Donald Trump, the Trump Family and Trump Organization Face Major Rent Overcharge Lawsuit

According to news reports, a proposed class action accusing Donald Trump, the Trump Family and Trump Organization, as well as numerous other companies, of unjustifiably inflating rents for approximately 14,000 rent-regulated apartments throughout New York City must proceed forward, according to a recent ruling by a state court judge.

New York State Supreme Court Judge Richard Velasquez refused to dismiss the Racketeer Influenced and Corrupt Organizations (RICO) Act and fraud claims for a proposed class of both current and previous tenants of Trump-owned properties. These allegations arose from a 2018 New York Times exposé spotlighting questionable billing tactics used by a purchasing agent for numerous rent-regulated apartment buildings owned by Donald Trump’s father, Fred Trump.

According to the plaintiffs’ allegations, the Trump-owned purchasing agent, All County Building Supply & Maintenance Corp. (“All County”), unreasonably inflated the costs of various property improvements, using this as a pretense for excessive rent increases in rent-regulated units under New York’s Rent Stabilization Law. According to the New York Times investigation and a separate lawsuit by the former President’s niece, All County’s inflated purchases also served the additional purpose of allowing Fred Trump to channel money to his children and nephew while bypassing a hefty gift tax.

Justice Velasquez made a ruling on June 27, 2023, finding that claims of the proposed class dating back to 1992 should not be dismissed due to the statute of limitations and did not sufficiently replicate previous challenges against similar rent increases before a New York City agency authority.  The Judge noted, “Plaintiffs may have observed the outcomes of All County’s purchasing operations, but they were oblivious to the inner workings of the supposed fraudulent plan as it was cleverly hidden. There was no possibility for plaintiffs to uncover what All County truly paid for materials and labor services on behalf of the defendants, as this information was deliberately withheld by the defendants.”

The class action complaint outlines a scheme implicating the Trump Organization Inc., Trump Organization LLC, Donald J. Trump, Robert S. Trump, Elizabeth Trump Grau, John W. Walter, and a host of residential properties owned by the Trump defendants. All County purchased assets from third-party suppliers at pre-set prices, selling them back to Trump-owned residential buildings at inflated rates. These inflated prices were then used by Trump entities to validate rent hikes for “major capital improvements” or “individual apartment increases,” as alleged by the tenants.

Prior to the enactment of 2019 rent laws, landlords could justify rent hikes beyond the annual increases stipulated by the city’s Rent Guidelines Board through capital improvement spending.

In their May motion to dismiss, the Trump Defendants asserted that the statute of limitations for the alleged misconduct, spanning from 1992 to 2004, had expired. Furthermore, they claimed that the proposed tenant class had the chance to challenge the rent increases before the Division of Housing and Community Renewal, an opportunity seized by at least four tenant groups, and that the propriety of these rent increases at issue was already determined.

However, Justice Velasquez found that the class plaintiffs sufficiently alleged that All County functioned as a “sham company”, disguising the real cost of materials and labor services from the DHCR, which did not support the Trump Defendants’ claim that the lawsuit was time-barred. Judge Velasquez also found that previous DHCR rulings on tenant claims regarding these rent increases did not prevent the proposed class from arguing that these increases were fraudulent or constituted a RICO violation. Judge Velasquez even questioned whether DHCR merely gave a nod to the Trump Defendants’ rent increase requests, citing one particular perplexing instance of a rent increase approval.

“The court’s decision stands as yet another legal retribution for the former president and The Trump Organization,” tenant counsel Jerrold Parker declared in a Thursday statement.

Representing the tenants are Raymond C. Silverman and Jerrold S. Parker of Parker Waichman LLP. The Trump Organization Inc. and Trump Organization LLC are represented by Jeffrey L. Goldman and Israel A. Katz of Belkin Burden Goldman LLP. James D. Kiley of Kiley Kiley & Kiley PLLC represents the Trump family defendants.

The case is Ishmail Dimson et al. v. Donald J. Trump et al., case number 518776/2020, in the New York Supreme Court, Kings County.