Donald Trump is settling all three fraud lawsuits against Trump University for a total of $25 million, ending a long legal battle against former students who said his real estate seminar business cheated them out of thousands of dollars.
Trump brags that he doesn’t settle lawsuits. But the three lawsuits against Trump University — two class-action suits in California and an attorney general–generated lawsuit in New York — threatened to follow him to the White House. One of the class-action suits was set to go to trial November 28, and Trump’s lawyers had initially said he planned to attend it even though he’s preparing for his inauguration in January.
Trump didn’t admit liability, according to the Los Angeles Times, although the $25 million he will pay includes $1 million in penalties to the state of New York and $21 million to former students.
The settlement, though, means that Trump will avoid the bizarre spectacle of serving as president-elect or even president while also facing a lawsuit for alleged fraud and racketeering — as well as the political fallout from any potential loss in court.
The two class-action lawsuits said Trump University was a fraud
The basic charge at the heart of two class-action lawsuits against Trump — Cohen v. Trump and Low v. Trump — is that Trump’s "university," a series of get-rich-quick investment seminars, was a fraud.
The presiding judge for both suits was Gonzalo Curiel, whom Trump famously insulted during the campaign by saying that his Mexican heritage should disqualify him from the cases because Trump wanted to build a wall on the Mexican border.
Documents disclosed in the suits revealed clearly that Trump University had two goals: to identify prospects with the money to spend on Trump's seminars, and to get them to spend as much of it as possible.
The first seminar was free. The second, which was three days long, cost $1,500. The crown jewel was the year-long partnership with an adviser hand-picked by Donald Trump, an experience that cost $35,000. Even after they paid tens of thousands of dollars, students would be pushed to buy even more products. Recruiters were trained in the art of the high-pressure scam and were told to toy with their prospects' emotions and urge them to run up their credit cards.
Then Trump University didn't deliver on its promises. "To my knowledge, not a single consumer who paid for a Trump University seminar program went on to successfully invest in real estate based upon the techniques that were taught," Ronald Schnackenberg, a former sales manager for Trump University, said in a deposition.
Cohen v. Trump makes essentially the same claims as Low v. Trump, but on behalf of anyone who purchased Trump University classes after January 1, 2007. Because it was brought under federal racketeering laws, it had the potential to be even more expensive by requiring Trump University to pay damages.
Cohen v. Trump also could have forced Trump to reveal one of his most closely guarded secrets: his net worth. In July 2015, Curiel ruled that Trump would have had to talk about how much he’s actually worth under penalty of perjury and respond to questions about how much money he'd put into, or made in profit from, Trump University.
The settlement means that information will stay secret. And the plaintiffs in the lawsuits will get $21 million in damages.
New York v. the Trump Entrepreneur Initiative: New York Attorney General Eric Schneiderman also took on Trump
The other suit settled Friday was brought by New York Attorney General Eric Schneiderman, known for his pursuit of high-profile cases. People of the State of New York v. the Trump Entrepreneur Initiative, accused Trump University and Trump himself of fraud, deceptive practices, false advertising, violating state rules for educational institutions, operating an unlicensed school, and disregarding buyers' rights to cancel a transaction.
A trial court initially ruled that Schneiderman was filing his suit against Trump too late, throwing out most of the charges against him. But in March, a state appeals court decided the statute of limitation hadn't passed and that it could include evidence from up to six years ago about Trump University's deceptive practices.
Before the settlement, the lawsuit was being appealed to the state's highest court, with a hearing scheduled for December. Schneiderman had initially sought millions of dollars in penalties, but the settlement means Trump will pay only $1 million.
Settling is a rare move for Trump, who usually prefers to carry out a grinding legal battle. But he apparently thought $25 million was a fair price to make a problem that could cast a shadow over the beginning of his presidency go away.