Tuesday, April 30, 2019

Michael Avenatti Charged Stealing From Clients & Avenatti Charged With Tax Evasion -Pleads Not Guilty

Los Angeles federal prosecutors had already charged Avenatti in March with embezzling client funds and bank fraud. The 61-page indictment on Thursday includes those charges.

At a press conference in Los Angeles on Thursday morning, U.S. Attorney Nick Hanna said restitution for the alleged victims will be one of the highest priorities for prosecutors.

“As an attorney, holding a client’s money in a trust is one of your duties,” Hanna said. “This is ‘Lawyer 101’ — you don’t steal your client’s money.”

While he said they wouldn’t be specifically contacting the California State Bar, Hanna said he was sure the bar will see the public indictment and “act accordingly” regarding Avenatti’s law license status.

Avenatti’s attorney, Steven J. Katzman, said in a statement that the indictment proves nothing against his client.

“We intend to fully investigate the charges and provide Mr. Avenatti the robust defense he deserves,” Katzman said.

Los Angeles federal prosecutors claim Avenatti defrauded five of his former clients by lying to them about the details of settlements in their favor while using the money for his own ends.

The indictment alleges that:

  1. Avenatti appropriated a $4 million settlement he had negotiated in 2015 for a client who sued Los Angeles County over injuries that left the client a paraplegic.
  2. As to a second client who settled for $3 million over a personal relationship, prosecutors claim Avenatti used $2.5 million from the settlement to buy a private jet in 2017.
  3. A third client was allegedly duped out of money from a $1.9 million intellectual property settlement in 2017. Avenatti put some of those funds towards his Tully's Coffee business, prosecutors claim.
  4. Avenatti is further accused of stealing from two additional clients who were to be paid $35 million minus attorney fees in a corporate stock transaction. Prosecutors claim Avenatti improperly used some $4 million of the funds to pay bankruptcy creditors and other clients with settlements into which he had dipped.
  5. The government alleges Avenatti also used funds from his coffee business to make payments to clients whose settlement funds he had taken.

Meanwhile, Avenatti was stiffing the government on payroll taxes from his coffee business to the tune of $3.2 million between 2015 and 2017, according to the indictment.

When the IRS started inquiring about taxes the business owed in 2016, Avenatti allegedly lied and claimed he was not involved in the business’ finances and did not know it had failed to pay.

He also started having Tully’s employees deposit funds into an account associated with his car racing team to avoid an IRS levy on an account associated with the coffee chain, according to the indictment.

Avenatti is further charged with failing to file personal tax returns between 2014 and 2017, and failing to file returns for his law firms Eagan Avenatti LLP and Avenatti & Associates between 2015 and 2017.

The case is U.S. v. Avenatti, case number 8:19-cr-00061, in U.S. District Court for the Central District of California.

Michael Avenatti pled not guilty in a California federal courtroom April 29, 2018 to a 36-count indictment that includes charges of embezzling millions from five clients and tax evasion, on top of separate charges in New York that he tried to extort $20 million from Nike.

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