Building — briefly held the title of “world’s tallest building” before it was surpassed by the Chrysler Building uptown. In 1981, the building was secretly purchased by Philippine President Ferdinand Marcos, a dictator and kleptocrat, who, with his wife, made major investments in several Manhattan buildings, through the developers Joseph and Ralph Bernstein, using money pilfered from the nation’s treasury. According to the New York Times, after Marcos was deposed and the Philippine government froze his assets, the federal government charged him with defrauding American financial institutions of ‘’more than $165 million in connection with the purchase and refinancing’’ of his four Manhattan buildings. The buildings would eventually be sold at auction, and the 70-year leasehold on 40 Wall Street went for a paltry $77 million.

The troubled building, just across the street from the New York Stock Exchange, continued to change hands, however, for increasingly smaller sums of money, until Donald Trump purchased it in 1995 for “a price estimated at less than $8 million,” the Times reported. According to the Trump Organization website, “After years of vacancy, Donald J. Trump purchased the property, invested more than $200 million in restorations, and brought it to the peak of its original grandeur. The high profile tenants that occupy the Trump building represent the pinnacle of New York City in their international prestige and power.” The Trump Building “towers over the city as a reminder of New York’s global import.”

But Trump is not the player in New York City real estate he may once have been: His holdings, which the Times describes as “modest,” include a garage below Trump Plaza. (“It’s a very successful garage,” he said.) In fact, he doesn’t even own 40 Wall Street: He controls the long-term lease on the building, which ends in 2059, and for which he paid either $1 million or $10 million, depending on whom you ask. The land on which the Trump Building sits is owned by an investor group led by a German shipping family, the Hinnenbergs, who purchased the lot in 1982. How’s that for a reminder of New York’s global import?

Photo by sukwendo