LOS ANGELES (CBSLA) – Newport Beach attorney Michael Avenatti was arrested Monday on charges of bank fraud, embezzling a client’s money and attempting to extort more than $20 million from athletic equipment giant Nike in cases filed in Santa Ana and New York.
Avenatti, 48, of Century City, was arrested in New York on a two-count felony complaint alleged wire fraud and bank fraud, according to U.S. Attorney Nicola Hanna.
He also was arrested in a separate federal case filed in New York, in which he was accused of threatening to use his ability to get publicity to harm Nike. Prosecutors say he demanded that the apparel company give him $10 million.
If convicted on both charges, Avenatti would face up to 50 years in federal prison.
Less than an hour before he was arrested Monday morning, Avenatti tweeted that he was holding a news conference Tuesday to announce that he had uncovered a college basketball scandal “perpetrated by Nike.”
“This criminal conduct reaches the highest levels of Nike and involves some of the biggest names in college basketball”, Avenatti tweeted.
At a news conference Monday morning, federal prosecutors said Avenatti’s alleged financial crimes funded a “lavish lifestyle” that included more than $200,000 in monthly expenditures and owning a $5 million home in Laguna Beach.
According to prosecutors, 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 criminal complaint alleges 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 inquired about the funds, Avenatti continued to conceal that the payment had already been received, court documents alleged.
Prosecutors say 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.
“A lawyer has a basic duty not to steal from his client,” said U.S. Attorney Nick Hanna. “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.”
Avenatti’s initial court appearance is scheduled for Monday afternoon in New York. He is expected to face the criminal charges in the California case in U.S. District Court in Santa Ana at a later date.
Porn star Stormy Daniels, who was formerly represented by Avenatti, said she was “saddened but not shocked” over his arrest.
In a statement Monday on Twitter, Daniels says she fired Avenatti a month ago after “discovering that he had dealt with me extremely dishonestly,” but wouldn’t elaborate.
Celebrity attorney Mark Geragos was named as a co-conspirator in Avenatti’s alleged extortion of Nike, The Associated Press confirmed Monday afternoon.
(© Copyright 2019 CBS Broadcasting Inc. All Rights Reserved. Wire services contributed to this report.)