Avenatti Indicted for Embezzling Money From Disabled Client

(Bloomberg) -- Celebrity lawyer Michael Avenatti, who made his name as a fierce critic of President Donald Trump, was indicted by a federal grand jury in California on three dozen charges, including a new claim that he stole millions of dollars from a paraplegic client’s settlement.

The indictment moves Avenatti, 48, a step closer to a trial. He was charged in a criminal complaint in Santa Ana, California, on March 25 for stealing a different client’s $1.6 million settlement to cover his own expenses, as well as cheating a Mississippi bank. On the same day, prosecutors in New York accused him of trying to extort millions of dollars from Nike Inc.

Avenatti now faces additional charges including wire fraud, tax violations and lying under oath in a bankruptcy case, as well as claims involving several clients whose settlements he allegedly embezzled after deploying a web of lies.

"Money generated from one set of crimes was used to further other crimes, typically in the form of payments designed to string along victims so as to prevent Mr. Avenatti’s financial house of cards from collapsing," U.S. Attorney Nicola Hanna in Los Angeles said Thursday at a press conference.

"It is lawyer 101," Hanna said. "You do not steal your clients’ money."

Avenatti, who gained notoriety by representing porn actress Stormy Daniels in a lawsuit against Trump, denied the allegations and said the case comes after two decades of representing “Davids vs. Goliaths.”

“Along the way, I have made many powerful enemies,” he said in an emailed statement. “I am entitled to a FULL presumption of innocence and am confident that justice will be done once ALL of the facts are known.” He’s also defending himself on Twitter.

The allegations involving Avenatti’s disabled former client, Geoffrey Ernest Johnson, add an element of depravity to the criminal case. Josh Robbins, a lawyer with Greenberg Gross LLP in Los Angeles, confirmed Johnson is the disabled man described in the indictment. Robbins now represents Johnson.

Avenatti sued the County of Los Angeles on behalf of Johnson, who suffered "severe emotional distress and several physical injuries, including paraplegia," according to the indictment.

The county paid $4 million to resolve the case in January 2015, the U.S. said, but Avenatti hid the money and, over a period of several months, drained the settlement for his own benefit. Avenatti continued to lie to his client through last month, according to the indictment. He allegedly sent Johnson occasional payments of no more than $1,900 and paid the rent for his assisted-living facility, while falsely telling the man that the money was an advance on the settlement, the U.S. said.

Robbins said Johnson was left destitute by Avenatti’s actions and is now cooperating with prosecutors. 

“Mr. Johnson is the victim of an appalling fraud perpetrated by the one person who owed him loyalty and honesty most of all: his own lawyer,” Robbins said in an emailed statement. “Mr. Avenatti stole millions of dollars that were meant to compensate Mr. Johnson for a devastating injury, spent it on his own lavish lifestyle, then lied about it to Mr. Johnson for years to cover his tracks.”

Social Security

Avenatti allegedly tried to cover up the scam by derailing Johnson’s attempt to buy a house and lying to the Social Security Administration about the settlement, resulting in the client losing his Social Security benefits in February, according to the indictment.

Avenatti also allegedly raided another client’s settlement in 2017 to pay $2.5 million for his portion of a jet, prosecutors said.

Avenatti capitalized on how the Stormy Daniels case raised his profile, repeatedly assailing Trump and his former attorney, Michael Cohen. He even floated a possible presidential run.

Avenatti also allegedly defrauded a bank in Mississippi, submitting false tax returns to get three loans for over $4 million in 2014 for his law firm and a company he owns, Global Baristas US LLC.

In New York, Avenatti said last month that the case was pushed by Nike in an attempt to distract attention from what he called its crimes. Avenatti also disputed Nike’s claim that it’s been cooperating with a probe into corruption in college basketball, as Nike said after Avenatti was arrested outside the company’s law firm.

Just before his arrest in New York, the embattled lawyer had posted plans to hold a press conference to unveil a case he claimed would show how “criminal conduct reached the highest levels of Nike.” According to prosecutors, he told lawyers at Boies Schiller Flexner LLP that he’d cancel the event if Nike paid more than $20 million for him and another lawyer to conduct an internal investigation.

Avenatti hasn’t been indicted in New York.

The case is U.S. v. Avenatti, 19-mj-241, U.S. District Court, Central District of California (Santa Ana).

--With assistance from Edvard Pettersson.

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Joe Schneider, Peter Jeffrey

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