Years before he announced plans for a social media and entertainment empire, Donald Trump was promoting another big idea in mass communication.
It was pitched as revolutionary: a desktop video phone that would modernize phone calls from the C-suite to the kitchen counter. Starting around 2008, the future U.S. president endorsed the device, sold by a multilevel marketing firm called ACN Opportunity LLC, with claims that people could make easy money peddling it "without any of the risks most entrepreneurs have to take."
"Trust me -- it's changing everything," Trump, who was paid almost $9 million to promote ACN products from 2005 to 2015, said in a promotional video shown at investor events across the country. "The absolute truth is that this technology will be present in every home within the next several years."
Needless to say, it didn't work out that way. Skype was gaining ground. Video-calling became ubiquitous on smartphones. And in 2018, four recruits who lost thousands of dollars trying to sell the company's products filed a class-action fraud suit against Trump and three of his adult children who also promoted ACN -- Donald Jr., Eric and Ivanka Trump. The Trumps, who deny the claims, now face a June 29 deadline to sit for depositions.
The plaintiffs believe they can prove the Trumps lied about their faith in ACN's products and exploited vulnerable investors for profit without disclosing that they were being paid to promote the company. If they win, damages will be at least $5 million, the judge said in her decision denying the Trumps' motion to dismiss the complaint, but the number could go much higher if more people join the lawsuit. The lawyers have said that during relevant years ACN had about 200,000 recruits.
The litigation is heating up just as Trump is preparing the biggest business move of his post-presidency career: Trump Media & Technology Group, which aims to take on big tech companies with offerings from social media to streaming. Its Truth Social site -- which will give Trump a platform after he was banned from Twitter and Facebook -- is expected to launch by the end of March, Chief Executive Officer Devin Nunes told Fox Business News last month.
Trump has said Trump Media is about "saving our country." It's already generating enthusiasm among retail investors betting on his name. Shares of Digital World Acquisition Corp., the special purpose acquisition company taking Trump Media public, have soared more than 700% since the deal was announced, even as details on the venture remain scant.
It remains to be seen if Trump Media will live up to the hype or fizzle. But the ACN case is a reminder of Trump's history of grandiose business claims gone awry, from Trump University, which paid $25 million in 2016 to settle fraud suits on behalf of thousands of former students, to Trump Mortgage, which launched not long before the housing bubble burst. Other ventures sputtered with less drama: Trump Vodka, Trump Steak, Trump Shuttle -- even a Trump board game.
Trump's core real estate business also is in legal crosshairs. The Manhattan district attorney charged the Trump Organization with tax crimes in 2021, while New York Attorney General Letitia James is pressing ahead with a 2019 civil investigation into possible bank and insurance fraud tied to asset valuations. Trump, 75, has denied wrongdoing and argued he was targeted for political purposes.
The pattern of lawsuits, investigations and bad ideas calls into question Trump's judgment and the value of his promotional pitches, said Roberta Kaplan, a lawyer for the former ACN recruits who claims Trump "deliberately defrauded" her clients.
The ACN investments "turned out to be worthless," Kaplan said. "While the Trumps earned millions of risk-free dollars for themselves, our clients and thousands of other Americans like them lost what to them was a huge amount of money."
Trump's own lawyers in the ACN case in 2019 sought dismissal of the suit by arguing that the billionaire's glowing claims about the video phone were "puffery" that no "reasonable investor" would have relied upon. They argued the lawsuit didn't provide evidence of him making false statements and that his comments were opinions.
Trump Media's press office didn't respond to requests for comment about the ACN case, nor did Joanna Hendon, the lawyer for Trump and his children. Taylor Budowich, a spokesman for the former president, also didn't respond to messages.
Trump Media, of course, is different from the ventures launched when Trump was known just as a billionaire real estate developer and celebrity host of "The Apprentice." He continues to hold strong influence over the Republican Party and has hinted he may run again for president in 2024. And his huge fan base may want to join Truth Social just to hear what the formerly prolific tweeter has to say, said Matthew Tuttle, chief executive officer of Tuttle Capital Management LLC.
"There will be a lot of people who will like the ability to go somewhere where they can speak freely," said Tuttle, whose firm is behind SPAC exchange-traded funds and the recently debuted FOMO ETF. "If you're a Donald Trump fan, none of that other stuff matters."
Still, there are parallels with ACN, according to Michael Cohen, Trump's onetime lawyer and fixer who's now a full-time critic of the former president.
"These claims about disrupting the industry and dominating the market -- they are the exact same claims that he made when he introduced Trump Mortgage, Trump University, Trump Steaks, ACN video phones and so many more -- all of which failed and failed miserably," said Cohen, who last year completed a three-year prison sentence for tax fraud, bank fraud, violations of campaign finance laws and lying to Congress.
ACN recruits paid hundreds of dollars to join and hundreds more to attend seminars and national conventions at sold-out arenas. Trump starred in promotional videos, appeared in-person at events and twice hosted ACN executives on "The Celebrity Apprentice." He told recruits that the "tremendous" phones, which required ACN internet service to work, were doing "half-a-billion dollars' worth of sales a year," and that ACN was "at the forefront of innovation," according to the complaint. The plaintiffs argue those claims were "abjectly false."
ACN isn't named in the lawsuit. Mark Henriques, a spokesman for the company, said the video phone was marketed from about 2008 to 2013, though sales may have winded down into 2014. He said that the product was affected by changing technology, noting that Apple's FaceTime didn't come along until after Trump starting promoting the products. Moreover, he said, Trump wasn't all wrong.
"Obviously folks make predictions about how new technologies will be adopted all the time," Henriques said in a statement. "Trump was right to predict that video communication would become ubiquitous, just not that the platform for that communication would be a physical video phone."
Kaplan, the plaintiffs attorney, argues that while many people did indeed predict the advent of video communication, neither Trump nor anyone else believed that would happen using a clunky ACN video phone.
"Trump fraudulently convinced our clients to spend their hard-earned savings to go into business selling the functional equivalent of a Bakelite rotary dial phone, when the future was in smartphones and tablets," she said.
Former ACN investors hope to eventually get their money back from Trump. The case could ultimately have hundreds or even thousands of plaintiffs once the lawyers get evidence showing how many investors lost money.
Millard Williams, one of the plaintiffs in the suit, was homeless in 2014, but he was so swayed by Trump's pitch at an ACN event that he spent hundreds of dollars -- all the money he had and more that he borrowed -- to start selling the company's video phones. When his efforts didn't pan out right away, he paid to attend more seminars to improve his sales skills.
"When Trump came on the screen, the entire arena was transfixed," the complaint says. "Williams was again impressed by Trump's seemingly genuine support for the company and left the convention re-inspired and reinvigorated, believing that ACN could still be a good business opportunity."
But the renewed feelings were short lived. After a few months of meetings, Williams had zero income and stopped believing in the company.
"Williams came to realize that, contrary to what Trump had said in the promotional videos, ACN was not a good moneymaking opportunity," the complaint says.
Bloomberg