Donald Trump. (Photo: David Becker, Getty Images)
Kevin McCoy, USA TODAY
USA TODAY - A newly filed lawsuit that accuses real estate developer Donald Trump of bilking students of his "Trump University" confronts the reality TV star with a potentially risky two-front legal battle over his name, reputation and integrity.
New York Attorney General Eric Schneiderman accused Trump of using an unlicensed university real estate program to scam would-be real estate investors who sought the mogul's secrets of success. The petition, filed Saturday, also charges Michael Sexton, the Trump venture's former president.
The case comes amid Trump's so far unsuccessful efforts to dismiss a California federal court lawsuit based on similar allegations filed on behalf of disillusioned former students.
Plaintiff lawyers are seeking class-action designation of the California case. Trump's effort to continue a defamation countersuit against the lead plaintiff was overturned by a federal appeals court in an April ruling his lawyers are now trying to appeal.
Schneiderman, whose petition contains references to the California case, said during a CNBC appearance Monday that Trump is "going to have to face justice. And he doesn't like doing that."
Trump quickly shot back. In a blitz of TV news show appearances, a newly launched website and numerous tweets, he accused the first-term Democrat of filing false allegations and being a "lightweight" who "sues a school w/ a 98% approval rating but doesn't go after billion $ fraudsters all over Wall St."
Trump also alleged Schneiderman sought campaign contributions from him during the probe. Schneiderman spokesman Damien LaVera said it's not unusual for investigation subjects to "make wild accusations" to "distract from the substance of the case."
Seeking restitution for former students allegedly defrauded of more than $40 million, the New York petition charges:
• Trump University LLC was formed in New York in 2004 and was told by state education officials the name was improper because the business wasn't chartered as a university. It operated as an "illegal educational institution" whose name wasn't changed to Trump Entrepreneur Initiative until May 2010.
• Students were lured to free, 90-minute classes that "served as a sales pitch for a three-day seminar costing $1,495." Those seminars were "an upsell to increasingly costly 'Trump Elite' packages starting at around $10,000" and ending with a year-long mentorship for $35,000.
• A widespread marketing campaign claimed students would be taught by real estate "experts" who were "handpicked" by Trump. Allegedly, none were, though Trump claimed otherwise Monday.
Trump University's day-to-day operations were directly managed by Trump's corporate headquarters firm, and both Trump and Sexton were "personally and knowingly involved with the operations of Trump University," the petition charged.
In sworn subpoenaed testimony, Sexton acknowledged that "(t)here wasn't anything sophisticated about" the three-day seminar.
The California case was filed in 2010 and listed Tarla Makaeff, who took a Trump University class two years earlier, as the lead plaintiff. Like the New York petition, the California lawsuit said the university "is anything but" a program to help students gain financial independence through real estate investing, as allegedly promised.
Instead, "Defendant Trump University is more like an infomercial, selling non-accredited products, such as sales workshops, luring customers in with the name and reputation of its founder and Chairman, billionaire land mogul Donald J. Trump," the California lawsuit charged.
A hearing to amend the allegations is scheduled for Friday. Plaintiff attorney Jason Forge declined to comment. Trump attorney David Schneider argued in an Aug. 16 court filing that the proposed amendment represented a "wholesale metamorphosis" of the case from fraud-based claims against the business to "quasi-criminal claims" against Trump. He called the claims "completely false."
Trump's new website also included a link to a video in which Makaeff called a Trump University presentation "great" and said "all the speakers were really good." Trump lawyers have used the statements in a bid to undermine her credibility and continue the defamation case.
But in blocking that case from proceeding, the U.S. Court of Appeals for the Ninth Circuit wrote: "As the recent Ponzi-scheme scandals involving onetime financial luminaries like Bernard Madoff and Allen Stanford demonstrate, victims of con artists often sing the praises of their victimizers until the moment they realize they have been fleeced."