Eric Trump, Donald Trump Jr., Ivanka Trump; Donald Trump (AP/Evan Vucci)

Judge rejects Trump's bid to stay lawsuit accusing his family of promoting “pyramid scheme”

The suit alleges members of the Trump family "conned" victims into "devastating and life-altering" financial losses



Igor Derysh
May 19, 2020 5:13PM (UTC)

A federal judge on Monday rejected President Donald Trump's bid for a stay in a class-action lawsuit accusing him and his eldest children of engaging in a pyramid scheme.

District Judge Lorna Schofield ruled the lawsuit can move ahead despite Trump's lawyers asking for a stay, Newsweek first reported. The lawsuit, which was filed by four anonymous complainants in 2018, alleges that Trump, Donald Trump Jr., Eric Trump and Ivanka Trump are guilty of fraud, false advertising and unfair competition stemming from their involvement with multi-level marketing company ACN. Schofield rejected additional charges of racketeering and conspiracy last year.

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Trump's lawyers had filed interlocutory appeals seeking to involve higher courts during the proceedings rather than after the conclusion of the litigation, but Schofield rejected that motion.

Schofield, who was appointed by former President Barack Obama, said Trump's unsuccessful attempt to force the case into arbitration "despite the absence of any written agreement" was among the reasons the appeal was unlikely to be successful.

"Weighing the two 'most critical' factors — likelihood of success on the merits and irreparable harm — against each other, any prejudice that defendants and ACN may suffer from proceeding with the litigation during the pendency of the appeal does not outweigh the strong likelihood that defendants and ACN will not succeed on appeal," the judge ruled.

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Schofield previously ruled against Trump's attempt to force arbitration after she ordered him to turn over 15 years of records related to the case.

The lawsuit alleges that Trump's dealings with ACN, a "get-rich-quick scheme," spanned from the mid-2000s until shortly before he kicked off his presidential bid. It further alleges that Trump and his family never disclosed their relationship with ACN as they bilked potential investors out of millions by claiming they had a "reasonable probability of success" if they invested hundreds of thousands more to participate.

"The Trumps conned each of these victims into giving up hundreds or thousands of dollars — losses that many experienced as a devastating and life-altering," the suit claims. "Surely the Trumps dismissed these amounts (and the lives they wrecked) as trivial. But by defrauding so many for so long, the Trumps made millions."

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The president has claimed that he was "not familiar" with the company's business practices, even though he spoke on behalf of the company at events, promotional videos and on his "Celebrity Apprentice" show, Newsweek reported.

The Trump family "promoted and endorsed ACN through videos, print and online media, at ACN events and during episodes of 'The Celebrity Apprentice,' a television program hosted by Trump and featuring Ivanka Trump and Donald Trump, Jr," the lawsuit claims. "Defendants' endorsement of ACN was crucial to plaintiffs' decisions to become [Independent Business Owners (IBOS)] for at least two related reasons. First, plaintiffs considered Trump and his family highly successful in business. Second, plaintiffs believed that the endorsement was independent of ACN."

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Schofield ruled last month that MGM Studios must turn over unaired footage of the "Celebrity Apprentice" from two separate episodes related to the lawsuit.

The plaintiffs in the case argued that the tapes "would shed light on the degree of control [the Trump family] exercised over ACN's presentation on the show" and "the extent of defendants' diligence into ACN [and] the falsity of defendants' representations."

"We continue to make every effort to gather the evidence we need to obtain justice for our brave clients," Robert Kaplan, the plaintiffs' attorney, said after the ruling, "and the thousands of other Americans just like them who were defrauded by the Trumps."

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Igor Derysh

Igor Derysh is a staff writer at Salon. His work has also appeared in the Los Angeles Times, Chicago Tribune, Boston Herald and Baltimore Sun.

Email: iderysh@salon.com Twitter: @IgorDerysh

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