Feds Charge Michael Avenatti with Extortion, Embezzlement

Feds Charge Michael Avenatti with Extortion, Embezzlement

At 11:16AM, lawyer Michael Avenatti tweeted about his press conference tomorrow morning, which would cover a high school/prep school scandal that involves Nike.

Only 46 minutes later, a CNN reporter tweeted that the Southern District of New York charged Avenatti for “attempting to extract more than $20M in payments from a publicly traded company by threatening to use his ability to garner publicity to inflict substantial financial & reputational harm on the company if his demands were not met.”

The DOJ also announced Avennati’s arrest on a separate charge of federal bank fraud and wire fraud.

*This is a BREAKING STORY. Will update as information rolls out…

New York

Here is Avenatti’s tweet:

Erica Orden tweet not even an hour later:

NEW: SDNY is charging Michael Avenatti for “attempting to extract more than $20M in payments from a publicly traded company by threatening to use his ability to garner publicity to inflict substantial financial & reputational harm on the company if his demands were not met.”

— erica orden (@eorden) March 25, 2019

The charges include conspiracy to transmit interstate communications with intent to extort, conspiracy to commit extortion, and extortion.

The federal prosecutors wrote in documents that Avenatti and a client claimed “they had evidence that Nike had funneled money to recruits in exchange for their commitments to college teams sponsored by Nike and that they would release them in order to damage Nike’s reputation and market capitalization unless Nike paid them between $15 and $25 million.” The document stated the alleged crime took place this month.

Sources told The Wall Street Journal that Mark Geragos, the attorney for Jussie Smollett, is Avenatti’s co-conspirator.

The complaint states that Avenatti and his co-conspirator met with Nike’s attorneys where they “threatened to release damaging information” if Nike “did not agree to make multi-million dollar payments to them, as well as an additional $1.5 million payment to a client Avenatti claimed to represent.” CNN announced that Geragos is no longer a contributor.

Avennati appeared confident with the scheme because he allegedly told Nike if the company did not do his bidding, “he would ‘go take ten billion dollars off your client’s market cap … I’m not f***ing around.'”

From USA Today:

“Avenatti’s conduct had nothing to do with valid advocacy on behalf of a client or any other kind of legitimate legal work. Instead, Avenatti used illegal and extortionate threats for the purpose of obtaining payments for himself,” said Geoffrey Berman, U.S. attorney for the Southern District of New York. “A suit and a tie doesn’t mask what at its core was an old-fashioned shakedown.”

Prosecutors described the effort, which played out largely over the past week, as a “multimillion-dollar extortion scheme.” The investigation is continuing, and prosecutors said they have not decided whether to charge Avenatti’s associate, who two people familiar with the matter said is Mark Geragos, a celebrity lawyer who represented “Empire” star Jussie Smollett. The people were not authorized to speak publicly.

Nike released this statement:

“Nike will not be extorted or hide information that is relevant to a government investigation. Nike has been cooperating with the government’s investigation into NCAA basketball for over a year. When Nike became aware of this matter, Nike immediately reported it to federal prosecutors. When Mr. Avenatti attempted to extort Nike over this matter, Nike with the assistance of outside counsel at Boies Schiller Flexner, aided the investigation. Nike firmly believes in ethical and fair play, both in business and sports, and will continue to assist the prosecutors.”

At the @SDNYnews presser re: Michael Avenatti and Nike. Here’s the alleged extortion scheme timeline: pic.twitter.com/D1EPCGjghV

— Laken Litman (@LakenLitman) March 25, 2019

U.S. v. Michael Avenatti – Sealed Complaint for Extortion by Legal Insurrection on Scribd

California

The Department of Justice also charged Avenatti with federal bank fraud and wire fraud charges. He faces up to 50 years in prison. From the DOJ:

Attorney Michael Avenatti was arrested today pursuant to a criminal complaint alleging he embezzled a client’s money in order to pay his own expenses and debts — as well as those of his coffee business and law firm — and also defrauded a bank by using phony tax returns to obtain millions of dollars in loans.

Avenatti, 48, of Century City, was arrested today pursuant to a two-count felony complaint charging him with wire fraud and bank fraud. He also was arrested pursuant to a separate federal case filed in New York.

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. The affidavit states that 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.

Avenatti also allegedly 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 affidavit, Avenatti obtained the loans by submitting fabricated individual income tax returns (Forms 1040) for 2011, 2012, and 2013, reporting substantial income even though he had never filed any such returns with the Internal Revenue Service. 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, according to the affidavit. 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. 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, court papers state. The affidavit also alleges that, as part of his loan applications, Avenatti also submitted a fictitious partnership tax return for his law firm.

Nick Hanna, U.S. Attorney for the Central District of California, described Avenatti as “a corrupt lawyer who instead fights for his own selfish interests by misappropriating close to a million dollars that rightfully belonged to one of his clients.”

Hanna called the charges against Avennati “a series of allegations that paint an ugly picture of lawless conduct and greed.”

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