Michael Avenatti pleads not guilty to defrauding former client Stormy Daniels

Avenatti accused of stealing $300,000 intended for Daniels — in order to make payments on his luxury car

Published May 28, 2019 4:19PM (EDT)

 (Getty/Frederic J. Brown)
(Getty/Frederic J. Brown)

Michael Avenatti, the silver-tongued attorney who until March represented adult film actress Stormy Daniels in her lawsuits against President Trump, pleaded not guilty Tuesday in Manhattan to accusations that he stole $300,000 intended for his former client.

A grand jury indicted Avenatti on two separate schemes last week: the Daniels-related case, in which he is charged with fraud and aggravated identity theft, and a second matter, in which prosecutors allege he attempted to extort more than $20 million in payments from Nike, the athletic apparel giant.

Avenatti has denied the allegations and said he intends to plead not guilty in both cases. He surrendered to federal authorities early Tuesday morning, according to Assistant U.S. Attorney Robert Sobelma, and was released on a bail package including a $300,000 personal recognizance bond.

Avenatti is accused of diverting cash owed to Daniels for her book advance to pay employees of his law firm and defunct coffee company, Global Baristas, according to court documents. He is also accused of using the money owed to Daniels to make a monthly lease payment on a luxury car and to pay for his dry cleaning.

Avenatti is prohibited from all contact with Daniels, except in the presence of an attorney, as part of the bail conditions set Tuesday.

In the case involving Nike, Avenatti allegedly attempted to extort millions from the company by "threatening to use his ability to garner publicity to inflict substantial financial and reputational harm on the company if his demands were not met," according to the Southern District of New York.

Avenatti allegedly threatened to hold a press conference to announce allegations of misconduct by Nike employees on the eve of the company's quarterly earnings call and the start of the NCAA men's basketball tournament, according to court papers. He said he would do so unless Nike paid him millions of dollars, along with a co-conspirator, to conduct an "internal investigation" that Nike did not request.

He is due to be arraigned in that case later Tuesday afternoon.

Avenatti also faces an unrelated indictment in federal court in Southern California on allegations that he stole millions of dollars from five clients and used a number of shell companies and bank accounts to cover up the theft.

Those allegations include the charge that Avenatti stole from a mentally ill paraplegic client on disability who won a $4 million settlement. The proceeds were wired to Avenatti, who allegedly "drained the entire settlement payment from his law firms' trust account and used portions of the settlement to finance his coffee business or pay personal expenses," the U.S. attorney's office statement said.

Avenatti is also accused of embezzling millions of dollars from other clients, using the money to purchase a private jet, finance his coffee business and pay for his own legal and personal expenses. Avenatti used some clients' money to pay previous clients he had swindled and also paid off "some of his law firm’s bankruptcy creditors, including the IRS," according to the U.S. attorney's office.

Avenatti has also been charged with tax evasion and making false statements during bankruptcy proceedings.

Avenatti's career took off last year when he represented Daniels in her lawsuit to break a confidentiality agreement with Trump that required her to keep quiet about an affair she has claimed they had in 2006. Late last year, Daniels publicly accused Avenatti of unethical conduct. Questions have also surfaced about Avenatti's unpaid debts and various tax liabilities, as well as an arrest last October for allegations of domestic violence, a charge which he has vehemently denied.

Avenatti became one of Trump's most prominent critics, regularly attacking him on cable news programs and on Twitter. He briefly became a media superstar and offered not-so-subtle hints about his political aspirations. At one point, he even considered throwing his hat in the presidential ring to challenge Trump in 2020.

But in California, the celebrity lawyer's business practices had come under scrutiny from the IRS, as well as from a former law partner who has claimed he is owed $14 million by Avenatti and his law firm, which filed for bankruptcy last month.

By Shira Tarlo

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