If Donald Trump is the Republican nominee, then a few months from now America may be treated to something it has never seen before: a presidential nominee being called to testify in his own defense while being sued for fraud.
High-information voters are likely to know at least the basics of the Trump University case. Before November, one suspects that everyone in America—or at least everyone in Ohio, Florida, Pennsylvania, Virginia, and North Carolina—will be intimate with Donald Trump's "University." Democrats will see to that.
In the meantime, the details of the Trump Institute—the scam which preceded Trump University—are relatively unknown. Yet they are germane, and fascinating, and two reporters at Ars Technica, Joe Mullin and Jonathan Kaminsky, have the goods.
You should read the entire piece. Not just because it will terrify well-meaning Republicans about having made themselves hostage to a political time bomb—but because the actual mechanics of the get-rich-quick schemes are intensely interesting.
Mullin and Kaminsky became interested in these sorts of scams back in 2005, as journalism grad students. They began investigating an outfit called National Grants Conferences (NGC), after seeing ads for the company on late-night TV. NGC put on seminars across the country promising to help people take financial advantage of government grants. NGC's founder, Mike Milin, had followed in the wake of Matthew Lesko (the crazy question mark guy) and built NGC into an empire: Milin had teams running free seminars all across the country, where the marks would then be pushed to spend $999 on "memberships" which would give them books and access to "counselors" to help them feast at the government-grant trough.
Here's Mullin and Kaminsky explaining what the seminars looked like:
NGC plied particular markets with mailers, newspaper ads, and its late-night infomercial, filled with customer testimonials. "I got $80,000 in grant money, and I don't have to pay it back!" said a supposed NGC customer named LaDawn Morris, who had gotten the money for "property rehab." Another supposed customer, Dave Morgan, testified about winning a "grant for up to $1.3 million.". . . The NGC ads urged people to attend one of several free seminars offered locally during an upcoming weekend. These seminars were part motivational speech, part religious revival; at the end, they became a hard sales pitch. The seminar salesmen—"front-end speakers" in industry lingo—assured the audience that they were big success stories who had learned the secrets of great wealth. The hardest work they did now was walking to the mailbox to pick up their checks. NGC had been started to "let everyone in this room play the game" typically reserved for the wealthy, frontman Rick Wiseman promised the crowd at one of the dozen conferences we attended in the course of our reporting. Wiseman's pitch hit every note of a classic rags-to-riches tale. He was dyslexic. He was called "dummy." But, of course, no one was calling him that now. To seal the deal, Wiseman transitioned from his difficult upbringing to boasting about his current wealth. That's where a story about his Utah home, replete with photographs, came in. It had been remodeled and upgraded, he said, with the help of $107,000 in state government grants. The frontmen, after establishing their authority, made sure to hammer home the importance of ignoring the dreaded "dream stealers" and "gunslingers" that surrounded each audience member. These people were typically family or close friends who might discourage customers from spending $999—and sometimes much more—on an infomercial product. An NGC membership was an "investment in yourself," Wiseman told one crowd. Poor people don't know what an investment is, he explained—but successful people do. "I cannot teach people how to get $107,000 when they think $1,000 is a lot of money," he said with a knowing smile.
You can probably guess where this is going:
But when we checked out Wiseman's story, Utah officials told us the state grants didn't exist. (Researching his home, we found that Wiseman did apply for a few tax credits, which were approved.) What really made Wiseman wealthy, according to sources who knew the business intimately, was getting a cut of every NGC membership he sold. This appeared to be enough, based on our observations of his sizable crowds, to clear five figures in a good week. Who was paying all that money? We interviewed nearly 50 customers who purchased NGC memberships and found that all had some source of income, but most were on the periphery of the middle class. Almost everyone appeared to pay by credit card. None of the people we interviewed had received any grants.
Anyway, here's why all of this is important: Because in 2006 Donald Trump struck a licensing deal with Milin and created the "Trump Institute" out of the NGC scam. As the Ars Technica team reports, they used much of the same pitch material and some of the same pitchmen:
In the spring of 2006, Wiseman and fellow NGC pitchman Saen Higgins began hawking Trump Institute, which promised to reveal the business mogul's tools for real estate investing and entrepreneurship. (Wiseman didn't return messages asking for comment. Higgins couldn't be reached.) That June, we saw Higgins address a crowd eager to learn Donald Trump's money-making secrets. Much of the pitch, delivered in San Diego, was recycled NGC material, including his telling of Wiseman's Utah grants story. The remainder was an extended riff on Donald Trump's real estate acumen. Though there were many similarities between the NGC and Trump Institute pitches, one thing had changed: the price. With the Trump name, membership had increased to $1,399.
Just as Trump was jumping in bed with NGC, NGC was hit with all manner of fraud litigation. (The details are all in the Ars Technica piece.) When questioned about this, Trump's people dissembled:
To find out why Trump would get involved with the Milins, we asked to speak with Michael Sexton, a Trump executive who helped manage the Trump Institute deal. Sexton was happy to grant an interview with a couple of journalism students. Yes, the live seminar business had a "checkered past" and was filled with actors who "have not done a good job of serving the needs of their customers," he told us at the time. After a "lengthy due-diligence process," Sexton said, Trump decided to team with the Milins. "We've partnered with a group that's the best in the business at putting this on," he said. "We've basically taken our curriculum and used their logistics infrastructure to make sure that this thing goes off without a hitch." The Vermont case was well underway by the time we spoke to Sexton, but he wouldn't answer questions about what he called the Milins' "past businesses." Sexton was happy, however, to offer an example of how Trump Institute inspired its students. It was one we knew well—Rick Wiseman's claim to have received $107,000 in government money to improve his home.
The Wiseman story, you'll recall, was total b.s.
That said, the lessons Trump learned from Milin helped him build Trump U:
Having spent two years learning how to market to working class strivers, Trump was ready to run a seminar business directly through Trump University. (This could be lucrative; according to a civil suit filed by the New York attorney general's office in 2013, Trump personally pulled in $5 million during the few years his "university" was functional.) Trump University operated much as NGC and then Trump Institute had. In a front-end free seminar at a hotel, speakers sold expensive packages and promised that anyone who bought into Trump University would get a year of "apprenticeship support" through a toll-free hotline. . . . Just as they had with the Milins, legal troubles followed this business model. The New York attorney general filed a suit that continues today. While NGC's phone support produced numerous complaints, Trump University didn't have a "hotline for students with substantive questions about real estate," according to the lawsuit. And Trump University's three-day seminars were really a long pitch "to upsell the expensive Elite programs," the lawsuit stated. (Those packages ranged from $10,000 to $35,000, according to the suit.) Private claims came, too. In 2010, a class-action lawsuit was filed by disgruntled customers, many asserting losses into the tens of thousands of dollars. Trump University changed its name after the New York lawsuit was filed, and it wound down that same year. Searching for it online now leads to a non-functioning website branded the "Trump Entrepreneur Initiative."
As I said, you should read the whole thing.