Lawsuit: Trump misled investors in money-losing company
NEW YORK (AP) — President Donald Trump is accused of misleading salespeople who lost money in a multi-level marketing company that he endorsed in speeches and on “The Celebrity Apprentice,” according to a lawsuit filed Monday.
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 claimed to salespeople he had done extensive due-diligence on the company though he knew all along they had little chance of recouping their fees.
The suit filed by four investors alleged Trump violated federal anti-racketeering law and is seeking class-action status.
The lawsuit 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 the Trump’s “fraudulent scheme” also involved a vitamin company bearing Trump’s name and his backing of 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.
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 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.