Celebrity lawyer Michael Avenatti was arrested Monday on charges that he tried to extort up to $25 million from Nike by threatening to hurt that athletic apparel giant financially with negative publicity.
Avenatti also is charged in a separate federal case out of Los Angeles, where he is accused of embezzling a client’s money “in order to pay his own expense and debts,” and of “defrauding a bank in Mississippi,” prosecutors said.
Avenatti had represented porn star Stormy Daniels in lawsuits against President Donald Trump and his former lawyer Michael Cohen related to a non-disclosure agreement she signed on the eve of the 2016 presidential election to keep quiet about her alleged affair with Trump in exchange for a $130,000 payment. Daniels replaced Avenatti as her lawyer earlier this month.
Daniels, in a statement released by her new lawyer Clark Brewster, told CNBC that, “Knowing what I know now about Michael, I’m saddened but not shocked regarding his arrest.”
“I made the decision weeks ago to terminate Michael’s services after discovering that he had dealt with me extremely dishonestly, and I will have my own announcement coming soon,” Brewster said.
Avenatti, 48, was busted in Midtown Manhattan at 12:30 p.m. by FBI agents, about 15 minutes after he tweeted that he would be disclosing a big high school and college basketball scandal “perpetrated by” Nike that he supposedly had uncovered.
Avenatti is due to be presented in Manhattan federal court on Monday on charges of conspiracy, extortion and transmitting interstate communications with intent to extort.
A criminal complaint filed in New York against Avenatti says he “devised a scheme to extort a company by means of an interstate communication by threatening to damage the company’s reputation if the company did not agree to make multi-million dollar payments to Avenatti and [co-conspirator], and further agree to pay an additional $1.5 million to a client of Avenatti’s.”
The complaint says that last Wednesday, Avenatti and a cooperating witness spoke by phone with lawyers for Nike “during which Avenatti stated, with respect to his demands for payment of milions of dollars, that if those demands were not met ‘I’ll go take ten billion dollars off your client’s market cap … I’m not f—ing around.’ “
Nike had no immediate comment.
In the Los Angeles federal case, Avenatti is accused in a 197-page complaint of negotiating a $1.6 million settlement for a client in a civil case, but then giving the client “a bogus settlement agreement with a false payment date of March 10, 2018,” according to the U.S. Attorney’s Office in Los Angeles.
That office said “Avenatti misappropriated his client’s settlement money and used it to pay expenses for his coffee business, Global Baristas US LLC, which operated Tully’s Coffee stores in California and Washington state, as well as for his own expenses.:
“When the fake March 2018 deadline passed and the client asked where the money was, Avenatti continued to conceal that the payment had already been received, court documents said,” according to prosecutors.
“A lawyer has a basic duty not to steal from his client,” said U.S. Attorney for Los Angeles Nick Hanna.
“Mr. Avenatti is facing serious criminal charges alleging he misappropriated client trust funds for his personal use and he defrauded a bank by submitting phony tax returns in order to obtain millions of dollars in loans.”
Hanna’s office said Avenatti also allegedly defrauded a bank in Mississippi by submitting to that bank fake tax returns to get three loans totaling $4.1 million for his law firm and coffee business in 2014.
The tax returns indicated that he had “substantial income even though he had never filed any such returns with the Internal Revenue Service,” the prosecutor’s office said. “The phony returns stated that he earned $4,562,881 in adjusted gross income in 2011, $5,423,099 in 2012, and $4,082,803 in 2013 … Avenatti allegedly also claimed he paid $1.6 million in estimated tax payments to the IRS in 2012 and paid $1.25 million in 2013.”
“In reality, Avenatti never filed personal income tax returns for 2011, 2012 and 2013 and did not make any estimated tax payments in 2012 and 2013,” Hanna’s office said.
“Instead of the millions of dollars he claimed to have paid in taxes, Avenatti still owed the IRS $850,438 in unpaid personal income tax plus interest and penalties for the tax years 2009 and 2010. Avenatti also submitted a fictitious partnership tax return for his law firm.”
Read the New York federal criminal complaint against Michael Avenatti:
Read the Los Angeles federal criminal complaint against Avenatti: