Thursday, November 1, 2018

Law suit challenges Trump's pyramid scheme ...

… that enriched the Trump family by “systematically defrauding economically marginalized people”.

Judd Legum writing in has this report on a law suit filed in federal court in the Southern District of New York. The suit names as Defendants Trump (“in his personal capacity”), his three eldest children (Donald Jr., Ivanka, Eric), and the Trump Organization..

The Trump family pyramid scheme

Trump has based his career in business and politics on a simple message: he’s a winner.

On Monday in federal court, four plaintiffs filed a lawsuit in federal court against Trump that tells a very different story: he’s a con man.

The civil action alleges Trump, his children, and the Trump Organization “operated a large and complex enterprise with a singular goal: to enrich themselves by systematically defrauding economically marginalized people looking to invest in their educations, start their own small businesses, and pursue the American Dream.” It is filed under the federal RICO statute, which is an abbreviation for Racketeer Influenced and Corrupt Organizations. The suit also alleges multiple violations of state and federal common law.

In 124 pages, the plaintiffs lay out in exhaustive detail how Trump and his family business participated in several pyramid schemes. Trump promised working-class people riches, told them there was little to no risk and, in the process, bilked thousands of people out of their money.

Trump’s outrageous claims about multi-level marketing

Much of the complaint focuses on ACN, a multi-level marketing company that sells business products. You can become an “Independent Business Owner” and sell ACN products by paying the company a $499 sign-up fee, plus $149 per year. Once you pony up, you get a small commission on the products you sell to other people. You’ll also be encouraged to purchase tickets, for $100 or more, to various ACN conventions to stay motivated.

Trump was paid lavishly for his endorsement and made extravagant claims about the money-making potential of ACN. Here is what Trump said on a video that was distributed by ACN from 2010 to 2013:

You have a great opportunity before you at ACN without any of the risks most entrepreneurs have to take. You have the ability to market breakthrough technology before it hits the critical mass. I’ve experienced the opportunity that exists when you’re able to jump ahead of the curve, and ACN gives you that opportunity.

“I know what it takes to be a success and ACN has a winning business model. And I mean – winning,” Trump told audiences.

ACN had a business model where almost everyone lost, except for Trump and ACN. Regular people were stuck trying to sell products that no one wanted to their friends and colleagues .

The reality of Trump’s multi-level marketing scheme

While Trump promised significant income with no risk, the reality was far bleaker.

The Montana Commissioner of Securities and Insurance found that people in the state, over one year, paid $234,812 in membership and convention fees but earned just $16,615 in income. The average Montanan paid $752.60 to ACN and received $53.25 in commission.

The human damage

The plaintiffs in the case, four people who were taken in by Trump and ACN’s scheme, have chosen to remain anonymous. (It’s unclear if the court will let them stay anonymous as the case progresses.) But they do share their stories about how the ACN scam impacted their lives.

One plaintiff referred to as Jane Doe in the complaint is a hospice caregiver who “often works 12-hour shifts, seven days per week.” Doe had very little extra cash.

She was convinced, after watching Trump’s video, to pay the $499 membership fee. She paid thousands more to attend conferences and meetings. She had little success but was promised if she kept working, she might be able to meet Trump.

In the end, she earned $38 in commissions.

The Trump response

In a statement, the Trump Organization dismissed the lawsuit as a political hatchet job.

This is clearly just another effort by opponents of the President to use the court system to advance a political agenda. Not only are the allegations completely meritless, but they all relate to activity which took place nearly a decade ago and are well past the statute of limitations.

This last claim is not true. The lawsuit concerns activity that took place between 2005 and 2015, which was just three years ago.

In support of that judgment here are assertions from the suit as abridged by your Scriber.

“[T]he Trump Enterprise conveyed a common, consistent, and pervasive Message” focused on persuading investors of a “reasonable probability of commercial success” supported by “Trump’s endorsement” and “extensive due diligence”.

Plaintiff Doe received the Message on multiple occasions at ACN meetings in late 2015. Plaintiff Loe received the Message at ACN meetings every two weeks through late 2015. Plaintiff Roe received the Message by watching a video around mid–2016. Around mid–2013 Plaintff Moe received the Message from a video featuring Trump.

“Each part of that Message was knowingly false.”

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