A U.S. attorney who announced charges against Michael Avenatti on Monday alleged the lawyer failed in his “basic duty” by embezzling money from his client.
The Department of Justice filed a two-count felony complaint in California for wire fraud and bank fraud.
“According to an affidavit filed with the criminal complaint in this case, Avenatti negotiated a settlement which called for $1.6 million in settlement money to be paid on January 10, 2018, but then gave the client a bogus settlement agreement with a false payment date of March 10, 2018,” a DOJ news release read.
The affidavit states that Avenatti took his client’s settlement money and used it to pay expenses for his coffee business, as well as for his own expenses.
Attorney Nick Hanna said that Avenatti has allegedly engaged in egregious crimes.
“A lawyer has a basic duty not to steal from his client,” Hanna said in a news release. “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.”
After the made-up March 2018 deadline came and went, and his client asked where the money was, Avenatti continued to conceal that the payment had already been received, according to court documents.
The DOJ further alleges Avenatti “defrauded a bank in Mississippi by submitting to the lender false tax returns in order to obtain three loans totaling $4.1 million for his law firm and coffee business in 2014.”
According to the complaint, the attorney secured the loans by providing fabricated income tax returns for 2011, 2012 and 2013 showing he earned approximately $14 million in all, though no such returns were filed with the Internal Revenue Service.
In fact, Avenatti did not file personal income tax returns at all during those years but does owe the IRS $850,000 in unpaid personal income tax, plus interest and penalties.
Special Agent in Charge Ryan Korner of IRS-Criminal Investigation found Avenatti showed a pattern of “selfish behavior” worthy of prosecution.
“Professionals, including attorneys, who create elaborate schemes that have no purpose other than to mislead others and defraud both their clients and federally insured financial institutions, run the very high risk of prosecution,” Korner said.
“The criminal complaint unsealed today shows a pattern of selfish behavior that paints Mr. Avenatti as a lawyer who only represents his own self interests.”
If convicted of both charges, Avenatti could get a maximum sentence of 50 years in federal prison.
The former attorney for adult film star Stormy Daniels is also facing charges in an alleged multi-million extortion attempt against Nike.
The complaint filed by New York prosecutors on Monday alleged that Avenatti planned to hold a media event timed to Nike’s quarterly earnings announcement and the NCAA basketball tournament to publicly announce that he had discovered employee misconduct at Nike.
The attorney tweeted on Monday, “Tmrw at 11 am ET, we will be holding a press conference to disclose a major high school/college basketball scandal perpetrated by @Nike that we have uncovered. This criminal conduct reaches the highest levels of Nike and involves some of the biggest names in college basketball.”
Tmrw at 11 am ET, we will be holding a press conference to disclose a major high school/college basketball scandal perpetrated by @Nike that we have uncovered. This criminal conduct reaches the highest levels of Nike and involves some of the biggest names in college basketball.
— Michael Avenatti (@MichaelAvenatti) March 25, 2019
According to the complaint, Avenatti targeted Nike because the company was not renewing a sponsorship contract it had with an amateur team coached by the attorney’s client.
CNBC reported FBI agents arrested Avenatti, 48, at a law office in Midtown Manhattan about 15 minutes after his tweet.
Truth and Accuracy
We are committed to truth and accuracy in all of our journalism. Read our editorial standards.