Trump University was an enterprise engaged in racketeering activity

June 5, 2016

Trump University was a massive fraudulent scheme that targeted financially stressed victims who borrowed money from friends and relatives, cashed out their IRAs and 401(k)s and maxed out their credit cards in order to extricate themselves from poverty. They were willing to risk financial ruin on the say-so of Donald Trump, who enriched himself by millions of dollars at their expense. If there is a silver lining to this tragic predation, you will find it in the Trump University Playbook, a remarkably detailed manual of step-by-step instructions to steal money from vulnerable victims. The fraud will not be difficult to prove because the playbook lays it all out in excruciating detail.

One of the civil cases pending against Donald Trump in federal court in San Diego is Cohen v. Trump, No. 3:13-cv-02519-DMS-RBB. I regard it as the most important case pending against Trump because, unlike the other cases, potentially hundreds of million of dollars are at stake. Two reasons explain why more money is at stake:

(1) This is the only case in which the plaintiff has alleged that Trump’s actions regarding Trump University violated the civil RICO statute that authorizes treble damages See 18 USC 1962(c), and

(2) The court has approved the plaintiff’s request to process the case as a class action that permits thousand of other victims to piggy-back their claims against Trump without having to retain counsel to independently sue him. The case is assigned to Judge Gonzalo Curiel.

RICO is an acronym for a Racketeer Influenced and Corrupt Organization that is referred to as the ‘enterprise’ in the RICO statute. An apparently legitimate organization or business, even a school or a police department, can qualify as an enterprise if it’s being used to defraud people through a pattern of racketeering activity. Trump University is the enterprise in this case. To prove a civil RICO violation, the plaintiff must prove that Trump knowingly, willfully and unlawfully defrauded people by conducting or participating, directly or indirectly, in the affairs of the enterprise (Trump University) through a pattern of racketeering activity. The ‘racketeering activity’ alleged in this case was to carry out the fraud by using wire transmissions to transmit money and the U.S. Postal Service to transmit communications. Specifically, the complaint alleges that Trump devised and knowingly carried out a material scheme or artifice to defraud or to obtain money by means of materially false or fraudulent pretenses, representations, promises, or omissions of material facts that he communicated to others by committing multiple acts of mail fraud and wire fraud every day. In short, the complaint accuses him of using his name and Trump University to create the appearance of legitimacy to conceal a scheme to induce people to pay thousands of dollars to learn his secret knowledge to make millions of dollars by acquiring distressed or forfeited real estate properties at auctions for little more than the amount of the owner/borrower’s deficiency and reselling them later at fair market value for a substantial profit.

We have a name for this money-making venture. We call it ‘vulture capitalism’ by flipping distressed properties pursuant to a detailed method controlled by statute to recycle properties that buyers no longer can afford. There is nothing magical or secret about this method. It has been around for hundreds, if not thousands of years and anyone can learn how to do it for free from the comfort of their own home by using the internet. Trump misled people when he induced them to pay thousands of dollars for his ‘secret’ knowledge that he did not develop and did not own. Even worse, he never provided the statutory process that details how to do it.

More important, this investment method is not risk free and he did not warn them about the risks involved. Consider the game Musical Chairs, for example. The proverbial music stopped when the real estate bubble burst and the market collapsed in 2007/2008. Expanding one’s inventory of dirt cheap properties is not recommended when the real estate market has not reached a bottom and reset itself so that buyers and sellers have a sufficient basis to estimate fair market value. In fact, the housing market is still circling the drain in many parts of the country.

Most of the victims of this fraud were struggling financially and hoped to avert disaster by making a killing flipping real estate. Spending their last dime to further enrich Donald Trump without receiving anything of value in return must have wreaked havoc. There ought to be a special place reserved in hell for people who engage in predatory financial frauds that target vulnerable victims.


To The State Attorneys General: Reject The Obama Administration’s Settlement Proposal

February 7, 2012

Our system of government will not survive unless we the people believe that it will respect, abide by, and enforce the Rule of Law, the Constitution and the Bill of Rights against all violators, regardless of race, ethnicity, gender, sexual preference, or class.

We rely on the Department of Justice and our various state attorneys general to protect our inalienable rights to life, liberty, and the pursuit of happiness. They and the police departments they supervise and rely upon to investigate and prosecute crimes, are the law enforcement arms of our federal and state governments.

At the expense of we the people who are victims of the biggest financial fraud committed in history, the Obama Administration’s proposed settlement of the real estate forfeiture crisis protects the banks that willfully and intentionally committed the crime. Moreover, the crime continues and there is no assurance that it will stop if the state attorneys general agree to the proposed settlement.

This situation is upside down and all wrong because the proposed settlement protects and rewards the criminals who committed the biggest financial fraud in history. If this case settles, how can anyone who is not a member of the 1% have any faith that our government will enforce the Rule of Law, the Constitution and the Bill of Rights against all violators, regardless of race, ethnicity, gender, sexual preference, or class?

The answer is self-evident.

We have reached a critical turning point in our history. If the state attorneys general adopt this outrageous and obscene settlement proposal, what little faith people still have in our federal and state governments will evaporate like the morning dew as the Sun rises bringing massive civil unrest and increasingly violent revolution.

Millions of people have been irreparably harmed, including people who were fraudulently induced to purchase intentionally overpriced homes with little or no money down financed by adjustable rate mortgages that would later skyrocket beyond their ability to pay the monthly payments and institutional investors, particularly pension funds, suckered into buying worthless mortgage backed securities. In search of ever higher profits for shareholders and mult-imillion dollar bonuses for CEOs and upper management, the TBTF banks have severely compromised and probably destroyed a working legal system governing real estate transactions to prevent frauds that was developed over hundreds of years reducing risk by protecting the integrity of sales so that buyers and sellers knew what they were purchasing and whether there were any restrictions on their use of the property or clouds on title. The system was relatively simple. Transactions were recorded in the counties where the properties were located and any member of the public could review who owned what, where it was located, the exact dimensions of property, and whether there were any encroachments, easements, other restrictions, or liens attached to it. There were legal and equitable remedies and insurance, if something went wrong, so that disputes could be resolved reasonably and equitably without violence. In service to their greed to avoid billions of dollars in recording fees and to facilitate the bundling of mortgages into mortgage backed securities to be sliced and diced into ever more exotic financial instruments of mass destruction for sale, the TBTF banks replaced this working legal system with MERS, which is little more than than a legal spreadsheet indicating who owns what. Meanwhile, most of the notes, mortgages, and other documentation no longer exist such that it is virtually impossible to verify the terms of any sales, including limitations on the use of property, the terms of the financial transactions, and who owns the note.

We use the criminal law to punish and deter others from committing similar acts of serious wrongdoing. There is no reasonable question any longer that the TBTF banks committed serious financial wrongdoing by willfully and intentionally engaging in a widespread conspiracy for profit by which they have destroyed the legal real estate recording system and caused trillions of dollars in losses.

The bankers who perpetrated this horrific financial crime must be held accountable by the criminal laws and the Racketeer Influenced and Corrupt Organizations Act (RICO) in 18 USC 1961 is the perfect vehicle with which to prosecute them. If ever there were criminal enterprises worthy of being put out of business, the TBTF banks are such enterprises.

There is no mystery to the process because the Department of Justice has written the book on how to successfully prosecute criminal organizations using the RICO statute. I know what I am talking about because I have defended people they have prosecuted.

Under threat of long prison sentences if they do not cooperate and testify against higher-ups, flip the less culpable defendants with easy cases to prove (i.e., the robo-signers and their bosses for forgeries and false statements under oath) and move up the tree of rot branch by branch building your case against the big boys.

Then you take them down. Hard.

The distressed homeowners also need principal write-downs to current fair-market value with credit for all payments made.

As I said at the beginning. We the people rely on the government to protect our inalienable rights to life, liberty, and the pursuit of happiness. If our federal and state governments through the Department of Justice and the state attorneys general sign-off on this settlement proposal, they will have joined the criminal predation leaving us with no recourse except to defend ourselves by fighting back with all means at our disposal.

It’s your move.


Racketeer Influenced And Corrupt Organizations (RICO)

November 9, 2011

The term “criminal banksters” has become an established part of our language to refer to the people who operate the too big to fail (TBTF) multinational Wall Street banks that practice an especially virulent and destructive form of worldwide predatory capitalism in which their profits are privatized to pay multimillion dollar bonuses to their CEOs disbursing the rest to investment managers and bank shareholders while their losses are socialized. That is, covered by the United States taxpayers without their consent.

This relationship basically functions like a super efficient vacuum cleaner sucking all the wealth out of the economy and redistributing it among the wealthiest 1% of the population, and especially the top 0.1%. As such, it imperils the economy and constitutes a clear and present danger to the Rule of Law, particularly the notion of equal justice under law, the Constitution, the Bill of Rights, and democracy itself.

This parasitic relationship came into being during the Reagan Administration when regulatory oversight of the banks relaxed and disappeared as enforcement of the banking laws ended with the exception of an occasional slap on the wrist that amounted to a forgettable mosquito bite-sized chunk of money removed from a massive flow of capital cascading through a fire hose under high pressure.

Coupled with the repeal by the United States of the Glass-Steagall Act that prohibited investment banks from lending money and their development and sale of novel and exotic financial instruments based on real estate mortgage backed securities as a form of insurance with which to hedge bets in the world wide casino, the banks invented and financed a new game to play in which the sky was the limit and the risk of failure all but extinguished. Or so they thought.

This get-rich-quick scheme was founded on the belief that the real estate market in the United States was the most secure investment in the world and the surest way to insure against investment losses in the thrilling world casino was to bundle real estate mortgages together into a package and sell them as insurance. The effort to sell this “insurance” and the demand to purchase it led to a massive systemic practice of inflating real estate appraisals and rounding up and signing up warm bodies to buy real estate financed by so-called “liars loans” in which the information in the loan applications was unverified and in many instances faked by the original lenders. The mortgages securing these loans were rarely, if ever, recorded with the title as required by law. Instead, the banks invented a new recordation system called MERS, which was nothing more than an electronic spreadsheet referencing the original mortgage. Meanwhile, the mortgages, which were basically worthless, were sliced and diced, bundled and rebundled to form worthless securities that were then sold and resold as insurance to institutional and international investors. This was and continues to be the greatest Ponzi scheme in history and sooner or later the music was destined to stop and bring the market crashing down.

Why? Because it created an enormous bubble in the housing market in the form of ever higher divorced-from-reality prices such that investors eventually realized that only hot air supported the value of the real estate.

Millions of homes have been forfeited unlawfully because the banks holding the mortgages had not recorded them properly and could only show that they owned the mortgage by manufacturing fraudulent and perjured loan documents using so called robo-signers to falsely claim to be persons in authority who supposedly signed the original loan documents that no longer existed and were never recorded.

Despite having been exposed for their wrongdoing in many states, and most recently by the Massachusetts Supreme Court, the banks that are saddled with many trillions of dollars of these worthless mortgages persist in seeking the unlawful forfeiture of millions more homes.

President Obama recently said that the banks have not violated any federal laws and cannot be prosecuted.

I am calling bullshit.

The CEOs of the banks can and should be prosecuted for violating the federal RICO statute. See 18 USC 1961, et seq. The banks meet the definition of enterprises and their CEOs engaged in a pattern of racketeering activity within a 10-year period under the federal statute by committing two or more of the crimes listed in the statute, including bribery, extortion, bank fraud, securities fraud, wire fraud, and money laundering.

Each count is punishable by a sentence of up to 25 years in prison and a $250,000 fine. In addition, all proceeds obtained from the pattern of racketeering activity may be seized and forfeited by the government, which can obtain a pretrial order freezing all of the personal assets of the defendants and their banks pending the outcome of the case in order to prevent them from dissipating, transferring, or hiding the assets to prevent their recovery.

Consider the case of Michael Milliken who was indicted for RICO on 98 counts of racketeering and fraud relating to an investigation into insider trading. He was accused of using a wide-ranging network of contacts to manipulate stock and bond prices. He pled guilty to six lesser offenses rather than face spending the rest of his life in prison.

Wikipedia reports:

Milken’s employer, Drexel Burnham Lambert, was also threatened with a RICO indictment under the legal doctrine that corporations are responsible for their employees’ crimes. Drexel avoided RICO charges by pleading no contest to lesser felonies. While many sources say that Drexel pleaded guilty, in truth the firm only admitted it was “not in a position to dispute the allegations.” If Drexel had been indicted, it would have had to post a performance bond of up to $1 billion to avoid having its assets frozen. This would have taken precedence over all of the firm’s other obligations—including the loans that provided 96 percent of its capital. If the bond ever had to be paid, its shareholders would have been practically wiped out. Since banks will not extend credit to a firm indicted under RICO, an indictment would have likely put Drexel out of business.

I have represented people indicted in federal court for violating the RICO statute and plaintiffs in civil litigation who sued defendants under the provisions of the civil RICO statute.

I do not see any problem, other than lack of political will or a desire to profit from the illegal scheme by preventing a prosecution, that would prevent President Obama from ordering his Attorney General to commence an investigation and prosecution.

Every American, regardless of political persuasion, has a fundamental and legitimate interest in assuring that the President and his Attorney General enforce the law.

Nothing less than our livelihoods, lives, and democracy are at stake.

Cross Posted at Firedoglake/MyFDL (http://my.firedoglake.com/mason/2011/11/09/racketeer-influenced-and-corrupt-organizations-rico/) and the Smirking Chimp.


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