Trump's failed Baja condo resort left buyers feeling betrayed and angry
by Michael Finnegan
WWhen Stephenee Simms heard in 2006 that Donald Trump was building condo towers in Baja, the lure of a posh weekend getaway on the rustic coast just south of Tijuana was hard to resist.
Simms, then an aerospace purchasing agent living in Canoga Park, said she used her life savings to pay a deposit of just over $50,000 for unit No. 602, a one-bedroom overlooking the Pacific.
The sales team gave her a book, bound in blue suede, describing a resort where residents “relax by the infinity-edge pool, margarita in hand, as the cabana boy brings fresh towels.”
It featured Trump, shown smiling in a French gold-leaf chair, telling readers that no words or pictures “can possibly describe what is about to take shape here, but it is certainly going to be the most spectacular place in all of Mexico.”
In the end, nothing at all was built at Trump Ocean Resort, and Simms lost her money. As did about 250 other buyers, most of them from Southern California.
All told, two years of aggressive marketing yielded $32.5 million in buyer deposits, every bit of it spent by the time Trump and his partners abandoned the project in early 2009 as the global economy was reeling. Most of the buyers sued them for fraud.
The Trump Baja fiasco fits a pattern in the Republican presidential candidate’s business record. Over decades of building a business empire in real estate, casino gaming, golf resorts, reality television and the sale of clothing and other merchandise, Trump has left a long trail of angry customers and vendors who accused him in court of cheating them.
Condo buyers at troubled Trump towers in Tampa and Fort Lauderdale, Fla., claimed in lawsuits that they too were misled and lost deposits. Students at the defunct Trump University say in fraud suits that they wasted money on worthless real-estate training. Trump’s string of business bankruptcies has stuck suppliers with unpaid bills and banks with uncollectible debts.
Trump has denied wrongdoing in every case, and he argues in the campaign that his success as a businessman qualifies him to run the country.
Most of the Trump Baja condo buyers accused Trump and two of his adult children, Ivanka and Donald Trump Jr., of duping them into believing that Trump was one of the developers, giving them confidence that it was safe to buy unbuilt property in Mexico.
“We were conned out of $140,000 in cash,” said buyer Sandra Sapol, 46, of Carlsbad. “That was hard-earned money, down the drain.”
The Trumps settled the fraud lawsuit, which neither Simms nor Sapol joined, and denied wrongdoing. The terms of the deal are confidential.
As for the charge of deception, Alan Garten, general counsel to the Trump Organization, the family’s umbrella enterprise, said, “Categorically untrue.”
A request to interview Trump and his two children was declined.
The Trumps say they licensed their name for the project, but were not a developer and had no responsibility to refund buyers’ deposits. They say the developers, Irongate Wilshire and an affiliate, P.B. Impulsores, collected and spent all the deposit money, then failed to get a construction loan.
The developers agreed to pay the condo buyers at least $7.25 million to settle their part of the fraud suit. Like the Trumps, they admitted no wrongdoing.
In the Republican primaries, Sen. Marco Rubio of Florida accused Trump of fleecing the Baja condo buyers, part of his case that Trump was a “con artist.” Trump’s Democratic rival, Hillary Clinton, is now using the full gamut of Trump business failures to attack the New York tycoon.
“He makes over-the-top promises that if people stick with him, trust him, listen to him, put their faith in him, he’ll deliver for them,” she told a crowd Tuesday in Ohio. “He’ll make them wildly successful, and then everything falls apart. And people get hurt.”
The Baja resort was supposed to cover 17 acres of oceanfront property on bluffs 10 miles south of the U.S. border. The 525 condos cost $275,000 to $3 million; Simms’ was $506,900. Buyers were required to make a 30% deposit in several installments.
As the Trumps and their partners promoted the condos with sleek brochures and what they called “VIP” cocktail receptions in San Diego County, they often left the impression — or said outright — that Trump was one of the developers. Their marketing team determined that the Trump name was the No. 1 draw for buyers, according to documents that surfaced in the lawsuit.
“We are developing a world-class resort befitting of the Trump brand,” Ivanka Trump said in a video on the Trump Baja website. “I’m very excited about it. I actually chose to buy a unit in the first tower.”
Her father appeared in the same video saying he was proud “that when I build, I have investors that follow me all over.”
“They invest in what I build, and that’s why I’m so excited about Trump Ocean resort,” he said.
Simms, in a video appearance she now regrets, was also shown praising Trump’s “wonderful reputation” at a VIP reception hosted by Ivanka Trump at L’Auberge Hotel in Del Mar. “The Trump name is synonymous with quality,” Simms said in the video.
Simms, 50, and Sapol, who went to the same party with her husband, Jeff, remembered meeting Ivanka Trump as waiters served canapés.
“She was joking around that she was my upstairs neighbor, and she could borrow sugar from me,” Simms recalled.
A few weeks later, Donald Trump Jr. met potential buyers at a similar event at the U.S. Grant Hotel in San Diego. A Trump Baja newsletter, sent by the sales team to those who put down deposits, reported that he “flew in from New York to purchase a suite at the event and meet with fellow buyers.”
In fact, according to court documents, Trump Jr. did not buy a condo at the Baja resort.
Garten, the Trump counsel, did not respond directly when asked by email why condo buyers were told that Trump Jr. had bought a unit. In general, Garten said, allegations in the lawsuit “were never proven.”
A July 2007 newsletter sent to condo buyers also stated that the resort was being “developed by one of the most respected names in real estate, Donald J. Trump.”
Further buttressing buyers’ belief that Trump was one of the developers, not just a brand name, Trump personally signed an August 2007 letter to condo buyers that identified him as exactly that. It was on the letterhead of P.B. Impulsores, the Mexican company named in unit purchase documents as the resort developer.
The letter, co-signed by Jason Grosfeld of Irongate, urged buyers to read an attached “Frequently Asked Questions” sheet about the project. This time, Trump and Irongate were listed as the developers.
Tony Brown, 50, a Carlsbad buyer who owns a medical imaging company, said he and his wife, Karen, lost a $170,000 deposit. To them, Trump’s name was a “security blanket” for those who could afford oceanfront property in Mexico, but not California, he said.
“When we found out later it was just a branding scheme, whatever confidence we had in his ability to take a project and bring it to fruition went out the window,” Brown said. The couple said they did not take part in the lawsuit because they did not want to waste any more money.
A webcam in Baja allowed buyers to monitor construction. As months went by with no sign of progress beyond the mounds of dirt bulldozed around the bluffs early on, investors’ alarm intensified.
“I was pretty much freaking out,” Simms recalled as she recently reviewed the blue-suede Trump Baja brochure at a Westside coffee house near the law firm where she now works as a receptionist.
Sapol and her husband, who own an embroidery and screen printing franchise, knew something was wrong when Trump Baja’s sales force stopped responding to their phone calls and emails. “We just started getting a pit in our stomach,” she said at their shop in an Encinitas strip mall.
The Sapols decided to drive to Baja to confront agents at the sales office where they’d once reviewed three-dimensional models of the resort and interior design displays.
“We go down there, and we look in the window, and all of the furniture is out, and the lights are out,” Sapol said. “They moved out. We were like, oh my God, where did everybody go? What happened?”
She remembered the billboard on the highway nearby, with a giant photo of Trump: “Trump,” it read. “Owning here is just the beginning. Phase One — 80% sold in one day. Phase Two — Now available.”
“We totally got ripped off,” Sapol said. “We just never thought it wouldn’t get built.”
In February 2009, buyers’ worst fears came true when an unsigned letter arrived from P.B. Impulsores saying “the project will not be able to proceed” for lack of financing in a dismal economy. No money was left to refund deposits, it said.
Donald Trump went unmentioned. But the letter said a company called “Trump Marks Baja LLC” had terminated its license agreement, making it “even less likely that a lender would ever step in.”
“When the project went south, no one from the Trump organization even contacted us to take responsibility,” Sapol said. “We were misled — all the marketing materials, the brochures, the name of the building, the fact that Trump’s daughter was at the event, saying she and her brother bought units.”
Ivanka Trump later told CBS News that her family had “lived up to our obligation under a license agreement.”
“We were never the developer of this project, and that was made clear,” she said. “We never took anyone’s deposit.”
Trump, she said, was just the brand. “I am sorry for everyone, but we are in the same boat,” she said.
The Trumps did collect $500,000 in licensing fees from developers Jason Grosfeld and Adam Fisher, the principals behind Irongate and P.B. Impulsores.
Grosfeld did not respond to requests for comment. Fisher declined to discuss the project.
Fearing they might lose still more money, the Sapols decided not to join the fraud suit because lawyers required payment upfront.
Simms was in worse shape. Soon after losing her deposit, she and everyone else at the aerospace office where she worked in Westlake Village were laid off. Her condo in Canoga Park went into foreclosure. When lawyers in the fraud suit invited her to join the case, she had no money to take part.
“No savings, 401K, home equity, job, nothing,” she wrote to them in an April 2010 letter.
For those who did not sue “to turn around now and make a claim is ludicrous,” Garten said. “They had ample opportunity.”
Simms still wants her money back — with interest.
