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August 26, 2013
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The New York Attorney General has filed suit against Donald Trump and his companies for fraud in connection with his real estate investor training activities. Trump University (now “Trump Entrepreneur Institute”) ran an education company from 2005 – 2012, during which it is alleged they bilked $40 million from customers based on false promises. Is this true?

I have some insight on the education business, and I personally know many of the instructors who ran the Trump University operation. First, it is doubtful that Trump personally did anything with regard to this operation, much less “hand pick” the trainers. Trump likely licensed his name to a Utah or Nevada-based company that runs real estate training for many celebrities. For many years, “Rich Dad” was run this way, with Kiyosaki’s name as a hook, having nothing in practice to do with Kiyosaki himself. That didn’t turn out too well. Read here. I have been approached by many of these operations over the years with an offer to take my name public and give me 5% of the proceeds. No thanks! I knew such an operation would ultimately ruin my reputation, which is my most valuable asset.  Trump was a fool if he turned over his name to run an operation without supervision.  Would Trump allow his name to be used on a golf course without some standards?  I doubt it.

So is Trump off the hook because he didn’t personally run Trump University? Not a chance! Trump allowed his personal name and reputation to be used for the operation, so the Attorney General is going after Trump personally for the consequences. $40M is a lot of dough, even for Trump, and I imagine he will settle the case for a fraction of that amount. Attorneys General often go after big companies and sue them for violating the law on a regular basis – Google, Microsoft, Bank of America, to name a few. The result is generally a settlement, a fine, and a promise not to do it again. If you operate on a large, public level, you are bound to break some consumer protection laws at one point or another, but when it happens to a guy named, “Trump”, its big news.

Trump claims the whole thing is bogus and a political move by the NY Attorney General, who’s political leanings are opposite Trump, who has flirted with the idea of running for President. Trump obviously thinks this lawsuit is intended to damage Trump’s reputation if he decides to run. I can’t say I agree that is the motive for the NY Attorney General, although making an example of a “big fish” is always a trophy for a law enforcement official. Politically, if the NY AG nails Trump or gets a settlement, its a win for him and his political future, which is always in the back of any state attorney general’s mind. To that extent, I believe politics does come into play.

On an anecdotal note, I have heard some not very flattering things about Trump University and its training from various customers. “Overpriced”, “fluff”, and “high pressure sales tactics” are the usual complaints, much like the Rich Dad format. While some may question my own motives (since I offer training and mentoring myself), I generally am not a fan of large, national seminar companies. Most are run to be “efficient”, which usually means “boilerplate” for the customer. The overhead of these companies is enormous because they do TV, radio and newspaper ads all over the country to fill seminars. I know for a fact that a lot more goes into marketing and sales commissions in these operations than goes to paying good instructors to fulfill the promises made to customers.

Thus, while Trump is the hook to get them in, I seriously doubt Trump’s claim that 98% of his customers are happy with Trump University’s product. Nobody in that business has a 98% customer satisfaction rating, even hard to believe if Trump himself did the training and mentoring of his students.  The Better Business Bureau, an independent agency, rates Trump’s operation as a B minus, with 15 complaints.  That’s not bad, compared to Rich Dad Education, which is rated C minus, with 75 complaints.

Some people will comment that people who sign up for a Trump seminar are idiots who deserve to lose their money.  I don’t agree, but I do think that the customer has to take some responsibility for his success or failure, even of the training is mediocre and they didn’t get to meet Trump personally.  Even so, I doubt that Trump himself can teach the average Joe how to buy and manage a duplex!


William Bronchick, ESQ.

Nationally-Known Attorney, Author, and Speaker

Attorney William ("Bill") Bronchick, the host of Legalwiz.com, has authored six best-selling books and is sought nationwide for his 30+ years of real estate and legal knowledge. He has been interviewed by numerous media outlets, such as CNBC, TIME Magazine, USA Today, Investor Business Daily, Forbes, and the LA Times, to name a few. William Bronchick is the co-founder and past President of the Colorado Association of Real Estate Investors and the President of the Colorado Landlords Association. Click on the "About" link above for more information on William Bronchick.

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