The Dallas Morning News
Avenatti faces slate of charges
Lawyer gained spotlight attacking Trump for actress Stormy Daniels
LOS ANGELES — Federal prosecutors portrayed highprofile attorney Michael Avenatti on Thursday as a scheming operator who stole millions of dollars from clients, cheated on his taxes, lied to investigators, and tried to hide money from debtors in bankruptcy proceedings.
A 36count indictment, returned late Wednesday in U.S. District Court in Santa Ana, Calif., offered a detailed account of Avenatti’s fall from grace just a year after he seized the spotlight while crusading for adultfilm actress Stormy Daniels in her legal battles against President Donald Trump.
Avenatti embezzled settlement funds for five clients and doled out small portions to prevent the thefts from being discovered, prosecutors said.
“Money generated from one set of crimes was used to further other crimes,” U.S. Attorney Nick Hanna said, “typically in the form of payments designed to string along victims so as to prevent Mr. Avenatti’s
financial house of cards from collapsing.”
Avenatti denied the charges on Twitter, saying he had made powerful enemies through his work and would plead not guilty. “I look forward to the entire truth being known as opposed to a onesided version meant to sideline me,” he said.
The new charges are in addition to a New York extortion case alleging that Avenatti demanded millions from Nike to stay quiet about purported allegations against the company. Avenatti, 48, was arrested March 25 in New York in the Nike case.
The 61page Southern California indictment adds dozens of counts and details charges that carry a potential prison sentence of 335 years, prosecutors said.
Avenatti faces 10 counts of wire fraud accusing him of stealing from a paraplegic man and four other clients. He is accused of using their settlement money to fund a lifestyle that included living in multimilliondollar homes, sponsoring an auto racing team, and buying a private jet, authorities said. The jet was seized Wednesday by federal agents.
He was also charged with 19 tax counts, including lying to an Internal Revenue Service officer, not paying personal income taxes since 2010, failing to pay taxes for his businesses, including two law firms, and pocketing payroll taxes from the Tully’s Coffee chain, which he owned, the indictment said.
Between September 2015 and January 2018, Global Baristas US, the company that operated Tully’s, failed to pay the IRS $3.2 million in payroll taxes, including nearly $2.4 million withheld from employees, the indictment said.
When the IRS later put tax levies on coffee company bank accounts to collect more than $5 million, Avenatti had Tully’s employees deposit cash receipts in an account for his auto racing team, authorities said.
Avenatti was also charged with submitting phony tax returns to get more than $4 million in loans from The Peoples Bank in Biloxi, Miss., in 2014. The tax returns he presented to the bank were never filed to the IRS, prosecutors said.
The charges are the latest blow to a career that took off when Avenatti represented Daniels in her lawsuit to break a confidentiality agreement with Trump to stay mum about an affair they allegedly had. Daniels, whose real name is Stephanie Clifford, has been living in Forney.
Avenatti became one of Trump’s leading adversaries, attacking him on cable news programs and Twitter. At one point, Avenatti even considered challenging Trump in the 2020 election.
Back home, his business practices had come under scrutiny from the IRS and a former law partner allegedly owed nearly $15 million by Avenatti and the Eagan Avenatti firm, which filed for bankruptcy.
Avenatti made false statements in bankruptcy proceedings by submitting forms that underreported income, such as a $1.3 million payment his firm received, the indictment said.
The most glaring example of deception and fraud was described in the indictment as scheming Avenatti allegedly did to deprive clients of money they were due from court settlements, legal negotiations or sales of stock and actions he took to cover his tracks.
Avenatti on Thursday called allegations “bogus nonsense” on Twitter.
Although Avenatti was due a portion of the more than $12 million he received for the five clients, the charges said he turned over only a fraction.
“It is Lawyer 101: do not steal your client’s money,” Hanna said.
Avenatti allegedly drained a $4 million settlement he negotiated in 2015 on behalf of Geoffrey Johnson, who was paralyzed after trying to kill himself in the Los Angeles County jail, the indictment said. Avenatti provided only $124,000 to Johnson, the indictment said.
Two years after the settlement was reached, Avenatti allegedly helped Johnson find a real estate agent to buy a house. But when Johnson was in escrow, Avenatti falsely said he had not received the settlement funds, the indictment said.
In November, when the Social Security Administration requested information to determine if Johnson should continue to receive disability benefits, Avenatti said he would respond, but he didn’t because he knew it could lead to the discovery of his embezzlement, the indictment said. The failure to respond led to Johnson’s disability benefits being cut off in February.
Johnson is now destitute, said attorney Joshua Robbins, who now represents him.