Could the fall of Michael Avenatti be at hand? For those who have been in the crosshairs of this manic, headline-addicted lawyer, it would be a welcome moment. Early yesterday afternoon, Avenatti, best-known for having represented Stormy Daniels in her civil lawsuits against President Donald Trump and Trump’s ex-personal attorney, Michael Cohen, was charged in Manhattan and Los Angeles federal courts with crimes that could land him up to 97 years in prison. In Manhattan, where he was arrested, Avenatti allegedly had tried to extort over $20 million from Nike Inc. in return for a promise not to savage the company’s reputation. In Los Angeles, he faces separate fraud charges of diverting funds from a client settlement to his personal use and of grossly overstating his income to obtain a bank loan. He is now free on $300,000 bond with travel restrictions.
National Legal and Policy Center several times over the past 12 months, and most recently in December, has analyzed the bizarre career trajectory of Michael Avenatti. The Newport Beach, Calif.-based lawyer, now 48, in addition to his boundless desire for money and publicity – and he has achieved both in spades – has a boundless contempt of anything related to Donald Trump. His merging of these passions propelled him to the apex of American public life a year ago when he became the lawyer for stripper/porn star Stephanie Clifford aka “Stormy Daniels.” Ms. Daniels had sought to void a nondisclosure agreement related to her extraction of $130,000 from Donald Trump via his lawyer, Michael Cohen, on the eve of the 2016 presidential election. Avenatti was all over the map. Not only was he Ms. Daniels’ mouthpiece, he also was the champion of a middle-aged woman, Julie Swetnick, who had come out of the woodwork last September to testify before the Senate Judiciary Committee in an attempt to sabotage the Supreme Court nomination of Brett Kavanaugh with wholly baseless accounts of sex crimes; Avenatti’s antics during that time were widely credited with convincing undecided senators to vote for approval. For a while, Avenatti even was a presidential candidate, claiming he could easily defeat Trump in the 2020 general election. In his outlandish manner, he exploited the news cycle to maximum advantage. Cable television networks couldn’t get enough of him.
These past several months, Michael Avenatti’s career has been in a downward spiral. His legal relationship with Stormy Daniels, for weeks collapsing, officially ended at a March 12 news conference with Daniels accusing him of dishonesty. In reacting to yesterday’s criminal charges, she tweeted, “I made the decision more than a month ago to terminate Michael’s services after discovering that he had dealt with me dishonestly and there will be more announcements to come.” Avenatti’s longtime Newport Beach, Calif.-based law firm, Eagan Avenatti LLP, unable even to pay its rent, declared bankruptcy for the second time. Last October, Avenatti was ordered by a Los Angeles Superior Court judge to pay $4.85 million to Jason Frank, a former Eagan Avenatti attorney, out of his own personal funds, a sum in addition to the $10 million that a federal bankruptcy court last May had ordered the firm to pay Mr. Frank. In November, an Orange County judge ordered Avenatti to pay his estranged second wife $162,295 a month in child and spousal support, and surrender certain marital assets. That same month, he was arrested for domestic violence against his girlfriend, actress Mareli Miniutti. When it rains, it pours.
Now it’s raining even harder. Yesterday Avenatti was slapped with criminal charges in each of Manhattan and Los Angeles federal court – a real twofer. In Manhattan, federal prosecutors allege that Avenatti tried to shake down Nike for more than $20 million by threatening to reveal supposedly scandalous information about company operations. According to charging documents, Avenatti approached Nike officials earlier this month and told them that one or more of its employees had “authorized and funded payments” to unnamed college basketball recruits and their families. He then threatened to hold a news conference on March 26 – on the eve of Nike’s quarterly earnings call – if Nike didn’t hire Avenatti to conduct an internal investigation of this “major high school/college basketball scandal.” The bombastic Avenatti and an alleged co-conspirator, also a lawyer (widely believed to be Mark Geragos, whose recent clients include Jussie Smollett and Colin Kaepernick), were demanding a lump sum payment of anywhere from $15 million to $25 million, plus an additional $1.5 million for the client, a Southern California Amateur Athletic Union basketball coach, to remain silent. Avenatti also offered to accept a $22.5 million payment to resolve any claims the corporation had. Federal investigators recorded a phone call between Avenatti and two attorneys for Nike on March 20 during which he threatened to destroy $10 billion of the company’s market cap. “I’ll go take $10 billion off your client’s market cap…I’m not f***ing around,” Avenatti growled.
Things aren’t looking any better out in Southern California. Federal prosecutors are asserting that Avenatti stole $1.6 million from an intellectual property settlement earmarked for a former client, Gregory Barela. Rather than disburse the funds on January 10, 2018, as promised, Avenatti allegedly moved the money into an account he had set up only days earlier. Violating federal law and state ethics requirements, Avenatti diverted the money to cover expenses of Eagan Avenatti LLP and his financially troubled side business, a coffee company known as Global Baristas, which has operated Tully’s Coffee stores in California and Washington State. Barela, having spent months desperately communicating with Avenatti in hopes of locating the money, filed an arbitration suit against Avenatti this January. Stephen Larson, whose firm, Larson O’Brien LLP, is representing Barela, hopes the federal prosecution will reveal the truth about the flow of funds. “We and our clients applaud the U.S. Attorney and IRS Criminal Investigation for addressing this matter and we intend to carefully follow its progress through the criminal justice system,” he told Fox News.
Los Angeles federal prosecutors also are alleging that Avenatti submitted false personal and business tax returns to a Biloxi, Miss.-based financial institution, The People’s Bank, in order to obtain $4.1 million in loans for his law firm and Global Baristas. “To obtain these loans,” said Nicole Hanna, U.S. Attorney for the Central District of California, “Mr. Avenatti submitted phony personal income tax returns claiming to have earned a total of $14.1 million in adjusted gross income for 2011, 2012 and 2013.” According to the indictment, during 2014-16, Avenatti, in applying to The People’s Bank for three loans totaling $4.1 million, falsely claimed that he: 1) made between $4 million and $5.5 million in each of 2011, 2012 and 2013; and 2) paid $1.6 million and $1.25 million to the IRS, respectively, for 2012 and 2013. Yet with respect to the latter claim, say prosecutors, he never filed personal income tax forms or made payments for either year.
Avenatti, set for arraignment in Los Angeles on Monday, is countering that the charges are politically motivated. Barela’s story in particular, he says, is “ridiculously false” and “fraudulent.” But Steven Bledsoe, a partner at Larson O’Brien LLP, insists the evidence of wrongdoing is overwhelming. He said: “Mr. Avenatti is a big talker, but I don’t think there is any way to get around the written record that…he falsified the terms of the settlement agreement, denied receiving the settlement payment, and then spent his client’s settlement money.” The case, he emphasized, involves the “falsification of a settlement agreement and theft of client funds that is supported by straightforward documentation, including bank records, text messages and emails.”
It is simply impossible to see Michael Avenatti as a wounded innocent whose idealism got ahead of his finances. The legal profession long has had its share of loudmouths, but Avenatti in addition is likely a criminal, someone who sees no difference between running a law firm and running a Ponzi scheme. For him, getting rich was a main mission. Moreover, his deep, personalized hatred of Donald Trump unwittingly provides a window into the motives of the larger political culture of the hard Left. While some observers may see the ongoing downfall of Avenatti as a Greek tragedy, a better term might be poetic justice.
Postscript: As if all this were not enough, Michael Avenatti now faces a fresh round of charges. On Thursday, April 11 Avenatti was indicted in Santa Ana, Calif. federal court on three dozen counts of fraud, embezzlement and tax evasion. The charges include 10 counts of wire fraud for diverting large portions of a combined more than $12 million from four settlements over the previous five years, one of them involving a paraplegic client. The bankruptcy fraud includes $1.36 million in attorney fees from a settlement resulting from a suit brought forth by ticket holders for the 2011 Super Bowl. The 19 tax evasion charges relate to his failure to file personal and business returns for various years.
Federal officials believe their case against Avenatti is overwhelming. “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,” said IRS Acting Special Agent-in-Charge Ryan L. Korner in Los Angeles. True to form, Avenatti sent out at least two tweets denying all wrongdoing. One read: “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.” It’s not likely a jury will buy this. His arraignment is set for April 29. If convicted on all counts, Avenatti faces up to 333 years in prison, plus two more years for bank fraud-related identity theft. That’s long enough to sideline any lawyer’s career.