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Trump U: $25M Settlement in University’s Fraud Case

Back in Novemeber of last year, now-President Trump agreed to settle a class-action fraud case against him for a whopping $25 million.  Now, months later, Judge Gonzalo Curiel-the same judge President Trump accused of prejudice for being “Mexican” (the Honorable Judge Curiel was born in Indiana)-has finally given approval for the settlement to go through.

You’re probably wondering to yourself why the settlement took so long to go through.  The answer is that, like most settlements, the settlement paid out to the many plaintiffs but admitted no fault whatsoever on the part of Trump.  For at least one plaintiff, a Ms. Sherri Simpson, this was not enough.  She felt that she wasn’t given enough of a chance to opt-out of the class action (choose to sue Trump on her own) and she has been challenging the settlement as insufficient.  Ms. Simpson wanted to see criminal racketeering charges brought against Trump and felt that she deserved at least an apology from Trump.  Ms. Simpson was quoted as saying “for him to out there and say, well ‘I didn’t do anything wrong’ it’s disgusting…I want an apology.

After much deliberation on the issue, Judge Curiel has finally determined that the settlement offer is fair-it’s around two-thirds of all the profits Trump University ever made and five times what Trump himself took in-for the entire class of plaintiffs including Ms. Simpson.  However, for those who have forgotten some of the details of the Trump U fraud case, let’s take a look at the charges brought against President Trump and why Ms. Simpson may have wanted to see some culpability on the part of President Trump.

Trump UTrump Accused of Fraud

Starting in 2005, Trump provided seminars of “Trump University” which–first and foremost–was not a university.  As soon as the “university” was established, the New York State Education Department warned Trump that he was violating New York law by failing to receive a license to operate as a school.  Trump never paid any attention to these warnings, despite a second warning in 2010, but ultimately changed the name of the business to the Trump Entrepreneur Initiative (TEI).

However, in the case itself the issues of education law violations were set aside in favor of the most important charges against Trump–fraud.  The complaints against Trump U from plaintiffs essentially alleged that, beyond providing nothing of benefit, nearly every advertised feature of the classes was untrue.  They sued under New York Executive Law 63.12, defining fraud as any “device, scheme or artifice to defraud and any deception, misrepresentation, concealment, suppression, false pretense, false promise or unconscionable contractual provisions.” The law provides remedies for ongoing and persistent cases of fraud.

TEI advertised teachers handpicked by Trump, but when asked at deposition Trump couldn’t name a single teacher at his “school.”  It became clear that Trump had had no connection to any teacher from his seminars.

While TEI was advertised as revealing Trump’s business secrets, it turned out that Trump himself had never reviewed any of the materials for Trump University whatsoever-instead allowing a third-party company (which primarily focused on making materials for motivational speaking and timeshare seminars) to design the full curriculum.  This curriculum included such riveting secrets as looking at the IRS website to learn about taxes.  In fact, many of the plaintiffs complaints revolved around the majority of the information in the curriculum–for classes which were sometimes as expensive as $35,000–being easily accessible on the internet.

TEI also promised access to private lenders, financing, a year-long apprenticeship support program, and even promised to improve the credit scores of its students.  None of these promises ever materialized.

Instead of curriculum, the “Playbook” to TEI (basically an operations manual) was focused on upselling more TEI services.  It included nothing about presentations, speakers, or teaching points.  Instead, it focused on advising employees to avoid all reporters, providing sales tactics and how to respond if a district attorney ever showed up.

So as you can see, the allegations and facts certainly seem to include false promises aplenty in Trump University–making a strong case under Executive Law 63.12.  Judge Curiel had already ruled that Trump himself could be held personally liable for fraud should the case succeed, although the statute of limitations only allowed claims for the last six years of operation.  An especially large issue since TEI closed its doors in 2011.  However, should the case have succeeded, a personally liable Trump had more at stake than you might have expected.

Why Simpson May Have Wanted to Go Further–And Why Trump Was Quick to Settle

When Trump initially settled the case, he characterized the choice to settle as a cheap way to remove an inconvenience.  He tweeted out ” “I settled the Trump University lawsuit for a small fraction of the potential award because as President I have to focus on our country.”  However, $25M is far from a small fraction of the award as mentioned above–five times what Trump himself made off TEI.  The truth is, the implications of a fraud case against Trump that stuck were serious.

A settlement is not guilt-period.  The truth is that many settle just to avoid the potential costs inherent in litigation.  This means that, without a fully litigated case, it would be irresponsible to say that Trump did or did not commit fraud here–regardless of the evidence lined up against him.  However, had Trump been found guilty of fraud–or criminal racketeering as Ms. Simpson hoped–that would fall among the high crimes and misdemeanors which can lead to impeachment.  Even when committed before a president enters offices, and determined in a civil court as opposed to a criminal court, a verdict against Trump might have left him in a particularly precarious position in terms of his presidency.

This is very likely why Ms. Simpson was so adamant about pursuing her case and holding Trump himself accountable.   It’s also, despite what Trump himself may say, likely a large factor in why Trump–up until that point doggedly fighting the lawsuit from every angle from attacking the judge in the case to filing ultimately nearly frivolous $100M counterclaims against the plaintiffs in the case–chose to settle on the eve of his inauguration.  However, with the settlement finalized there will never be a fraud ruling against Trump in this case.  Settlements aren’t and should not be thought of as admissions of guilt, they are a generally a business decision, but as this chapter closes and the settlement is finalized it’s worth looking back at the case itself and how both Trump and the plaintiffs got here.

Jonathan Lurie


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