Celebrity attorney Michael Avenatti is in legal hot water yet again, this time facing perhaps his most serious criminal charges yet: a 36-count federal indictment alleging that he stole millions of dollars from his clients, skirted taxes, and committed wire fraud, perjury, and a number of other financial crimes.
The 61-page Justice Department indictment lays out an alleged scheme Avenatti conducted starting in 2015 to defraud five clients, where he would secure major settlements and then lie to clients about the terms. He would instead put the money in accounts he controlled and then “embezzle and misappropriate” the funds.
Prosecutors allege Avenatti would “lull the client to prevent the client from discovering” his activities. He would tell them payments hadn’t been made yet, or were in installments instead of a lump sum.
One of the clients is a paraplegic man who was granted a $4 million settlement payment from Los Angeles County in January 2015. Avenatti allegedly had the money deposited into a trust for the client he controlled but did not disclose that the payment had been made. He paid his client in installments of about $1,000 to $1,900 over more than three years, totaling $124,000, and told the client that payments to assisted living facilities where he lived were “advances” of the settlement. Because of Avenatti’s activity, the client couldn’t buy a house he wanted, and he lost Social Security benefits because Avenatti failed to respond for him.
Meanwhile, prosecutors say, Avenatti transferred the money to other accounts, including personal ones.
Prosecutors placed the charges into four buckets: wire fraud, tax fraud, bank fraud, and bankruptcy fraud. They allege that on top of defrauding clients, Avenatti failed to file personal tax returns and hid his coffee company’s income, failed to pay payroll taxes for the employees of his coffee company, submitted phony tax returns to secure loans from a Mississippi bank, and lied about his income after filing for bankruptcy, among other allegations.
“Money generated from one set of crimes was used to further other crimes,” said Nick Hanna, a US attorney for the Central District of California, in a press conference on Thursday outlining the charges.
Hanna said Avenatti (who’s recently become known for his anti-Trump posturing) would use money taken from his clients to finance his coffee business, his auto racing enterprise, and his lifestyle. In one instance, Avenatti allegedly used money from a client settlement to pay for his portion of a private jet. (The jet was seized Wednesday.) Hanna said Avenatti’s schemes were an attempt to keep his “financial house of cards from collapsing.”
Some of the charges against Avenatti were announced in March.
If convicted of the 36 charges outlined on Thursday, Avenatti could face 333 years in federal prison plus an additional two-year mandatory sentence for an identity theft charge. He is scheduled to be arraigned on April 29 in the US District Court in Santa Ana, California.
But that’s not the extent of his legal troubles. The IRS is also conducting an ongoing investigation into Avenatti’s tax practices.
“The financial investigation conducted by the IRS details a man who allegedly failed to meet his obligations to the government, stole from his clients, and used his ill-gotten gains to support his racing team, the ownership of Tully’s coffee shops, and a private jet,” acting Special Agent in Charge Ryan L. Korner with IRS Criminal Investigation in Los Angeles said in a statement outlining the charges. “Individuals who intentionally thwart the IRS and fail to meet their tax obligations will be caught and they will be held accountable.”
Avenatti says this is just the big guns out to get him
Avenatti, who never shies away from the spotlight, posted a series of tweets before the charges were released on Thursday, proclaiming his innocence and casting the charges as an effort by his “powerful enemies” to take him down. “I intend to fully fight all charges and plead NOT GUILTY,” he wrote. He also tweeted Theodore Roosevelt’s famous “man in the arena” quote.
For 20 years, I have represented Davids vs. Goliaths and relied on due process and our system of justice. Along the way, I have made many powerful enemies. I am entitled to a FULL presumption of innocence and am confident that justice will be done once ALL of the facts are known.— Michael Avenatti (@MichaelAvenatti) April 11, 2019
I intend to fully fight all charges and plead NOT GUILTY. I look forward to the entire truth being known as opposed to a one-sided version meant to sideline me.— Michael Avenatti (@MichaelAvenatti) April 11, 2019
Avenatti also tweeted about one of the clients listed in the indictment. The LA Times identified the paraplegic man whom Avenatti allegedly kept the $4 million settlement from as Geoffrey Ernest Johnson, who sued Los Angeles County over his treatment at the Twin Towers Correctional Facility. While jailed there, Johnson, who was suicidal, jumped from an upper floor and injured himself. On Thursday, Avenatti tweeted out a “client testimonial approval” he says Johnson signed less than a month ago “attesting to my ethics and how this case was handled.”
Any claim that any monies due clients were mishandled is bogus nonsense. By way of example only (there are MANY more like this), here is a document Mr. Johnson signed less than a month ago attesting to my ethics and how his case was handled. I look forward to proving my innocence pic.twitter.com/tWL1aIuPy0— Michael Avenatti (@MichaelAvenatti) April 11, 2019
Avenatti just can’t keep out of legal hot water
Avenatti rose to public prominence as the attorney for Stormy Daniels, the porn actress whom Donald Trump’s lawyer and fixer Michael Cohen paid off ahead of the 2016 election in order to keep her from speaking out about an affair she says she had with Trump in 2006.
He became a media fixture and was eager to bask in the attention. He frequently criticized the president on television and on Twitter and even flirted with a potential 2020 presidential bid.
Avenatti inserted himself into the confirmation hearings of now-Supreme Court Justice Brett Kavanaugh, representing a woman who claimed that Kavanaugh sexually assaulted girls in high school and that he was at a party where she was assaulted. The FBI did not consider her claims to be credible.
But most recently, Avenatti has been in the headlines for his own legal troubles.
In March, federal prosecutors in New York arrested him for allegedly attempting to extort more than $20 million from Nike. Prosecutors said Avenatti threatened to hold a press conference revealing “allegations of misconduct by employees of Nike” the night before Nike’s quarterly earnings call if the company didn’t pay him and his client, a former Amateur Athletic Union basketball coach, millions of dollars.
According to prosecutors, in a phone call with Nike’s attorneys, Avenatti said he would take “10 billion dollars” off of the athletic apparel company’s market cap if they didn’t comply. “I’m not fucking around,” he said.
In the New York case, Avenatti was released on $300,000 bond, and if convicted of those charges, he could face 47 years in prison. That would be on top of the more than 300 years the California charges could carry.
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