Skip To Content


What’s Next: The Plaintiff’s Perspective – Suit Targets Manhattan Condo Marketers – and Donald Trump – for Deceptive Sales Practices

By: Larry Smith

August 4th, 2010

In this regular feature, Bulletproof interviews top plaintiffs’ counsel for their perspective on the crises likely to affect businesses in the near future. Today, we speak to William J. Geller, a lawyer at Adam Leitman Bailey, P.C. in New York, who is representing a group of 15 buyers at the Trump SoHo Hotel Condominium in Manhattan.

The lawsuit, filed in Federal District Court in Manhattan on August 2, claims that, in both sales pitches and statements to the press, Trump SoHo representatives misrepresented the number of units in the building that were already sold. After the offering plan became effective in May, buyers say they learned that just over 15 percent of the building had been sold, significantly less than what they’d been led to believe.

Plaintiffs want their contracts canceled and deposits returned. They are also asking for unspecified punitive damages. Named defendants include, among others, project sponsor Bayrock/Sapir Organization LLC, along with Donald J. Trump and Mr. Trump’s children, Ivanka Trump, Eric Trump, and Donald Trump Jr. for their part in the marketing and sales of the project.

In the New York Times coverage of your case, you say the defendants engaged in “a concerted and consistent pattern of lying about the numbers of units sold.” In what way was it “concerted and consistent?”

William Geller: The Trump SoHo was introduced on the 2006 season finale of Donald Trump’s The Apprentice, and unit sales started in September 2007 in a blaze of hype and hopefulness. As we detail in our 176-page complaint, starting from the lavish sales kickoff gala, project executives and sales representatives gave both the media and individual buyers sales figures that were grossly inflated.

Our clients each provided us with their variation of the same story, being told that 30, 40, 50, 60 or even 70 percent of the units were sold; that units they wanted were almost sold out or unavailable; and that they had to act quickly. Their stories matched what was being reported in the media about unit sales,including quotes from the Trumps.

Why do you think they thought they could misrepresent the number sold when they knew they had to report eventually to the state Attorney General’s office?

William Geller: Ultimately, the developers did have to file the true sales with the state Attorney General, and reported that only 16% of the units were sold, just three units more than the minimum required for the offering to proceed.

I don’t know why they gave inflated sales when they knew the actual figures would come out, but they may have hoped that sales would eventually catch up with their numbers, and that nobody would bother to track when the sales they had reported were actually made.

In the world before the market crash, where everybody knew that Manhattan real estate prices would only go up, it was easy for developers to sell out high-profile projects. So they may have gotten careless about what they were saying and, once their initial misstatement was reported, they couldn’t back down.

What is your response to the defense assertion in the Times article that there were more than 100 contracts signed (about 25 percent of the units) but the company decided to report only the minimum 15 percent as “the most prudent and conservative way to go?”

William Geller: I first saw the response when I read that New York Times article about the case. I was surprised because the regulations require that the Attorney General filing must “state the percentage of units being offered for which sponsor has accepted purchase agreements.” So stating this as the minimum doesn’t seem to be permissible, much less “prudent and conservative.”

Further, even if 100 units were under contract, it isn’t a defense, since project executives have been quoted as saying that as many as 270 units had been sold.

What should be a minimum standard of disclosure by the sellers in situations like this?

William Geller: The Attorney General’s condominium sales regulations have detailed disclosure requirements, but the basic standard should be self-evident: tell the truth.

When everything that is ever reported about a project can be found through a quick Google News search, and buyers keep their archived e-mails for years, it really is a fact that anything you say can and will be used against you in a court of law.

Although marketers and sales people love to hype their projects, they have to be trained in what is an improper sales practice, and that training has to be enforced in the field. Outright lies about verifiable figures should, of course, be tossed right out.

Will this case have any impact on sellers and developers beyond this particular situation?

William Geller: My main hope is that it will be a cautionary tale, that you can’t just say anything to sell units and expect not to be called on it, though I guess that’s what any fraud case is about.

More specifically, I expect that any developer following the case will be more careful about complying with, not only state condominium regulations, but also federal law. Because the Trump SoHo was promoted both as real estate and as an investment opportunity, we are bringing our case under the federal securities laws, as well as under the federal Interstate Land Sales Full Disclosure Act (“ILSA”) for both deceptive sales practices and technical violations, in addition to common law fraud, breach of contract, and state consumer protection law.

Beyond this case, what other specific issues or causes of action are currently on your front broiler?

William Geller: Right now, we’re up to our elbows representing buyers in new construction condominiums. Although the Trump SoHo has the most egregious fact patterns of all the buildings we’re involved with, many projects started in 2006 and 2007 were quite careless in complying with all of the applicable development and sales laws, probably because nobody held their feet to the fire during the prior years of rising prices. We’re doing interesting things with ILSA, a federal law originally adopted in 1968 that many New York developers don’t know much about.

Larry Smith is Senior Vice President of Levick Strategic Communications, the nation’s top crisis communications firm, and a contributing author to Bulletproof Blog.

We don't support Internet Explorer

Please use Chrome, Safari, Firefox, or Edge to view this site.