High profile Los Angeles attorney Michael Avenatti was arrested by federal law enforcement officials in a wire fraud and bank fraud case, the U.S. attorney's office said Monday.
The extortion charge is separate from another federal case out of Los Angeles, where he is accused of embezzling a client's money "in order to pay his own expense and debts" and of "defrauding a bank in Mississippi," prosecutors said.
The U.S. attorney's office said in a press release that details about the arrest would come at 11 a.m. PT at a news conference in Los Angeles. Avenatti is due to be presented in federal court on Monday.
Avenatti gained recognition when he represented adult film actress Stormy Daniels in her public war with President Donald Trump and his former lawyer Michael Cohen.
In a statement from the United States Attorney for the Southern District of New York, prosecutors accused Avenatti, 48, of "attempting to extract more than $20 million in payments from a publicly traded 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."
The charges were revealed less than an hour after Avenatti scheduled a press conference to discuss purported claims against Nike. An FBI agent said in the complaint in New York that Avenatti had threatened to hold a press conference on the eve of Nike's quarterly earnings call to announce "allegations of misconduct by employees of Nike."
The criminal complaint filed in New York against Avenatti says he "devised a scheme to extort a company by means of an interstate communication by threatening to damage the company's reputation if the company did not agree to make multi-million dollar payments to Avenatti and [co-conspirator], and further agree to pay an additional $1.5 million to a client of Avenatti's."
According to CNBC, the complaint says that last Wednesday, Avenatti and a cooperating witness spoke on the phone with lawyers for Nike, "during which Avenatti stated, with respect to his demands for payment of millions of dollars, that if those demands were not met 'I'll go take ten billion dollars off your client's market cap ... I'm not f—ing around.'"
In the Los Angeles case, Avenatti is accused of negotiating a $1.6 million settlement for a client in a civil case, but then giving the client "a bogus settlement agreement with a false payment date of March 10, 2018," according to the U.S. Attorney's Office in Los Angeles.
It added 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."
Prosecutors said that the attorney continued to conceal that the payment had already been received when the client asked where the money was after the fake March 2018 deadline passed.
Earlier this month, Avenatti's law firm, Eagan Avenatti, filed for bankruptcy protection — making it the second time in as many years the firm has sought court protection from its creditors.
Last month, Jason Frank, a former lawyer at Avenatti's firm, filed court papers accusing Avenatti of hiding millions of dollars from the court that oversaw its previous bankruptcy.
"A lawyer has a basic duty not to steal from his client," said U.S. Attorney for Los Angeles 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."
The phony tax returns pertain to a bank in Mississippi, which the L.A. U.S. Attorney's Office says received false tax returns from Avenatti in order to obtain three loans totaling $4.1 million for his law firm and coffee businesses in 2014.0comments
He allegedly claimed to have paid millions of dollars in income taxes despite never having filed personal income tax returns for 2011, 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," the U.S. Attorney's Office said. "Avenatti also submitted a fictitious partnership tax return for his law firm."