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ATTORNEY GENERAL OF TEXAS


GREG

ABBOTT

January 6, 2010

Certified Mail No. 7005 2570 0000 2876 6089


Return Receipt Requested
TO:

Trump University, LLC


40 Wall St., 32"d Floor
New York, NY 10005-1304

CIVIL INVESTIGATIVE DEMAND


Pursuant to the authority granted by Section 17.61 of the Texas Deceptive Trade Practices
and Consumer Protection Act, Sections 17.41 et seq. of the TEX. Bus. & COM. CODE ANN., you are
hereby directed to produce the documentary material specified in Attachment A for inspection and
copymg.
You are to make available the material described in Attachment "A" to the person designated
below as "authorized agent." Copies of the described documentary material may be sent certified
mail or via courier to be received on or before February 1, 2010 at our offices, located at 808
Travis, Suite 1520, Houston, Texas 77002. Please refer to the additional instructions and
definitions below.
This material is relevant to the subject matter of an investigation of possible violations of
17.46(a) and 17.46(b) of the Texas Deceptive Trade Practices-Consumer Protection Act. The
;general subject matter of this investigation is your company's advertising and business practices in
connection with offering real estate investment classes to Texas consumers.

TAKE NOTICE THAT pursuant to 17.62, Tex. Bus. & Com. Code, any person who
attempts to avoid, evade, or prevent compliance, in whole or in part, with this directive by
removing, concealing, withholding, destroying, mutilating, altering, or by any other means
falsifying any documentary material is guilty of a misdemeanor and on conviction is
punishable by a fine of not more than $5,000.00 or by confinement in the county jail for not
more than one year, or both.
TAKE FURTHER NOTICE THAT information contained on your computer systems
may be relevant to the investigation. No potentially discoverable data should be deleted or
modified. Procedures that may alter or erase computer data should be suspended and
affirmative steps should be taken to prevent deleting, overwriting, defragmenting or
808 TRAVIS, STE. 1520, HOUSTON, TEXAS 77002 TEL: (713) 223-5886 WEB: WWW.OAG .STATE.TX. US
An Equal Employment Op por t unity Employer Pri n ted on Recycl ed Paper

43474c 000060

compressing. Please preserve archived back-up tapes, local hard drives and network drives,
floppy disks, and other portable drives, information on portable computers, and data from
retired computers.
ISSUED: Wednesday, January 06,2010.
Sincerely,

Rick Berlin
Assistant Attorney General
Consumer Protection and Public Health Division
808 Travis, Suite 1520
Houston, Texas 77002
(713) 223-5886

~~~t~tor
Authorized Agent
(713) 223-5886

2
43474c 000061

DEFINITIONS AND INSTRUCTIONS


1.
The terms "you" and "your" means Trump University, LLC, and all current and former
predecessors, successors, affiliates, parent companies, subsidiaries, or wholly-owned or controlled
entities, and any affiliated business venture or entity that is involved in providing the services of
your business, and all principals, operating divisions, employees, servants, officers, directors, agents,
representatives, attorneys, accountants, independent contractor or other persons or entities acting on
behalf of or under the direction, authorization, or control of Trump University, LLC or their
subsidiaries and affiliates involved in providing the services of your business.
2.
"Document" shall be construed in its broadest possible sense to include within its scope all
writings, recordings, photographs and things contemplated in TEX. R. CIY. P. 192.3(b) and TEX. R.
EVID. 1001.
3.
It is not sufficient to fail to provide responsive paper or electronic documents if you can
obtain them from persons reasonably available to you or under your control. If any of the paper or
electronic documents requested are in existence, but not in your possession, custody, or control,
please identify the name and address ofthe person or firm having possession, custody, or control of
said documents. If any paper or electronic document requested is no longer in existence, state
whether it is missing, has been destroyed, or has been otherwise disposed of, and, in each instance,
explain the circumstances surrounding, the reason for, and the manner of such disposition, and state
the date or approximate date thereof and a description of its contents and subject matter.
If any paper or electronic documents called for in this request are not produced or given
4.
because of a claim of privilege, work product, or trade secret, state the privilege claimed and identify
each such document by its title, date, originator(s) and recipient(s) and the identity and address of its
custodian, and a brief description of the general subject matter of the document.
5.
Electronic data should be provided in native format. If this information is not available in a
readily accessible and usable form, you must include all necessary glossaries, keys, indices, and
software necessary for interpretatioH of the material.
6.
Each document and other tangible thing produced shall be clearly designated as to which
Request, and each sub-part of a Request, that it satisfies.
7.
In any situation in which it is not clear in which capacity you are responding, you are to
designate all relevant capacities.
8.

The relevant time period for these requests is January 1, 2008 through the present.

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43474c 000062

ATTACHMENT "A"
1.

An organizational chart for Trump University, LLC.

2.

Documents evidencing the contractual relationship with all licensees, affiliates, subsidiaries,
sponsors, partnerships, corporations, or any other individual or entity that operates or with
whom you do business or coordinate to do business in Texas.

3.

All promotional material, used or available in Texas during the relevant time period
including television, newspaper, magazine, and internet ads, flyers, brochures, signs,
postcards, letters, notices, emails, and websites.

4.

All workshop or mentoring program training material created, used or intended for use by
you in Texas during the relevant time period. Include materials aimed at:
a)
b)
c)
d)
e)
f)

Selling the programs to the attendees;


Signing up the attendees for the programs;
Sales techniques of your staff for selling the programs to the attendees;
Profit or projections of profit discussed in the workshop;
Talking points and sales scripts; and
Testimonials used at the workshop.

5.

A complete copy of all materials used or distributed in any workshop, including all slide
presentations, worksheets, testimonials, transcripts, contracts and other materials.

6.

A complete copy of all materials used or distributed during the mentoring program, including
all worksheets, references, testimonials, transcripts, contracts and other materials.

7.

A list of all Texas consumers who purchased your workshop or mentoring program during
the relevant time period. Include their name, address and phone number, the amount paid,
the date purchased, the dates they attended any workshops, and any evidence that such person
successfully implemented your methods.

8.

Any and all evidence of complaints or requests for refunds from Texas consumers, including
evidence of any action taken by you related to or in response to such complaints or requests.

9.

All assumed name certificates filed in any county in the State of Texas or with the Texas
Secretary of State under which you conduct business.

10.

Copies of all professional licenses and registrations held by you (or relied upon by you), your
agents, your independent contractors, or your employees, including any held by Steven Goff.

11.

All documents evidencing any continuing education (e.g. Texas Real Estate Commission
Mandatory Continuing Education) credit offered in conjunction with your workshops,
including applications, approvals, certifications, etc.
4

43474c 000063

12.

All documents related to any real estate contracts negotiated by a representative of yours,
including but not limited to Steven Goff, on behalf of or in conjunction with your students.

If possible, please produce copies of documents responsive to this request in both hard copy

and electronic format as available. Each page of the hard copy must be Bates labeled (or
numbered consecutively).

5
43474c 000064

STATE OF _ _ _ _ _ __

COUNTY OF _ _ _ _ __

BUSINESS RECORDS AFFIDAVIT

BEFORE ME, the undersigned authority, personally appeared

--,-,::---:-:---:::-:-----:-:c:------:---

(Custodian ' s Printed Name)

known to me, who, being by me duly sworn, deposed as follows:


. I am of sound mind, capable of making this affidavit,

My name is
(Custodian's Printed Name)

and personally acquainted with the facts herein stated:


I am the custodian of the records of ---=----~------~--- . Attached hereto are
(Business/Company Name)

c::-:--:-::----,-

pages of records from

(No. of Pages)

. These said
(Business/Company Name)

pages
(No. of Pages)

of records are kept by -,-----,--------,-,--------,-,----- in the regular course of business, and it was the
(Business/Company Name)

regular course of business of ____--,-,.-----,-.,---- for an employee or representative of the


(Business/Company Name)

business, with knowledge of the act, event, condition, opinion, or diagnosis, recorded to make the
record or to transmit information thereof to be included in such record; and the record was made at
'

or near the time or reasonably soon thereafter. The records attached hereto are the original or exact
duplicates of the original.

Affiant

SWORN TO AND SUBSCRIBED before me on the _ _ day of_ _ _ _ _ , 2010.

Notary Public

43474c 000065

OFFICE OF THE ATTORNEY GENERAL


STATE OF TEXAS

REQUEST TO OPEN AN INVESTIGATION


CONSUMER PROTECTION DIVISION
HOUSTON REGIONAL OFFICE
THIS REPORT IS CONFIDENTIAL, PRIVILEGED PARTY COMMUNICATIONS FURNISHED
SOLELY FOR THE INTERNAL USE OF THE TEXAS ATTORNEY GENERAL. RELEASE OF
ANY INFORMATION TO ANY THIRD PARTY WITHOUT THE CONSENT OF THE TEXAS
ATTORNEY GENERAL=S OFFICE IS PROHIBITED.
Date:
Attorney:
Office:
Section:

October 7, 2009
Rick Berlin
Consumer Protection & Public Health Division
Houston Regional Office

Individual Name:

Steven Matejek
40 Wall St., 32nd Floor
New York, NY 10005-1304
Paul Quintal
40 Wall St., 32nd Floor
New York, NY 10005-1304
Michael Sexton
40 Wall St., 32nd Floor
New York, NY 10005-1304
Donald j. Trump
725 5th Ave.
New York, NY 10005-1304
Stephen j. Goff, Sr.
301 Demonbreun St., Unit 915
Nashville, TN 37201-2234

OFFICE OF THE ATTORNEY GENERAL


STATE OF TEXAS

REQUEST TO OPEN AN INVESTIGATION


CONSUMER PROTECTION DIVISION
HOUSTON REGIONAL OFFICE
THIS REPORT IS CONFIDENTIAL, PRIVILEGED PARTY COMMUNICATIONS FURNISHED
SOLELY FOR THE INTERNAL USE OF THE TEXAS ATTORNEY GENERAL. RELEASE OF
ANY INFORMATION TO ANY THIRD PARTY WITHOUT THE CONSENT OF THE TEXAS
ATTORNEY GENERAL=S OFFICE IS PROHIBITED.
Date:
Attorney:
Office:
Section:

October 7, 2009
Rick Berlin
Consumer Protection & Public Health Division
Houston Regional Office

Individual Name:

Steven Matejek
40 Wall St., 32nd Floor
New York, NY 10005-1304
Paul Quintal
40 Wall St., 32nd Floor
New York, NY 10005-1304
Michael Sexton
40 Wall St., 32nd Floor
New York, NY 10005-1304
Donald J. Trump
725 5th Ave.
New York, NY 10005-1304
Stephen J. Goff, Sr.
301 Demonbreun St., Unit 915
Nashville, TN 37201-2234

Business Name:
Location:

TO:

Trump Universityffrump University, LLC


40 Wall St., 32nd Floor
New York, NY 10005-1304

DAVIDS. MORALES
Deputy Attorney General for Civil Litigation

Approved:
Date:

PAUL D. CARMONA
Chief, Consumer Protection and
Public Health Division

Approved:
Date:

JOHN OWENS
Deputy Chief, Consumer Protection
and Public Health Division

Approved:
Date:

ROSEMARIE DONNELLY
Managing Attorney, Houston Regional Office

Approved:
Date:

Synopsis: This is a request to open an investigation against the above mentioned businesses and
persons. On Thursday, September 24, 2009, ATrump University@ placed advertisements in The
Houston Chronicle for several Afree investor workshops@ to be held in the Houston area. The free
workshop advertisement advises you to ACash in on the Greatest Property Liquidation in History!@
The full one page ad claims that A2009 is the >perfect storm= for real estate investors@ and that the
workshops will teach you about foreclosure investing, how to finance deals using other people=s
money and quotes Donald Trump as saying AI can tum anyone into a successful real estate investor,
including you.@ The ad further professes that you can buy real estate from banks at up to 70% below
market value. The ad, however, includes a disclaimer stating that results are not typical. The next
workshop is on October 12, 2009 in Austin, Texas.

Background Facts: Consumers on blog sites have complai~ed that Atidbits@ of information are
gained at the workshops, but that the information is not worth the thousands of dollars one ultimately
pays to remain in the three day workshop after the initial Afree@ day. The workshop is a high stress
sales pitch to pay money for the rest of the information. One consumer stated that the only things
that happened at the three day workshop was:
1.
2.
3.

They pre-qualify you for a $35,000 Gold Package.


They ask that you call your credit card company for a credit limit increase.
They try and sell you on their mentoring services.

Legal Basis: Defendants in the course of trade and commerce may have directly or indirectly
engaged in false, misleading and deceptive acts and practices declared to be unlawful by TEX Bus. &
COM. CODE ANN. 17.46(a) and 17.46(b), to wit:
I

1.

Representing that goods or services have sponsorship, approval, characteristics, ingredients,


uses, benefits, or quantities which they do not have or that a person has a sponsorship,
approval, status, affiliation, or connection which he does not in violation of TEX. Bus. &
COM. CODE 17.46(b)(5);
I

2.

Advertising goods or services with intent not to sell them as advertised, in violation of TEX.
Bus. & CoM. CoDE 17.46(b)(9);
I

3.

Representing that an agreement confers or involves rights, remedies, or obligations which it


does not have or involve, or which are prohibited by law, in violation of TEX. Bus. & COM.
CODE 17.46(b)(12);
I

4.

Representing that a guarantee or warranty confers or involves rights or remedies which it


does not have or involveY, in violation of TEX. Bus. & COM. CODE 17 .46(b )(20); and
I

5.

Fajling to disclose information concerning goods or services which was known at the time of
the transaction if such failure to disclose such information was intended to induce the
consumer into a transaction into which the consumer would not have entered had the
information been disclosed, in violation of TEX. Bus. & COM. CODE 17 .46(b )(24 ).
I

Time Constraints: There is no particular issue regarding timing.


Plan of Action:
$

Contact some of the consumers and attempt to gain more specific information on
their dealings with Trump University.

Issue a CID to Trump University to determine: how many consumers have paid for
their products/services, how many consumers have filed complaints regarding their
products/services, what responses Trump University has provided to these
consumers, what, if any, refunds have been provided to consumers complaining of
their products/services, and whether any consumers in Texas have successfully
employed their methods.

If the results of the investigation show that a lawsuit is necessary. we will seek relief
which prohibits them from any continued deceptive advertising or business practices
that violate the DTPA by filing an action seeking a TRO and Tl.

REQUEST FOR APPROVAL TO FILE


CONSUMER PROTECTION AND PUBLIC HEALTH DIVISION
HOUSTON REGIONAL OFFICE
THIS REPORT IS CONFIDENTIAL, PRIVILEGED PARTY COMMUNICATIONS FURNISHED
SOLELY FOR THE INTERNAL USE OF THE TEXAS ATTORNEY GENERAL. RELEASE OF
ANY INFORMATION TO ANY THIRD PARTY WITHOUT THE CONSENT OF THE TEXAS
ATTORNEY GENERAL=S OFFICE IS PROHIBITED.

TO:

DAVID MORALES

FROM:

PAUL D. CARMONA

Approved: _ _ __
Deputy Attorney General for Civil LitigationDate: Date:
Approved:
Date:

Chief, Consumer Protection and Public


Health Division

Approved: _ _ __
Date:

JOHN OWENS
Deputy Chief, Consumer Protection and
Public Health Division

ROSEMARIE DONNELLY
Managing Attorney, Houston Regional Office

Approved: __RMD_
Date:
_5/6/10_

RICK BERLIN
DATE:

May 6, 2010

RE:

Request for Approval to File Original Petition and Application for Permanent
Injunction in the case of State of Texas v. Trump University LLC and Donald].

Trump; Short Name: Trump U; AG #093157089


'

SYNOPSIS

Defendants engage in false, misleading and deceptive practices in promoting and selling their real
estate investment seminars in Texas. Defendants target Texas consumers eager to earn additional
income during the economic slowdown by promising to teach them dubious real estate investment
strategies that will "score" them big profits in virtually no time. Defendant Trump University
("Trump U") advertises "free investor workshops" on real estate investing in various newspapers
throughout Texas to the general public. The advertisements promise consumers that if they attend
the "free workshops" they will have the opportunity to "[l]eam from Donald Trump's handpicked
experts how you can profit from the largest real estate liquidation in history", how to "profit from the
billion dollar bailouts" and to teach "foreclosure investing from the inside out." Further, the

advertisements promote a method of "creative financing to invest without risk," including how to
"invest in real estate through your IRA-tax free!"
The ads contain an enlarged photograph of Donald Trump, Chairman of Trump University, who is
also quoted in the ad: " 'I can tum anyone into a successful real estate investor, including you.'
Donald Trump" The ads also promise to teach attendees "Donald Trump's powerful techniques and
strategies."
In fact, the "free" workshops are little more than 2-hour long infomercials for Trump U' s 3-day real
estate investment course. At the end of the "workshop", attendees are offered the 3-day course at a
cost of $1495 (a "special" price). Consumers who pay for the 3-day course complain that they are
taught little useable content. Our review of the course materials reveals that the course teaches
legally and ethically questionable real estate investment strategies and instructs "students" to target
home sellers in financial turmoil.

Further, Defendants falsely assert at these "free workshops" that the classes are approved continuing
education credit for realtors. The Texas Real Estate Commission has not approved any Trump
University courses for continuing education credit. Defendant Trump University is also not an
accredited institution of higher learning and does not have a certificate of authority to use the term
"University" in the state of Texas in violation of TEX. Enuc. CODE 6.313. Trump University has
also not complied with Secretary of State registration or tax requirements necessary to do business in
Texas or paid sales tax on any of their sales.
There have been approximately 57 "free" Trump U workshops conducted in Texas, with
approximately 50-100 attendees per workshop.

FACTUAL BASIS
Pre-suit Investigation:
During our investigation, we attended a "free" seminar in Hohston. We also sent aCID to Trump
University to which the company responded. We have also sent out over 60 letters to consumers in
an attempt to gain more specific information on their dealings with Trump University. We have
interviewed 20-30 consumers by telephone. There are no filed complaints with the OAG. We are
checking with the BBB in New York. We believe the Trump U representatives tell the "students"
that if they are not successful it is because they are not sufficiently committed or did not follow their
advice, etc.
Trump's Deceptive Trade Practices:

In addition to newspaper ads, Defendant Trump U also advertises by direct mail to Texas
residents. These advertisements solicit consumers to attend Defendants' workshops by
including two complimentary VIP tickets and a letter signed by Donald Trump. In these
letters, Defendant Trump U claims it will "demonstrate specific, proven and profitable

strategies that you can use right away to score big profits within these current market
conditions" and have "a proven system for profitable real estate investing that anyone can
use, right away, to score big profits in today's market." Defendants claim that "[t]here is no
question [Trump] can tum you into a successful real estate investor" and that they are
offering an opportunity for people to "better their life, quit their job, and be set for life!"

The "free workshops" are merely a selling ground for the Defendant Trump U's 3-day
seminars and offer little useable content. The "free workshops" are usually a couple of
hours long and take place in large conference rooms at local hotels. Attendees are ushered
into the conference room to watch a large screen video "sales pitch" for Trump U. Donald
Trump is a featured speaker on the video. Speaking directly to the attendees, Trump assures
them that making money in real estate investing is going to be "a short process" if they sign
up for the Trump U seminar. The video also features several alleged "graduates" of the
Trump U seminar, who give testimonials about large and virtually instantaneous profits they
earned as a result of the Trump U seminar.

The Trump U "instructors" who appear live represent themselves as successful students of
the Trump U seminar and give verbal testimonials that resemble motivational speeches
about how easily they made money in real estate investing. After the video, testimonials,
and motivational speech, the Trump University representatives engage in the hard sell,
emphasizing to their audience that if they leave without signing up for the 3-day seminar,
they will not succeed using the information they learned at the "free workshop."

As an added incentive, the Trump U representatives tell attendees that the 3-day seminar is
being offered at a special reduced price ($1 ,495) for workshop attendees even though the 3day seminar is primarily marketed to "free workshop" attendees at this regular price and
rarely, if ever, marketed at the inflated rates quoted to attendees. However, Defendants fail
to tell the attendees that the "instructors" are paid a commission by Trump U for every
student who signs up for the 3-day course.

The Trump U representatives also tell attendees that they should go out and find properties
that are for sale-by-owner, for rent or lease, or in foreclosure and bring these leads to the 3day seminar so that instructors can take them step-by-step through the negotiation process
and work out deals for the attendees. Defendants claim that they have worked out up to 15
deals at one seminar. Consumers complain that this is not the case, and at most only a few
contacts are ever called at the 3 day seminars and no deals were made. In other cases, no
contacts are called at the 3-day seminar at all.
'

The training materials we have reviewed indicate that Trump University 3-day seminar
attendees are taught to prey upon homeowners in financial turmoil and to target foreclosure
properties. Instructors teach students that by using terms such as "subject to ... " and "and/or
assigns" they will be able to enter contracts with horne sellers which they can then turn over
to a private party investor for a profit without risk because the "subject to ... " language
allows them to walk away from the contract.

Defendants' representatives also ask attendees, on the morning of the first day of the
seminar, to call their credit card companies, banks, and mortgage companies and ask for an
increase or extension of credit so that they may finance the "Gold Elite" package purchase.
Defendant Trump U will even ask attendees to call their bank during these one-on-one
sessions while the representative waits. The primary goal of the 3-day seminars appears to
be more high pressure sales tactics in an attempt to induce them into purchasing Defendant
Trump U's "Gold Elite" package for $35,000.

The "Gold Elite" package includes additional classes, foreclosed property search software,
and a 3-day meeting with one of Defendants' representatives, which are also all offered for
sale independently. Consumers complain that the information is out of date, inapplicable to
the Texas real estate market, and generally of little practical value. Moreover, the so-called
strategies that are taught are highly speculative and may be tantamount to encouraging
attendees to sell real estate without a license, which is illegal in Texas.

We have cited some additional representative examples of consumer complaints in the petition.

LEGAL BASIS
DTPA
Defendants in the course of trade and commerce may have directly or indirectly engaged in false,
misleading and deceptive acts and practices declared to be unlawful byTExBus. &CoM. CODE ANN.
17.46(a) and 17.46(b), to wit:
I

A. False, misleading, or deceptive acts or practices in the conduct of any trade or


commerce, in violation of 17.46(a);
B. causing confusion or misunderstanding as to the source, sponsorship, approval, or
certification of goods or services in violation of 17 .46(b )(2);
C. causing confusion or misunderstanding as to affiliation, connection, or association
with, or certification by, another in violation of 17 .46(b )(3);
D. Representing that goods or services have sponsorship, approval, characteristics,
ingredients, uses, benefits, or quantities which they do not have or that a person has a
sponsorship, approval, status, affiliation, or connection which he does not in violation
of 17.46(b)(5);
E. Representing that goods or services are of a particular standard, quality, or grade, or
that goods are of a particular style or model, if they are of another, in violation of
17 .46(b )(7);
F. Advertising goods or services with the intent not to sell them as advertised, in

violation of 17 .46(b )(9);


G. making false or misleading statements of fact concerning the reasons for, existence
of, or amount of price reductions in violation of 17 .46(b )( 11 );
H. Representing that an agreement confers or involves rights, remedies, or obligations
which it does not have or involve, or which are prohibited by law, in violation of
17 .46(b )(12); and
I.

Failing to disclose information concerning goods or services which was known at the
time of the transaction if such failure to disclose such information was intended to
induce the consumer into a transaction into which the consumer would not have
entered had the information been disclosed, in violation of 17 .46(b )(24 ).

TEX. Bus. 0RG. CODE


Defendant Trump University, LLC is a foreign filing entity transacting business in this state and is
not registered in accordance with Chapter 9 of the TEX. Bus. ORG. CODE ANN.
PLAN OF ACTION
We have been in contact with Trump's lawyers for several months concerning the CID we issued,
and Trump U agreed to discontinue its seminars in Texas until the investigation is completed.
We have a pre-suit settlement conference scheduled with the Trump lawyers for May 19, 2010 in
Houston.
In the event we are unable to settle, we request permission to file the attached petition and request for
permanent injunction and initiate discovery immediately. Should Trump U resume seminars in
Texas, we will seek a temporary injunction. At final trial, we will seek civil penalties, restitution,
permanent injunction, attorneys' fees and costs.

REQUEST FOR APPROVAL TO SETTLE


CONSUMER PROTECTION AND PUBLIC HEALTH DIVISION
HOUSTON REGIONAL OFFICE
THIS REPORT IS CONFIDENTIAL, PRIVILEGED PARTY COMMUNICATIONS FURNISHED
SOLELY FOR THE INTERNAL USE OF THE TEXAS ATTORNEY GENERAL. RELEASE OF
ANY INFORMATION TO ANY THIRD PARTY WITHOUT THE CONSENT OF THE TEXAS
ATTORNEY GENERAL=S OFFICE IS PROHIBITED.

TO:

DAVID MORALES
Deputy Attorney General for Civil Litigation

RUTH HUGHS
Associate Deputy Attorney General for Civil
Litigation

FROM:

PAUL D. CARMONA
Chief, Consumer Protection and Public
Health Division

JOHN OWENS
Deputy Chief, Consumer Protection and
Public Health Division

ROSEMARIE DONNELLY
Managing Attorney, Houston Regional Office

Approved: _ _ __
Date:
Approved: _ _ __
Date:

Approved: _ _ __
Date:

Approved: _ _ __
Date:

Approved: __RMD_
Date:
_5/12/10_

RICK BERLIN
DATE:

May 11,2010

RE:

Request for Approval to Engage in Pre-Suit Settlement Negotiations in State of

Texas v. Trump University LLC and Donald]. Trump; Short Name: Trump U;
AG #093157089

SYNOPSIS
We are seeking approval to enter into settlement negotiations with Defendants, who engage
in false, misleading and deceptive practices in promoting and selling their real estate investment
seminars in Texas.

CURRENT STATUS

We have not filed suit. We opened an investigation into Trump University and Donald J.
Trump in the fall of 2009 after attending (undercover) a series of "free" workshops of Defendants
held in Houston. As we described in the draft petition in more detail, the "free" workshops are little
more than 2-hour long infomercials for Trump U' s 3-day real estate investment course. At the end
of the "workshop," attendees are offered the 3-day course at a cost of $1,495 (a "special" price).
We sent aCID and have interviewed approximately 30 Texas consumers who purchased one
of the courses. Our review of the Trump course materials and audio tapes of the seminars reveals
that the course teaches legally and ethically questionable real estate investment strategies and
instructs "students" to target home sellers in financial turmoil. Consumers who pay for the 3-day
course complain that they are taught little useable content and are given the hard sell for yet another
Trump U course (a "Gold Elite" package that costs $35,000). They also complain that much of the
actual content of the course is too general to be of much use.
The specific strategies that are taught are also legally questionable. For example, Trump
"students': are urged to target distressed homeowners and enter into a contract to buy the home that is
"subject to" the student's ability to locate financing. Of course, the Trump "student" has no
financing and is simply placing want ads in an attempt to locate a buyer for the property. If by some
miracle the "student" were to find a buyer, and negotiate a sale for the homeowner, the "student"
would realize a "profit" from the homeowner's equity in the property, i.e., equity skimming. If no
buyer is found, then the Trump student can simply walk away and would have succeeded in tying up
the property during a critical period in which the homeowner could have tried to sell the property on
his own or found a licensed realtor to help or turned the keys back to the mortgage lender. Frankly,
the notion that the homeowner is fully informed of the pitfalls of this "subject to" strategy is
extremely unlikely.
In addition to the CID and consumer interviews, we have also been in contact with the Texas
Real Estate Commission regarding whether the techniques taught in the seminars violate Texas law,
and their response was that for an untrained person it would be very easy to step over the line into the
realm of selling real estate without a license, which is a Class A misdemeanor. TREC has had
complaints over the years regarding similar activities and has initiated proceedings to punish
offenders.
' -

We have also been in contact with the Comptroller regarding Trump U' s failure to pay sales
and franchise taxes. Trump U also has failed to register to do business in Texas.
After receiving our CID, Defendants agreed to discontinue their seminars in Texas during our
investigation. Based upon the materials in response to our CID and phone interviews with
consumers, we issued and prepared a draft petition for which we have sought Exec approval to file.
We held a conference call on May 11, 2010 with Defendants' lawyers (including a former
General Counsel of Trump U who is now practicing with the Austin based firm Reed & Scardino).
During the call, we summarized the findings of our investigation and outlined the potential claims
that we believe the evidence supports under Texas law. Trump's lawyers indicated that the Trump U
is "not a money maker" for Donald Trump and he formed it "to give back to the community."

Trump's lawyers questioned the claims against Donald Trump individually, which we explained.
They acknowledged that Trump personally reviewed and approved the course materials. We are
presently scheduled for a face to face settlement conference in Houston on May 19, 2010. Trump
lawyers indicated there would be four people attending for their side.
We are seeking approval to enter into settlement negotiations to recover consumer restitution,
DTPA penalties, unpaid sales taxes, and attorneys' fees, plus a permanent injunction to enjoin future
seminars in Texas.

SETTLEMENT ANALYSIS:
A number of issues warrant additional information:

Donald]. Trump Is Named Individually.


We have named Donald J. Trump individually because he has extensive direct involvement
in this business. He is featured prominently and directly in the advertising (identified as Chairman of
Trump U) and he speaks directly to the audience at the seminars, encouraging them to sign up for the
courses so that they can learn his secrets to success. The ads contain an enlarged photograph of
Donald Trump, who is also quoted in the ad: "'I can tum anyone into a successful real estate
investor, including you.' - Donald J. Trump." The ads also promise to teach attendees "Donald
Trump's powerful techniques and strategies."
Trump also signs direct mail letters to prospective attendees residing in Texas. These letters
are a personal invitation from Mr. Trump to attend his class and ask the question if traders and
bankers get bailouts and rescue packages, "who's helping you? I will," states Donald Trump
(emphasis in original).
At this point, we do not know how much involvement Donald Trump in fact has in the day to
day running of Trump University; however, the gist of the marketing message is that students will
learn his techniques and strategies as taught to his "hand picked" proteges. The program markets
itself as the next best thing to being his Apprentice. Further, Trump U's lawyers confirmed in the
May 11 conference call that Trump himself reviews the written materials provided to attendees and
the advertisements using his name and/or likeness.
It is also clear that Trump is aware and approved the deceptive marketing strategy of inviting
people to a "free" workshop that promises to teach them Trump's investment strategies but is
actually a sales pitch for the Trump U courses.

Consumer Complaints.
Consumers complain on internet complaint boards about Trump U, and Trump U formerly

'B'

had a "D" rating with the BBB but now appears "Unrated." OAG does not have any written
complaints from Texas consumers; however, we have spoken directly with approximately 30 Texas
consumers who purchased the 3-day seminar. Almost all share the view that the seminar was oflittle
value to them. None has earned a dime as a result of what they were taught.
There have been approximately 57 "free" Trump U workshops conducted in Texas, with
approximately 50-100 attendees per workshop. Approximately 450 Texas consumers have
purchased the $1,495 three-day seminar, the $35,000 "Gold Elite" package, or other courses or
products.

California federal court class action.


Last week a private federal class action was filed against Trump U (not Donald Trump). The
allegations in the class action suit are similar to the allegations in our proposed suit.

Potential Defenses.
We anticipate that Trump U will contend that students who take the course and do not
succeed in real estate investing were not sufficiently motivated, did not follow the instruction, etc.
We believe we will be able to demonstrate at trial that virtually none of the students ever earn a dime
as a result of the course and certainly not enough to recoup their $1,495 for the 3-day course or
$35,000 for the "Gold Elite" package. The testimonials from consumers on the advertisements,
promotional materials, and workshop power point and video presentations represent the rare few
who actually closed a deal (assuming the testimonials are accurate), and certainly are not
representative of what the average consumer can expect. We will have to do some discovery on this
issue.
Defendants are likely also to claim that their marketing is mere puffery and therefore not
actionable. We believe we will be able to demonstrate at trial that Trump U specifically targets
consumers who are unsophisticated about real estate, falsely promises them they will make a profit in
a short period of time, and then blames them for not being able to achieve success with Trump U' s
"proven" methods.
'
Defendants will also claim that they offer to refund students their money prior to the first day
of the 3-day seminar. Of course, the refund offer is accompanied by the simultaneous promise that
the really useful part of the seminar will be presented on Day 2 and 3.
Defendants will also likely point to contract waiver language in their form contract; however,
Texas law is clear that the contract waiver language, even assuming it would be enforceable in a
breach of contract action, is not enforceable to defeat a DTPA action. TEX. Bus. & CoM. CODE
17.42.
In defending Trump individually, Defendants are likely to argue that he had no knowledge of
what was being said by the "instructors" at the workshops and seminars and that if they went "off
script" it was done without his knowledge or consent. Even assuming that to be the case, we believe

the evidence will demonstrate that Trump himself approved the business model and marketing plan
for the "free" workshops which is sufficient to impose individual liability.
We believe there is a possibility that Trump University will file for bankruptcy, primarily to
stay both the California federal court class action and this case.

SETTLEMENT PROPOSAL

We request approval to settle for the following:


(i)

Full restitution for the approximately 267 Texas consumers who purchased the 3
day seminar and who file a claim with the OAG. Estimated amount: $425,865

(ii)

Full restitution for the approximately 39 Texas consumers who purchased the
"Gold Elite" package. Estimated amount: $1,364,815

(iii)

Full restitution for the approximately 150 Texas consumers who purchased other
goods or services: $ 826,462

(iv)

Matching DTPA penalties. Estimated amount: $ 2,590,442

(v)

Full payment of all unpaid sales taxes and penalties for not being registered to do
business in Texas.

(vi)

Attorneys' fees. Settlement offer: $250,000.

(vii)

Permanent injunction enjoining future seminars in Texas.

The total, all in, we would recommend for settlementat this point is $3,750,000, plus
injunctive relief. We recommend a starting point of $5,430,884, all in, to begin negotiations.
Next week, on May 19, 2010, at the settlement conference, we will present our case to
Defendants' attorneys in more detail and if we have approval will give them ft copy of the draft
petition. At that time, we would like to set forth our demand with the "all in" number of $5.4
million. We have already advised Defendants' lawyers that any settlement will run into the
"seven figures."