Trump University (also known as the Trump Wealth Institute and Trump Entrepreneur Initiative LLC) was an American company that was founded in 2004 by Donald Trump and his associates Michael Sexton and Jonathan Spitalny. It offered courses in real estate, asset management, entrepreneurship, and wealth creation. Its real estate training program ran from 2005 to 2010. It was owned and operated by the Trump Organization. A separate organization, Trump Institute, was licensed by Trump University but not owned by the Trump Organization. In 2011, amid multiple investigations, lawsuits and student complaints, it ceased operations.
Despite its name, the organization was not an accredited university or college. It conducted three- and five-day seminars (often called "retreats") and used high-pressure tactics to sell them to its customers. It did not confer college credit, grant degrees, or grade its students. In 2011, the company became the subject of an inquiry by the New York attorney general's office for illegal business practices, which resulted in a lawsuit filed in August 2013. An article in National Review called the organization a "massive scam".
Trump University was also the subject of two class actions in federal court. The lawsuits centered on 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. Despite repeatedly insisting he would not settle, Trump settled all three lawsuits in November 2016 for a total of $25 million after being elected president.
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.
Trump University was incorporated in 2004 by Trump, Sexton, and Spitalny, as a New York limited liability company. Trump owned 93% of the company. On May 23, 2005, Trump University formally launched its education program. 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." According to The Washington Post, part of the school sales pitch was, "the billionaire had made enough money for himself. Now, he would put his famous brain to work for the little guy". High prices were charged for seminars and programs not to enrich Trump, but so that (as one teacher explained to students) "you assume personal responsibility for doing the work".
The company's original business plan focused on online education, but quickly expanded to include live, in-person instruction. The instruction's focus was real estate investing, with Trump claiming in advertisements: "I can turn anyone into a successful real estate investor, including you." Instruction typically 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 $1,495 seminars to a $35,000 "Gold Elite" program. Records indicate 7,611 tickets were sold to customers attending courses. About 6,000 of these were for a $1,500 3-day course, and 1,000 were for silver, gold or elite mentored courses ranging in price from $10,000 to $35,000. While not licensed as a college or using student loans, the operation used many of the same tactics as predatory colleges: preying on vulnerable populations, implying that the school offered a fast track to financial security, and creating the impression that the recruiter is a friendly advisor.
Trump claimed that students gave the program 98% favorable reviews, but according to some former students, Trump University employees pressured students to give favorable reviews, told them they had to fill out the forms to obtain graduation certificates, and did not undertake procedures often used to ensure that surveys were filled out objectively.
In an infomercial, Trump said he "hand-picked" Trump University's instructors. But in a 2012 deposition, he testified that he never selected the instructors. According to Sexton, Trump signed off on the school's advertisements. For a time in 2008, it used the name "Trump Wealth Institute". In June 2010, Trump University changed its name to "The Trump Entrepreneur Initiative". It largely ceased operations in 2010.
The Trump Institute was a separate business. It was licensed by Trump University, and Trump received a cut of every seat sold, but Trump University owned no part of it. It was owned and operated by Irene and Mike Milin of Boca Raton, Florida. It offered real estate seminars from 2006 to 2009, at which point the licensing agreement expired and was not renewed. Trump was not involved in the operation of the Trump Institute, but he recorded a broadcast infomercial promoting it and appeared in an introductory video before each seminar.
Allegations of impropriety and lawsuits
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 actions: one against Trump University and its managers, including Trump, and one against Trump personally. A third case was filed in New York State court.
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 Trump University was not actually chartered as one and did not have the required license to offer live instruction or training. Sexton promised that the organization would stop instructing students in New York State, but the New York Attorney General alleged that such instruction continued.
A March 2010 letter Deputy Commissioner for Higher Education Joseph Frey sent 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." In June 2010, Trump University changed its name to "The Trump Entrepreneur Initiative".
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. According to a press release from New York Attorney General Eric Schneiderman, the case was to be handled by Assistant Attorneys General Tristan C. Snell and Melvin L. Goldberg, under the supervision of the Bureau of Consumer Frauds and Protection's Deputy Bureau Chief Laura J. Levine, Bureau Chief Jane M. Azia, and Executive Deputy Attorney General for Economic Justice Karla G. Sanchez. Schneiderman described Trump University as a bait-and-switch scheme. He accused Trump of misleading more than 5,000 people to pay up to $35,000 to learn his real estate investment techniques.
Trump denied the allegations, claiming the school had a 98% approval rating, and said Schneiderman was "a political hack looking to get publicity". He filed a complaint alleging that Schneiderman's investigation was accompanied by a campaign donation shakedown; a New York ethics board investigated the complaint and dismissed it in August 2015. Because of strict confidentiality laws, it is unknown whether the complaint was dismissed because Trump's claims were untrue or because Schneiderman's actions did not contravene any ethical rules.
In October 2014, a New York judge found Trump personally liable for operating the company without the required business license.
Texas investigation In May 2010, the consumer protection division of the state of Texas sought permission from the office of the Attorney General of Texas to sue Trump University. An investigation by the consumer protection division had found the company was "engaging in false, misleading and deceptive practices" and had defrauded Texas taxpayers out of $2.6 million. According to John Owens, the Texas attorney general's deputy chief of consumer protection at the time, an estimated 267 Texans spent more than $425,000 on the three-day seminars, and 39 purchased Trump's "Gold Elite" package of additional classes and other perks costing $35,000 each. Another 150 customers from Texas spent more than $826,000 on other goods and services. According to the investigation, The "free workshops" are merely a selling ground for the Defendant Trump U's 3-day seminars and offer little useable content. The training materials we have reviewed indicate that Trump University 3-day seminar attendees are taught to prey upon homeowners in financial turmoil and to target foreclosure properties. ... Defendants falsely assert at these "free workshops" that classes are approved continuing education credit for Realtors, but Trump University courses were not approved by the Texas Real Estate Commission, nor was Trump University an accredited institution with the legal credentials to call itself a "university." The lawsuit proposed by the consumer protection division sought to recover more than $2.6 million that Texas taxpayers who had been students at the "university" had "spent on seminars and materials, plus another $2.8 million in penalties and fees".
The investigation was dropped and no lawsuit was filed, but Trump University agreed to cease operations in Texas. (The attorney general Greg Abbott went on to become governor, and the deputy chief of consumer protection Owens later alleged that Abbott's decision "not to sue [Trump] was political": Trump later donated $35,000 to Abbott's campaign for governor. Abbott's communications director called the charge "absurd", and Trump University "disputed that its classes were deceptive".)
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 against Trump University on April 30, 2010, in the U.S. District Court for Southern California. 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, but did so in a later amended complaint. 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 14 charges.
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", which 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 hastened consideration of the defamation claim without further discovery.