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New York Attorney General Is Investigating Trump’s For-Profit School

Michael Barbaro|The New York Times
Friday, 20 May 2011 | 10:56 AM ET

The New York State attorney general’s office is investigating whether a for-profit school founded by Donald J. Trump, which charges students up to $35,000 a course, has engaged in illegal business practices, according to people briefed on the inquiry.

Donald Trump
AP
Donald Trump

The investigation was prompted by about a dozen complaints concerning the Trump school that the attorney general, Eric T. Schneiderman, has found to be “credible” and “serious,” these people said, speaking on the condition of anonymity because the investigation was not yet public.

The inquiry is part of a broader examination of the for-profit education industry by Mr. Schneiderman’s office, which is opening investigations into at least five education companies that operate or have students in the state, according to the people speaking on the condition of anonymity.

The investigation is the latest problem for a six-year-old company, known until last year as Trump University, that already faces a string of consumer complaints, reprimands from state regulators and a lawsuit from dissatisfied former students.

George Sorial, a managing director of the Trump Organization, confirmed that the company had received a subpoena from the attorney general’s office, and said, “We look forward to resolving this matter and intend to fully cooperate with their inquiry.”

Mr. Schneiderman is looking into whether the schools and their recruiters misrepresent their ability to find students jobs, the quality of instruction, the cost of attending, and their programs accreditation, among other things. Such activities could constitute deceptive trade practices or fraud.

The four other companies are the Career Education Corporation, which runs the Sanford-Brown Institute, Briarcliffe College and American InterContintental University; Corinthian Colleges, the parent company of Everest Institute, WyoTech and Heald Colleges; Lincoln Educational Services, the owner of Lincoln Technical and Lincoln Colleges Online; and Bridgepoint Education, the operator of Ashford University.

Spokesmen for Lincoln Educational Services, Bridgeport Education and Corinthian Colleges each said the companies had been sent requests for information by the attorney general’s office and would comply with them.

A representative of Career Education Corporation declined to comment.

For-profit schools have become big business in the United States, especially as the unemployed seek a way back into the work force. Some of those schools, however, have been accused of creating as much economic harm as help: students have reported falling deep into debt to pay for classes that they said had failed to deliver what they had promised.

Mr. Trump’s institution is unique among for-profit schools: it is built almost entirely around the prestige and prominence of a single individual. Mr. Trump said he created the university in 2005 to impart decades’ worth of his business acumen to the general public. He aggressively marketed the school, telling students that his handpicked instructors would “teach you better than the best business school,” according to a transcript of a Web video.

The school has charged premium prices because of the Trump name, with the cost of the courses ranging from $1,500 to $35,000 each.

But, as The New York Times reported last week, dozens of students have complained about the quality of the program to the attorneys general of New York, Texas, Florida and Illinois. The Better Business Bureau gave the school a D-minus for 2010, its second-lowest grade, after receiving 23 complaints. Over the last three years, New York and Maryland have told the company to drop the word “university” from its title, saying that using it violated state education laws. (The school was renamed the Trump Entrepreneur Initiative in 2010.)

Four former students filed a suit against Trump University last year in a federal court in California, seeking class-action status. They contended that the school used high-pressure sales tactics to enroll students in the costly classes, promised extensive one-on-one instruction that did not materialize and employed “mentors” who at times recommended investments from which they stood to profit.

Mr. Sorial of the Trump Organization, which oversees Mr. Trump’s businesses, forcefully disputed those claims. He said on Thursday that 95 percent of the school’s students in New York had rated their courses as “excellent” on evaluation forms. The school’s national average is even higher, he said.

“Our customer satisfaction surveys speak for themselves,” he said.

As its troubles have mounted, the school has suspended new classes and begun overhauling its curriculum, executives said. One priority is finding a way to inject more of Mr. Trump into the program.

“The one thing is that they really wanted me involved, instead of the teachers,” Mr. Trump said in an interview last week.

In interviews, several former students said they felt betrayed by the real estate mogul and his school, especially after investing tens of thousands of dollars in what they thought was to be a comprehensive education.

“They lure you in with false promises,” said Patricia Murphy, 57, of the Bronx, who is among the former students suing Mr. Trump, whose suit makes similar claims. She said she had spent about $12,000 on Trump University classes, much of it paid with credit cards, in the hope of escaping her career as a part-time teacher and becoming a real estate investor.

Her instructors said they would introduce her to banks, help her secure loans and walk her, step by step, through deals, she recalled. “They did none of that,” she said. “I was scammed.”

Mr. Sorial said the school was looking into Ms. Murphy’s claims.

Carmen Mendez, 59, a public school teacher in Brooklyn, wrote to the Better Business Bureau in 2009 about her disappointment with the school — and with Mr. Trump. She said she had dipped into her retirement savings to pay nearly $35,000 for the classes, because “Mr. Trump is a very respectable person, and I thought that Trump University was a real institution,” she said in the letter to the Better Business Bureau.

An instructor promised her, she wrote, that the school guaranteed financial assistance to buy e real estate. But once she had enrolled, Ms. Mendez wrote, she was refused such assistance. Because her credit cards were loaded with debt to pay for the classes, mortgage brokers told her she was ineligible for a loan, she said.

“I am writing because I want people to be aware that Trump University is not a real educational institution,” she told the Better Business Bureau. “Please advise other people so they do not lose their savings in these difficult days.”

Mr. Sorial said that the school tried to offer Ms. Mendez a full refund more than six months ago. “She failed to return our numerous calls and e-mails,” he said.

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