WASHINGTON – Federal prosecutors in two states revealed criminal charges Monday against Michael Avenatti, the high-profile lawyer who battled President Donald Trump, accusing him of scheming to extort shoemaker Nike, embezzling money and defrauding a bank.
Avenatti was arrested Monday afternoon in New York outside the office of one of Nike’s lawyers.
In the Nike case, federal prosecutors in New York charged Avenatti with four counts of extortion and conspiracy for allegedly threatening to reveal evidence that he claimed would show improper payments to high school basketball players, according to court records filed there.
They charged that Avenatti sought $1.5 million for an unnamed client and between $15 million and $25 million for him and an associate to conduct an internal investigation of Nike, according to the documents. Prosecutors described the effort, which played out largely over the past week, as a “multi-million extortion scheme.”
Minutes before he was arrested, Avenatti posted on Twitter that he was about to disclose a “major high school/college basketball scandal.”
Federal prosecutors in Los Angeles separately revealed Monday that they had charged Avenatti with embezzling a client’s money to pay his own expenses and defrauding a bank by using a fake tax return to obtain loans, a scheme they said had been going on for considerably longer.
Avenatti is charged with embezzling more than $1 million from a client in order to pay his own expenses and debts — as well as those of his coffee business and law firm, according to the 197-page complaint. He also is accused of defrauding a bank by using phony tax returns to obtain millions of dollars in loans.
Prosecutors outlined an elaborate scheme in which Avenatti sought three loans from a Mississippi bank in 2014 by allegedly inflating his income by $5.2 million and falsely reporting that he paid $2.8 million in federal taxes to the IRS during the two preceding years. At the time he declared the tax payments to the bank, prosecutors asserted that Avenatti had made no tax payments for those years and owed the IRS about $850,000.
Avenatti is the combative Los Angeles lawyer who represented pornographic actress Stormy Daniels in a lawsuit over what she said was a bid by Trump during his campaign to prevent her from speaking about having sex with him. Federal prosecutors in New York ultimately determined that the payment had been an illegal contribution from Trump’s lawyer, Michael Cohen, to the president’s campaign, creating one of a handful of criminal investigations centered around Trump and his associates.
As his profile rose, Avenatti publicly flirted with the idea of running for president himself.
Daniels, whose real name is Stephanie Clifford, said she terminated Avenatti’s services more than a month ago after he dealt with her “extremely dishonestly.”
In the Nike case, Avenatti negotiated a $1.6 million settlement for a client but then provided the client a bogus settlement agreement, according to court documents. Prosecutors 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.
Avenatti also allegedly defrauded a bank in Mississippi by supplying it false tax returns to obtain three loans totaling $4.1 million for his law firm and coffee business in 2014.
“A lawyer has a basic duty not to steal from his client,” Los Angeles U.S. Attorney Nick Hanna said. “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.”
IRS special agent Ryan Korner characterized Avenatti’s alleged actions as “elaborate schemes that have no purpose other than to mislead others and defraud both their clients and federally insured financial institutions.”
“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,” Korner said.
If convicted on the charges in Los Angeles, Avenatti faces up to 50 years in federal prison, though few defendants generally receive the maximum punishment.
Neither Avenatti nor Nike immediately replied to requests to comment.
Following Avenetti’s court appearance on the New York charges, he will be brought to a federal court in Santa Ana, Calif., to face the California charges.
In the Nike case, prosecutors charged that Avenatti said he was representing an unnamed Amateur Athletic Union basketball coach who had evidence the shoemaker had made payments of families of several high-school basketball players, according to the court documents. He threatened to reveal that information publicly, which he said would hurt Nike’s market value. The threat came before a Nike quarterly earnings call March 21, according to the documents.
“You guys know enough know now to know you’ve got a serious problem. And it’s worth more in exposure to me to just blow the lid on this thing,” Avenatti told Nike, according to a transcript in the court records of the profanity-laced call March 20. “A few million dollars doesn’t move the needle for me.”
Avenatti had scheduled a meeting with Nike’s lawyers on Monday to give them a final opportunity to meet his demands, prosecutors said. He was arrested outside the lawyer’s office.
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