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Thursday, March 28, 2024 | Back issues
Courthouse News Service Courthouse News Service

Trumps Still on the Hook for Promoting Pyramid Scheme

They may not be able to prove racketeering, but victims of a purported multilevel-marketing scheme can sue President Donald Trump for luring them in without disclosing that he was being paid millions to do so.

MANHATTAN (CN) – They may not be able to prove racketeering, but victims of a purported multilevel-marketing scheme can sue President Donald Trump for luring them in without disclosing that he was being paid millions to do so.

The ruling today pushes the Manhattan case forward, but U.S. District Judge Lorna Schofield’s rejection of a conspiracy count and an alleged violation of federal anti-racketeering law is significant as RICO claims allow for the possibility of treble damages.

Four anonymous Americans brought the suit at issue last year, seeking to hold the Trump Corp., the president himself and three of his children liable for their promotion of business-seminar programs offered by American Communications Network.

The class says ACN promised independent business owners they could earn commissions from selling products to customers at small “motivational rallies,” but investors made back less than 10% of their investments.

Trump meanwhile claimed in 2015 he knew “nothing about the company,” even though he and his children appeared in promotional videos for ACN, booked the company’s executives on his “Celebrity Apprentice” show, and headlined conferences boosting the company.

Schofield nevertheless tossed the suit’s RICO and conspiracy counts Wednesday for failure to show that the Trumps were the “proximate cause” of victims’ losses.

“At most, the complaint pleads a ‘but for’ theory of causation,” Schofield wrote, noting that Trump’s promotion of ACN led only to the investors paying sign-up and renewal fees, as well as other expenses from attending the conferences.

“Numerous intervening factors may account for [the class’s] inability to recover their investments in ACN,” Schofield wrote, pointing to the “inherent challenges of multi-level marketing” as well as the individual sales capabilities of the recruits.

“The losses may also be attributable to the market for ACN products in the [investors’] localities and ACN’s business practices — legitimate or otherwise — separate from [the Trump Corp.’s] role.”

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

Roberta Kaplan, an attorney for the class with the firm Kaplan, Hecker & Fink, said she is pleased the state claims remain.

“We look forward to proceeding expeditiously with the case on the merits in order to obtain justice for the plaintiffs, and thousands of other working Americans just like them, who each lost hundreds or thousands of dollars as a result of the defendants’ fraudulent scheme,” Kaplan said.

But the decision also appeared to gratify Spears & Imes attorney Joanna Hendon, who represents the Trump Corp.

“The RICO claims are baseless and should never have been brought and we look forward to dispensing with the rest of the case,” Hendon said, noting Trump will petition to compel arbitration for the remaining claims.

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Categories / Business, Consumers, Entertainment, Media, Politics

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