Buying a Trump Property, or So They Thought
Mr. Tufenkian, who lives in Portland, Ore., was especially drawn to what Trump University described as a year-long mentorship. But he said that it amounted to a real estate expert from California taking him on a tour of homes in Portland that he could have seen on his own, for free.
At one point, he said, the mentor suggested an educational trip to Home Depot , an idea he found comical; at another, he said, the mentor recommended a sales technique (selling the option to buy a house), that several lawyers later told Mr. Tufenkian he was ineligible to perform because he lacked a real estate license. He recalled how, during a much cheaper Trump class on foreclosure, he and his wife were encouraged by instructors to raise their credit card limits, ostensibly in anticipation of investing in real estate, only to have the accounts maxed out with the purchase of the next $35,000 class, a charge mirrored in the lawsuit. The fee, and the resulting credit card interest payments, have wiped out much of the couple’s savings. Mr. Tufenkian’s requests for a refund have been rejected.
“You can understand how a business makes mistakes,” he said, “but a proper business will do what it takes to make it right. Trump University has no interest in taking care of its customers.”
George Sorial, a managing director and lawyer at the Trump Organization, the company that oversees Mr. Trump’s various businesses, said that the school had a “very generous” refund policy — and that less than two percent of students ask for their money back.
Mr. Sorial called claims that instructors took students on tours of Home Depot and asked students to raise their credit limits “ridiculous” and “unsubstantiated.” He said mentors were prohibited from profiting from their advice. According to student evaluations, he said, Trump University has a 97 percent customer satisfaction rate with its 11,000 paying students around the country.
“I guarantee that if you went out and surveyed Harvard grads, you would find some who are not happy. It’s inevitable,” he said. “You cannot look at the exception to the rule.”
Students said the evaluations must be put into context: they were told to fill them out using their names, often in the presence of the instructors they were assessing. Mr. Tufenkian, for example, said he gave high marks to the program after his mentor told him he would not leave until Mr. Tufenkian did so. “I had to fill it out right in front of him,” Mr. Tufenkian said.
The school has repeatedly sought to use such evaluations to raise questions about the credibility of unhappy former students. After Tarla Makaeff, who spent about $37,000 on Trump classes, joined the lawsuit against the school, the company released raw footage of a Trump University videographer approaching her in a hotel conference room, asking her to assess the program and her mentors. On the video, her mentors can be seen standing beside her, clearly within earshot. While warning that “we just got started,” Ms. Makaeff, 37, calls the mentors “great” and “awesome.”
In retrospect, Ms. Makaeff said, university employees “were trying to cover themselves,” by putting her on tape. Trump University is now suing her for defamation, seeking at least $1 million in damages for her public criticism of the school in letters, e-mail and online. “That just shows you how low they will go to silence people,” Ms. Makaeff said.
The school’s troubles are intensifying. Last year, the Texas attorney general, Greg Abbott, opened a civil investigation into Trump University’s practices. Since then, the company has agreed not to operate in Texas indefinitely, said Thomas Kelley, a spokesman for the attorney general. (Mr. Sorial said there was no formal agreement.)
And last March, New York state officials demanded that Trump University change its name, saying its use of the word university “is misleading and violates New York education law,” joining Maryland, which issued a similar warning in 2008.
The school has since changed its name to the Trump Entrepreneur Initiative, but has not held a new class in seven months as it reworks its curriculum. “It’s on hiatus,” Mr. Trump said in an interview.
The Trump Institute, meanwhile, shut down in 2009. “It doesn’t meet our standards,” Mr. Sorial said. “Our standards are very high.”
Five-letter Brand Name For Rent
Selling the Name
Even as his empire has expanded into reality television and the clothing aisle, Mr. Trump remains, at least in the public imagination, primarily a real estate developer.
But to a remarkable degree over the last five years, Mr. Trump has retreated from that role, becoming, instead, a highly-paid licensor, who leases his five-letter brand name to other developers in Toronto, Honolulu, Dubai and even his own backyard, New York City.
The arrangements allowed Mr. Trump, who is notoriously competitive, to remain a player in the world of big-city builders without risking his own money — a prospect that seemed especially appealing as the economy began to crater.
“When things got over-inflated in the world,” Mr. Trump’s son Donald Jr., said in an interview, “we removed ourselves from the ground-up development world, where we are risking a lot more.”
“We switched more to a license model,” he said, describing several of the projects, including the Honolulu building, as “big successes.”
However it was that kind of license deal — in places like Baja California, Mexico, and in Tampa and Fort Lauderdale, Fla. — that led to disappointment and anger among those seeking to buy a home carrying the Trump name, according to the lawsuits.
John Robbins, 62, a retired lieutenant colonel in the United States Army who is among those suing Mr. Trump, recalled being dazzled by the amenities available in the nearly 2,000-square-foot apartment that he and his wife, Rosanna, bought six years ago at the Trump Tower Tampa: granite countertops, sweeping views of the Tampa Bay, and room service from a high-end ground-floor restaurant.
The most important amenity of all, though, was the name on the side of the building. “With the Trump name,” Mr. Robbins said of his $756,000 unit, “we thought it would be a quality building and address.”
The marketing materials left little doubt that Mr. Trump was a driving force behind the 52-story tower: “We are developing a signature landmark property,” Mr. Trump declared in a news release unveiling it, which described him as a partner. In a marketing video, Mr. Trump called it “my first project on the Gulf of Mexico,” and even showed up to mingle with potential buyers at a lavish, catered event. “I love to build buildings,” Mr. Robbins recalled Mr. Trump telling the audience.
A confidential agreement, later made public in court filings, told a different story: Mr. Trump was not one of the developers or builders. For $4 million, plus a share of any profits, he had licensed his name. As for the mingling with buyers? He was required to do it, up to two times, in the agreement, which spelled out that the appearances last “for no more than six (6) working hours each.”
According to the document, the very existence of the license agreement was to be kept confidential. And it remained that way, buyers said, long after they bought their units. “If at any point I had known this, I would have walked away,” said Mr. Robbins, who put down a deposit of about $150,000 — half of which, under Florida law, the developer could use for construction costs.
A similar situation unfolded in Baja, where Mr. Trump licensed his name to another glamorous-sounding waterfront property: the Trump Ocean Resort Baja.
As financing for the building froze in 2008 and the developer missed key deadlines, Mr. Trump exercised his right to terminate the license agreement and remove his name. According to a lawsuit, the partners behind the deal burned through $32 million worth of buyer deposits, even though little, if any, construction was done.
One of the buyers suing Mr. Trump, Donald Isbell, said he has lain awake countless nights trying to figure out how he erred. He has lost his entire deposit of $147,000. “I have come to the conclusion,” he said, “that what I did wrong was to trust Donald Trump.”
Mr. Trump and his advisers seem unapologetic about how they handled the three deals. Asked, in a deposition with lawyers for the Tampa buyers, if he would be responsible for any shoddy construction, Mr. Trump replied that he had “no liability,” and said that he was unsure whether his licensing arrangements were disclosed to buyers. Pressed during the deposition as to why he did not return his license fee after the development fell apart, Mr. Trump replied: “Well, because I had no obligation to the people that signed me to give it back.”
But what has most galled people like Mr. Robbins, who sank much of their life savings into their dream homes, was Mr. Trump’s suggestion that the collapse of the project was a blessing — because it had allowed buyers to avoid the housing crash and the resulting plunge in home values.
“They were better off losing their deposit,” Mr. Trump said.
“Better off?” asked Mr. Robbins, who lost $75,600, the half of his deposit spent on construction. “No. I would be better off if he had been truthful and honest with us from the beginning. I would be better off if he returned my deposit.
“But he will never do that. He is looking out for Donald Trump and the dollar.”