Selling the American Dream: What the Trump University Scam Teaches Us about Predatory Colleges

classic scams usually revolve around products that are difficult for consumers to assess: the effectiveness of a medical procedure or drug; the integrity of an investment vehicle; the value of a gemstone; the authenticity of a work of art or historical artifact. Frequently, outright deception is not necessary for a con to be successful, because marketers have become experts in crafting sales pitches that play on "modern enticements and anxieties," creating messages that are misleading but without a stated untruth (Balleisen 2017, 174). Since the consumers seem to make their choices voluntarily, holding "unrealistic hopes for profit, cure, and inexpensive quality," the sellers, even though they have an informational advantage, are frequently not held responsible for bad outcomes for the consumer (Braucher and Orbach 2015, 250).

Nowhere is the danger of scams greater than in education. Advancing one's education is widely seen as a wise investment, even for buyers without disposable income. Taking out loans to pay for an education can be portrayed by the seller as a wiser choice than buying a car, because the car depreciates while an education yields returns for a lifetime. The buyer, meanwhile, has a role not only in choosing the education but also in attending, studying, and then seeking a job. As a result, a scam school has multiple ways to portray any bad out-come—dropouts, joblessness, loan defaults—as the fault of the student rather than the school.

Education exhibits a type of market failure that Yale law professor Henry Hansmann, in a seminal article, called "contract failure." When it is difficult to evaluate the quality of a promised or provided product or service, the provider can too easily overcharge or deliver inferior goods (Hansmann 1980, 845). Consumers in these circum-stances may not realize they did not get their money's worth until many years later, if ever. And it is extremely difficult to craft a contract that ensures that every aspect of the product will be delivered as the consumer expects. These "trust markets" are frequently where nonprofit entities emerge as preferred providers (Winston 1999, 14). For-profit providers in such markets find themselves in need of a way to convince consumers that they can be trusted. That signal may take the form of their institution being eligible to accept federal financial aid—or, as in the case of Trump University, the signal may be the nameplate of a prominent business figure.

TRUMP UNIVERSITY SETS UP SHOP

On a cold Thursday evening in March 2009, 40 local residents showed up at the Doubletree Hotel in Somerset, New Jersey, for a free introductory class sponsored by Trump University. Capitalizing on the hit television show The Apprentice, the 90-minute "Apprenticeship Workshops," held regularly across the country since 2007, were promoted in ads featuring a smiling Donald with the blaring headline, "Are YOU the next DONALD TRUMP? Come prove it to me!" (People v. Trump Entrepreneur Initiative LLC, Affirmation of Asst. Att'y Gen. Snell 2014, Ex. M2, 000388; hereafter Snell Affirmation).

From the moment they walked in the door, the participants were scrutinized by a sales team trained to find ways to "set the hook" for a later sale. "Let them know that you've found an answer to their problems and a way for them to change their lifestyle," the salespeople were instructed. "Collect personalized information that you can utilize during closing time," for example, "are they a single parent of three children that may need money for food? … [T]he more it hurts, the more they'll be prepared to pay for a speedy solution" (Trump University 2010, 19-20, 100, 104).

The school's operations manual, unselfconsciously labeled the "Playbook" (Trump University 2010), assumed that potential customers would be skeptical. After all, the economy was in freefall due in part to mortgage scandals, and Bernie Madoff's arrest the prior December for an epic investment fraud was still fresh in the news. To "disarm any uncertainty," salespeople were told to be friendly and engaging during the registration process, taking care to keep the...