Suit: Trump misled investors in money-losing firm
New York – President Donald Trump is accused in a lawsuit Monday of misleading salespeople who lost money in a multi-level marketing company that he endorsed in speeches and on “The Celebrity Apprentice.”
The suit filed in Manhattan federal court alleged Trump received millions of dollars in exchange for reassuring potential salespeople for telephone company ACN there was little risk if they paid fees and incurred other expenses to start selling its phone service to others. The suit said Trump falsely reassured them he had done extensive due-diligence on the company and all was well, though he knew all along they had little chance of recouping their fees.
The suit filed by four salespeople alleged Trump violated federal anti-racketeering law and is seeking class-action status.
The suit said Trump made his millions by “systematically defrauding economically and marginalized people looking to invest in their educations, start their own small businesses, and pursue the American Dream.”
The suit also named the Trump Company, which is a unit of the Trump Organization, and the president’s three oldest children as defendants. It said Trump’s “fraudulent scheme” also involved a vitamin company bearing Trump’s name and his backing of a real estate lecture series called the Trump Institute.
The Trump Organization did not respond to a request for comment from The Associated Press. A lawyer for the Trump Organization, Alan Garten, told The New York Times the allegations are meritless and motivated by politics, coming just days before the midterm elections.
The lawsuit is being underwritten by a nonprofit whose leader is a major Democratic Party donor.
ACN used a system of salespeople recruiting other salespeople, each paying an “initial fee” of $499 to join.
It has drawn scrutiny in Canada, Australia and the U.S. states of Maryland and Montana, where a securities regulator issued a cease-and-desist order in 2010, accusing ACN of running an “illegal pyramid promotional scheme” that relied heavily on fees from new salespeople to generate income. Regulators dropped the charge after ACN agreed to refund money lost by salespeople and to improve training.
Trump also gave at least three speeches at ACN events, earning $1.35 million in fees, according to figures at the Federal Election Commission.
On an episode of “The Celebrity Apprentice” in 2011, Trump said he knew ACN “very well” and, in a video ad, said he had done “a lot of research” to gain insight into how it has “stayed ahead of the pack.” In a Wall Street Journal article in 2015, however, he was quoted saying he was “not familiar” with what the company did or how it functioned.
The suit depicts the four anonymous plaintiffs as struggling workers trying to make ends meet who could not afford losing even a few hundred dollars. One was a hospice caregiver who was initially skeptical of the venture, the suit said, but was won over after watching an ACN promotional video featuring Trump and it being talked up on a “Celebrity Apprentice” episode.
She spent thousands of dollars in expenses to attend ACN events and meetings, the suit said, but only received one check – for $38.
The nonprofit Tesseract Research Center, which is paying fees for the plaintiffs’ lawyers and other costs, is run by Democratic donor Morris Pearl, a former managing director at investment giant BlackRock.
In response to the Trump Organization’s criticism about the suit’s timing before the midterms, the plaintiffs’ lawyers said the case was brought now because “it is ready now.” “No matter when this was filed, the Trump Org would say it was politically motivated,” they said in a statement.
The 160-page suit accuses Trump and the other defendants of misleading and deceptive practices and asks for triple damages under the Racketeer Influenced and Corrupt Organizations Act, or RICO.
Trump has a slew of legal woes, including lawsuits accusing him of violating the anti-bribery emoluments clause of the U.S. Constitution by accepting payments from foreign governments at his hotels and other properties.
He and his three oldest children also face a lawsuit from the New York state attorney general alleging they used money donated to the president’s charity, the Trump Foundation, to help his campaign, pay for a painting of himself and other personal uses.
Trump has called the suit “ridiculous” and vowed in tweets not to settle.
A New York judge put that case on hold last week until a higher court rules whether a sitting president can be sued in state court.