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Wednesday, June 5, 2024 | Back issues
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Pyramid scheme lawsuit drops claims against Trump children

The younger Trumps already sat for deposition testimony, which a federal judge said will be admissible evidence as the fraud suit against the elder Trump heads to trial next January.

MANHATTAN (CN) — Donald Trump’s adult children Ivanka, Don Jr. and Eric will dodge civil liability for their roles in a multilevel marketing scheme. A New York federal judge on Friday granted their dismissals from a fraud lawsuit against their father and the family’s namesake company.

Four anonymous investors claimed in a 2018 federal class action complaint they lost hundreds or thousands of dollars investing with American Communications Network after they were duped by the Trump family’s promotion of the telecommunications pyramid scheme on “The Apprentice” and at business conventions.

Represented by New York firm Kaplan Hecker & Fink LLP, the investors sought damages from the then-first family and their corporate entity, the Trump Organization, alleging the Trumps concealed that they had received millions of dollars across ten years in exchange for reassuring potential salespeople for ACN there was little risk if they started selling its phone service.

U.S. District Judge Lorna G. Schofield signed off on a three-page stipulation order Friday that granted the Trump children’s dismissal from the case, “in order to streamline and focus the issues to be adjudicated at trial.”

The investors’ attorney, Roberta Kaplan, welcomed the order.

“Discovery in this case, including the depositions given by Ivanka Trump, Donald Trump Jr. and Eric Trump, made clear that Donald J. Trump himself was the architect, principal actor and largest beneficiary of the fraudulent scheme to endorse and promote ACN in exchange for secret payments,” Kaplan said on Friday. “That is why we proposed this stipulation in the first place: Donald J. Trump and the company he used to carry out the scheme, The Trump Corporation, are the right defendants as we move toward a jury trial.”

Judge Schofield, an Obama appointee, previously a trial date in the case for Jan. 29, 2024, on counts of fraud, false advertising and unfair competition.

The order also states the younger Trumps’ discovery responses and deposition testimony can be used as evidence in connection with dispositive motions and at trial against the remaining codefendants in the case: Donald Trump and the Trump Corporation.

From 2005 through 2015, Trump and three of his three grown children appeared in promotional television ads, at events and in magazines touting the telecommunications company, which offers business seminars and encourages enrollees to bring in new recruits.

In a 2018 federal class action, four investors who said lawyers for the plaintiffs argued that the Trumps misled them to believe they were endorsing the company based on an independent assessment of the company rather than in return for large payments.

According to the complaint, ACN charged investors $499 to register with the promise that they can earn commissions from selling products to customers at small “motivational rallies.” The enterprise works by having recruits identify leads by hosting small events for family and friends, and “small motivational rallies” where a DVD is shown to encourage investment. Multiple versions of the DVD included Donald Trump’s personal endorsement. Investors allegedly made back less than 10% of their investments.

As Trump emerged as the Republican presidential frontrunner in 2015, he claimed to “know nothing about the company” and denied he was paid for his endorsements. But the complaint noted that ties between ACN and the Trumps remained.

In 2017, ACN sponsored a hole at the Eric Trump Foundation’s annual golf tournament, Curetivity, and held a celebrity golf tournament of its own at Trump National Golf Club in Moorseville.

Judge Schofield advanced fraud, false advertising and unfair competition claims against the Trumps in July 2019, but also rejected racketeering charges that could have put the family on the hook for treble damages.

In refusing to dismiss the class’s state-law claims for fraud, unfair competition and deceptive trade practice, Schofield noted that the case likely involves more than 100 plaintiffs and $5 million in damages.

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