The $40 million lawsuit Donald Trump is facing for operating a phony university highlights how for-profit colleges are increasingly under a microscope and, in some cases, in the cross hairs of federal prosecutors, state attorney generals, and disillusioned students.
Over the weekend and yesterday New York Attorney General Eric Schneiderman filed a suit against Trump, Trump University and former president of Trump U Michael Sexton for misleading more than 5,000 customers across the country into buying expensive courses to learn the billionaire developer’s real estate investing secrets and techniques. Instead, the AG alleges Trump U’s seminars and mentorship programs failed to deliver on their widespread marketing campaign: “Just copy exactly what I’ve done and get rich.”
Trump, uncharacteristically defensive, has labeled the “frivolous suit” “thug politics” by a “lightweight” “political hack.” He took to the waves (Fox & Friends, Morning Joe, Twitter), countering that the people who signed up and paid for his courses gave him a 98% approval rating. Yesterday he launched98percentapproval.com, a site that offers such testimonials as “Great presentation!” and “Thank you for a great, informative, energizing, helpful, practical & fun seminar.” All reviews are vaguely ID’d only by initials.
Trump has always brawled in a big, bad, hyped-up way, whether it’s challenging President Obama’s birth certificate, hating on Rosie O’Donnell or tussling with Scottish officials over proposed wind turbines overlooking his new golf course. Only this time, his opponents are consumers who have risked thousands of dollars for not much more, according to Schneiderman, than diploma-like Certificates of Completion with Trump’s signature and an opportunity to have their picture taken with a life-size photo of the celebrity billionaire valued at $3.2 billion.
Trump Organization EVP and counsel George Sorial told FORBES’ Kathryn Dill yesterday that they are considering bringing a “major lawsuit” against the NY attorney general. “This fight,” said Sorial, “has just begun.”Didn’t they know better? “This was a bait and switch in the hardest economic times, preying on people who could not afford to buy these programs,” Schneiderman said on Good Day New York. “Mr. Trump used his celebrity status to lure people in.”Education advocates applauded Schneiderman’s move, hoping that it would dampen other for-profits’ deceptive recruiting tactics into expensive programs that offer certificates or degrees with little value and poor job prospects.
Trump U was formed in 2004 and between 2005 and 2011 operated as an unlicensed educational institute. The name was changed in 2010 to Trump Entrepreneur Initiative after repeated warnings from state education officials that the school was not chartered as a university and was operating as an “illegal education institution.” The New York case comes on the heels of a California federal court lawsuit against Trump U filed based on similar charges from dissatisfied students. Schneiderman, who referenced the pending California case in the complaint, has said that Trump is “going to have to face justice. And he doesn’t like doing that.”
Trump isn’t the only one. In past years there have been not just one or two but an escalating handful of individual, class action, and government suits against for-profit colleges — as well as the release of a two-year investigation by Sen. Tom Harkin of Iowa into some 30 for-profits, which found that most charge significantly more than similar programs at community colleges or even flagship state universities. Trump U three-day seminars cost $1,495 for three days and $10,000 to $35,000 for mentorship programs. A developing list includes:
In August 2013 Career Education Corp., agreed to pay more than $10 million to settle a state claim that the company systematically deceived students with misleading advertisements and inflated job placement statistics. This was part of a similar investigation by AG Schneiderman.
In July 2013 Chester Career College, formerly known as Richmond School of Health and Technology, in Richmond, Va., agreed to pay $5 million in a class-action suit filed by eight former students who claimed that the school targeted minorities for enrollment and did not provide them an adequate education.
In June 2013 student Jennifer Kerr won a $13 million suit against Vatterott College in Missouri for deceptive practices.
In March 2012 Westwood College (owned by Alta Colleges, Inc.) agreed to pay $4.5 million to settle a lawsuit brought by Colorado’s AG for inflating job-placement rates, compensating admissions representatives for number of enrollments, among other charges.
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