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Donald Trump Suffers Serious Setback in Trump University Fraud Suit

Donald Trump hawks  copies of his Trump University book 'How To Build Wealth'  in this 2005 photo. He was sued by last year for perpetrating a fraud. (Photo by Scott Gries/Getty Images)

Donald Trump hawks copies of his Trump University book ‘How To Build Wealth’ in this 2005 photo. He was sued last year for allegedly perpetrating a fraud. (Photo by Scott Gries/Getty Images)

Donald Trump suffered a serious setback today in a long-running battle with New York Attorney General Eric T. Schneiderman over allegations of fraud involving the defunct Trump University. An appeals court cleared the way for a fraud lawsuit to continue against the Republican presidential contender.

A four-judge state Appellate Court panel ruled that the Schneiderman is “authorized to bring a cause of action for fraud” against Trump and Trump University on behalf of disgruntled students.

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The lower trial court, called the Supreme Court, had previously granted the attorney general’s motion for a summary judgement. The decision put Trump and the university on the hook for as much as $40 million in damages. But Trump appealed the decision.

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Trump’s lawyers had argued that the state’s statute of limitations had expired on the claims.

“We look forward to demonstrating in a court of law that Donald Trump and his sham for-profit college defrauded more than 5,000 consumers out of millions of dollars,” Schneiderman said.

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Meanwhile, Trump is still expected to win Super Tuesday primaries today against chief rivals Marco Rubio and Ted Cruz.

Schneiderman filed the lawsuit in New York State Supreme Court in August 2013, charging Trump with fraud. IM reported on a ruling in Oct. 2014 by Judge Cynthia Kern.

She ruled that Trump knew that the school’s continued operation was against the law, yet he continued to operate it anyway. The judge also dismissed Trump’s counterclaim against Schneiderman alleging malicious prosecution.

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More than 5,000 customers bought courses to learn Trump’s so-called “real estate investing secrets and techniques,” according to court papers. Some students ended up paying more than $35,000 for “live seminars and mentorship programs.”

But in reality, Trump University, and its successor Trump Entrepreneur Initiative, cheated students out of $40 million through bogus programs, Schneiderman claimed.

“This was a bait and switch in the hardest economic times, preying on people who could not afford to buy these programs,” Schneiderman said after filing the suit. “Mr. Trump used his celebrity status to lure people in.”

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The school suffered a legal blow in 2010 after New York State charged that it was operating as an educational institution without a license. Trump merely renamed the program and stopped calling it a university.

Trump’s programs also made a series of bogus claims about the programs in marketing materials.

Alan Garten, general counsel for the Trump Organization, told The New York Daily News, Trump intends to appeal the decision.

“We respectfully disagree with the court’s decision,” which he called “internally inconsistent” contradictory of earlier rulings by the same court, according to the paper.

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