Trump University's bogus curriculum is the real scandal

The original idea for Trump University was a good one: to offer a range of online courses covering all aspects of business. In practice, it soon became a dangerous get-rich-quick real-estate scheme, one that looks especially bogus to anyone who does real estate education for a living, as I do.

Michael Sexton, a Dartmouth-educated management consultant who would go on to become president of Trump U., reportedly approached Trump in 2005 with the idea of capitalizing on Trump’s name to set up an online education program.

In a deposition, Sexton said the original offerings at Trump U. were intended to be much broader than just real estate. It would offer a traditional business curriculum with courses on marketing, finance, sales and entrepreneurship.

Trump U.’s faculty members were going to be prominent professors from major universities. The online courses were going to be well-structured, utilizing techniques borrowed from, among others, Columbia University’s online program.

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It turns out that one of my friends, John Vogel, is a distinguished real estate professor at Dartmouth’s Tuck School of Business. Vogel was Sexton’s real estate professor at Dartmouth, and in those early years, Sexton invited him to develop some lectures for Trump U.

Vogel gave a short course on “how to buy a house” — one of his favorite classes in the introductory course at Dartmouth. He agreed to do it in part so he could see what it was like to offer an online course, which, in 2005, was still ahead of its time.

Vogel says the notion, as presented to him, was to offer a whole series of high-quality online courses. When they launched the university, Vogel was photographed sitting next to Trump.

“Trump was quite a publicity machine. It was an opportunity to reach a lot of people,” he told me.

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That was then. By 2007, Trump University had picked up steam — and dramatically changed directions. Vogel suspects the online courses did not make enough money. Whatever the reason, the “university” morphed into make-a-quick-buck seminars with high-power sales gimmicks aimed at people who could not afford it.

Students were told they would get rich by following Trump’s techniques. Advertisements promised that students would get Trump’s personal attention and training from hand-picked experts.

NEW YORK - JANUARY 10: Copies of "How To Build Wealth," which is a series of nine audio business courses created by Trump University, lie on display at a Barnes & Noble store January 10, 2005 in New York City. (Photo by Scott Gries/Getty Images)

NEW YORK – JANUARY 10: Copies of “How To Build Wealth,” which is a series of nine audio business courses created by Trump University, lie on display at a Barnes & Noble store January 10, 2005 in New York City. (Photo by Scott Gries/Getty Images)

(Scott Gries/Getty Images) Exhibit taken from lawsuit affirmation against Donald Trump University, which includes all of the exhibits (PDFs of ads, witness testimony, etc..)

Exhibit taken from lawsuit affirmation against Donald Trump University, which includes all of the exhibits (PDFs of ads, witness testimony, etc..)

“How To Build Wealth” a series of  nine audio business courses created by Trump University, and exhibit taken from lawsuit affirmation against Donald Trump University

They got neither. Vogel would go on to state in a Wall Street Journal article that if he had known what the “University” would become, he would have had no part of it.

I don’t blame him.

Trump University was never a university. It was not accredited, offered no degrees and had no coherent curriculum. Indeed, the New York State Office of Education demanded that those running the place quit calling it a university because they were not chartered as one in the state.

To get around the state’s order, those running the operation set up an address in Delaware, and Sexton promised not to hold live classes in New York. But they did not stop using the name Trump University in advertisements in New York, and they violated the state’s order to hold no live classes there.

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And perhaps most important, while the “university” eventually would focus on real estate rather than general business, it never offered the full set of courses that are standard in real estate programs at major universities such as Harvard, MIT, Columbia, Wharton and USC.

Graduate-level Master’s degree programs typically require one or two years of full-time instruction. Having set up two such programs at USC and Harvard, I know that there is general agreement among experts that the curriculum should include full-semester courses in real estate finance (introductory and advanced), market analysis, urban economics, legal transactions, construction, planning and urban design, entrepreneurship, negotiation and ethics.

Many major university-based real estate programs also offer courses in appraisal, property management, corporate real estate, complex deal structures, capital markets, private equity, public finance, housing and social policy to augment the core curriculum.

All programs have multiple courses covering the three main areas — finance, design and construction.

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Let’s compare and contrast with what Trump U. offered.

The Trump U. Gold Elite package includes only four retreats, one three-day field mentorship and an online training course — all that for a cost that is higher than a full semester at Harvard.

The Trump U. Gold Elite package includes only four retreats, one three-day field mentorship and an online training course — all that for a cost that is higher than a full semester at Harvard.

(Trump University)

According to the Trump University Playbook released as part of the class-action lawsuit filed by students who claimed to be victims of fraud, students were drawn in first with a free, 90-minute preview. They were encouraged to sign up for a three-day fulfillment workshop costing $ 1,495: “Profit from Real Estate,” also called “Fast Track to Foreclosure.”

A former employee named Jason Nicholas who gave testimony in the lawsuit in 2012 describes the aggressive tactics used in the seminars to upsell students to the more expensive packages: The Trump Gold Elite package was the most expensive at $ 34,995. The Silver Elite package was $ 19,495, and the Bronze Elite package was $ 9,995.

The class-action complaint states that the instructor played on the fears of the audience, which included many senior citizens. “How many of you lost a lot of your 401(k) investment in the market? How many of you want to leave a legacy or property to your children or grandchildren?”

The speaker then encouraged attendees to cash out their 401(k)s or increase their credit limits so they could supposedly make a higher return on their investments in the foreclosure market.

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Students were told at the free preview that all they needed to get the skills and knowledge necessary to profit hugely in the real estate world was the three-day Fulfillment course. However, at that course, students were told what they really needed was the Gold Package. To make the up-sell, instructors made standardized pitches using a separate PowerPoint presentation.

Nicholas further testified he heard numerous complaints from customers after they attended seminars or live events that it was just a big marketing scam — and that they never got the information or training they paid for.

“It was all about the up-sell,” he said. He says it was the practice that if a student gave high ratings on the evaluation form, “we were supposed to immediately call them back and try to up-sell them — to get them to sign up and pay for more seminars.”

In the Gold Elite package, students would get a three-day personal training session with a mentor who would lead them through the entire process. Students were promised that they would be able to call the mentor at any time over the next year for assistance.

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If this had been delivered, students may indeed have succeeded in achieving the results promised — to make money doing foreclosure deals and other opportunities. However, Nicholas said that “the mentor didn’t take you through deals step by step, you didn’t have the skills or knowledge to do it, and — after paying $ 35,000 for the course, you didn’t have the finances to invest either.”

It is lamentable that Trump's accusations of bias based on Judge Gonzalo Curiel's Mexican heritage are obfuscating the merits of the class-action suit itself.

It is lamentable that Trump’s accusations of bias based on Judge Gonzalo Curiel’s Mexican heritage are obfuscating the merits of the class-action suit itself.

(Tom Lynn/Getty Images)

Corrine Sommer, who worked for Trump University from May through October 2007, testified that “many of the speakers, instructors and mentors lacked real estate experience. Many of them did not even own houses, and had no experience buying or selling real estate.” She recalled one person who had been a jewelry salesman. After working on the sales team for a year, he began speaking as an instructor at seminars.

In our real estate programs at Harvard, we would never hire an instructor who was not a recognized expert in real estate — who not only had the credentials but also the reputation and recommendations to teach our students.

Sommer attested further that Trump University did not provide a year of real estate mentoring as promised. Rather, mentors were paid on commission for signing up students. Once paid, they had little incentive to follow through on the mentoring.

She testified, “I received calls from many angry students telling me that they had been trying to reach their mentors to no avail.” She further stated, “I do not believe that Trump University taught Donald Trump’s investing ‘secrets.’ Donald Trump came from a wealthy family and had resources at his disposal to purchase real estate — that is the secret — one that the average consumer could not replicate.”

A quick look at the offerings for the Gold Elite and Silver Elite packages from the Trump playbook shows how ill-equipped a graduate of Trump University would be to succeed in real estate development or investment.

Even the Gold Elite package includes only four retreats, one three-day field mentorship and an online training course (perhaps 15-20 days of total instruction) — all that for a cost that is higher than a full semester at Harvard.

Such short courses are what one would expect to see in executive programs such as the Advanced Management Development Program at Harvard — a six-week executive program costing $ 30,000. The big difference, however, is that AMD participants have 15-25 years of real estate experience. They are hardly beginners.

Trump’s promise of direct engagement with the school, and his pledge to have hand-selected its instructors, were among the biggest forces drawing students to pony up big sums of money to be a part of Trump U. However, in a deposition for the lawsuit, Trump acknowledged he did not pick the instructors. Sexton further testified that Trump never even reviewed the curriculum.

It is lamentable that Trump’s accusations of bias based on Judge Gonzalo Curiel’s Mexican heritage are obfuscating the merits of the class-action suit itself.

Based on the public record, there is plenty of evidence that the class action has sufficient merit to go to trial. The entire real estate profession suffers when courses such as those offered by Trump University mislead vulnerable attendees to pay large sums of money for education that fails to deliver the promised results.

Richard Peiser is the Michael D. Spear Professor of Real Estate Development at the Harvard Graduate School of Design, and author of “Professional Real Estate Development: the ULI Guide to the Business.”

Tags:
donald trump
fraud
dartmouth
2016 election

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