Suspended California lawyer Michael John Avenatti, who at one time eyed a presidential bid, is now a prison inmate following his convictions in federal courts. Here are events this year, in descending order:
•Oct. 25: Assistant U.S. Attorneys Brett A. Sagel and Ranee A. Katzenstein of the Central District of California filed a 52-page position paper in the U.S. District Court asking that Avenatti be sentenced next Monday to 17 years and six months in prison—if he owns up to his misdeeds—on four counts of wire fraud and one count of obstructing the due administration of the internal revenue laws. The latter charge relates to an effort to cheat the government out of about $5 million. The government reckons the total loss to victims to be $12,350,000.
It asks that the time be served consecutively to other sentences and, though Avenatti now claims to be penniless, that restitution be ordered in the amount of $10,838,908—$7,631,764 to defrauded clients and $3,207,144 based on money owed the Internal Revenue Service.
Avenatti on June 16 pled guilty. The Department of Justice announced after the plea that it would not pursue 31 remaining counts of wire-, bank-, and tax-fraud.
The memorandum of points and authorities filed on Tuesday says:
“Although the details pertaining to each of the four clients underlying the charges in the indictment differ, the general pattern was the same. Defendant would lie about the true terms of the settlement agreement he had negotiated for the client, conceal the settlement payments that the counterparty had made, secretly take and spend the settlement proceeds that belonged to the client, and lull the client into not complaining or investigating further by providing small "advances" on the supposedly yet-to-be paid funds. Through this multi-year fraudulent scheme, defendant stole millions of dollars from his clients.
“Defendant was also a tax cheat.”
The memorandum goes on to say:
“Defendant's scheme to defraud his clients was cruel—often reducing those clients to begging for needed funds and making them feel beholden to him when he ‘advanced’ or ‘loaned’ them funds that were, in fact, the clients' own money; callous—blaming and disparaging the supposedly derelict counterparties for the ‘missing’ money that defendant himself had stolen; and calculating—with defendant exploiting his knowledge of the legal system to conceal his thefts by falsely telling his victims that the settlements were confidential and dire consequences would follow if they discussed their cases with anyone other than defendant.”
It adds that his “tax fraud scheme was massive, resulting in losses to the federal treasury of over $3.2 million from just the failure to pay payroll taxes” for his investment firm “and harming hundreds of his employees whose payroll taxes he stole” The memorandum comments:
“There was no excuse for defendant's criminal conduct, which was motivated solely by arrogance and greed.”
It declares:
“[I]f defendant accepts responsibility for his conduct, the government submits that a sentence of 210 months (consecutive to any previously imposed sentences) is appropriate and necessary to achieve the goals of sentencing in this case. In the event that defendant does not accept responsibility for his offenses, the government recommends that a higher sentence be imposed.”
By contrast, the Probation Office—noting Avenatti’s “stable work history as an attorney” and being “a devoted father to his children”—has recommended a sentence of 12.6 years in prison, with five of those years to run concurrently with terms imposed in federal court in New York.
Avenatti will be sentenced by Senior Judge James V. Selna.
•Sept. 27: U.S. District Court Judge Jesse Furman of the Southern District of New York ordered Avenatti to pay $148,740 to his former client Stephanie Clifford—known as “Stormy Daniels”—as restitution.
Avenatti was sentenced by Furman on June 2 to four years in prison by Furman on fraud and aggravated identity theft counts in connection with cheating Daniels out of nearly $300,000. The judge said at the sentencing hearing that Avenatti applied “his intelligence and formidable legal skills, not for good, not for his clients’ interest, but for his own.” He said the defendant had been “brazenly lying to and stealing from” his clients, then “defaming them, both privately and publicly, when they had the audacity to confront him for his crimes.”
He was convicted of the charges on Feb. 4.
Avenatti pilfered money from Daniels that was an advance in connection with her book, “Full Disclosure,” in which she tells of her affair with then-President Donald Trump. Avenatti forged her signature on a letter to her literary agent, directing that payments be sent to a bank account he controlled. Avenatti represented himself in the proceeding.
Furman ordered that debts be paid to natural persons in preference to corporations—in particular, Nike, from which he attempted to extort funds.
•July 28: Orange Superior Court Judge Walter F. Schwarrm ordered that a default judgment against Avenatti be entered in the amount of $16,102,467.60. The award was based on a jury’s finding on June 22 that Avenatti wrongfully failed to pay the law firm of Stoll Nussbaum & Polakov APC its share of the $15,335,683.42 in attorney fees paid under the settlement of a case. The money went into Avenatti’s client trust account.
Schwarrm’s award was pursuant to Penal Code §496(c) which provides for a trebling of damages where property has been stolen. The judge declined to award punitive damages, explaining that “there is no evidence regarding the current financial condition” of Avenatti.
•July 21: The Third U.S. Circuit Court of Appeals declined to revive Michael Avenatti's $250 million defamation action against Fox News Network over coverage of his arrest in 2018. Judge Margorie O. Rendell recited:
“Plaintiff-Appellant Michael Avenatti is a celebrity lawyer who rose to public prominence in early 2018 by representing Stephanie Clifford (a/k/a Stormy Daniels), a woman with whom then- President Trump had allegedly had an extra-marital affair. But Avenatti’s freshly minted fame soon took on a different hue when, in November 2018, he was arrested by officers of the Los Angeles Police Department. Given his public profile, his arrest was covered extensively in the media, including by Defendant-Appellee Fox News Network…and the individual Defendant-Appellees, all of whom were on-air personalities for Fox News. Avenatti claims that the Defendants engaged in a ‘purposeful and malicious’ campaign of defamation and slander against him by lying, on air and in print, about the details of his arrest.”
Avenatti sued in state court in Delaware; Fox removed the case to the U.S. District Court for the District of Delaware based on diversity of citizenship; Avenatti then, without leave to do so, added a Californian as a defendant in an effort to deprive the federal court of jurisdiction; Judge Stephanos Bibas dismissed the Californian as defendant, restoring complete diversity; he later dismissed the action based on a lack of a plausible claim.
On appeal, Avenatti argued that once he added the defendant, Bibas was obliged to remand the case to state court, and the District Court lacked jurisdiction from that point on. Rejecting the contention, Rendell wrote:
“We think the District Court chose the correct path. Where, as here, a nondiverse defendant has been added post-removal by amendment as of right, courts may sua sponte consider dropping the spoiler under Rule 21.”
She said that “[i]f the new defendant is dispensable and can be dropped without prejudicing any party,” the court may proceed to decide if the action should be dismissed with prejudice for failure to state a claim.
In past years:
•July 8, 2021: Avenatti was sentenced to two-and-a-half years in prison by U.S. District Court Judge Paul G. Gardephe, also of the Southern District of New York, based on his effort to exact a sum of about $25 million from Nike by threatening to blacken its reputation in litigation if it did not comply. The judge said in imposing the sentence:
“Mr. Avenatti's conduct was outrageous. He hijacked his client's claims and he used those claims to further his own agenda, which was to extort millions of dollars from Nike for himself....[His client] was never more than a convenient pawn for Avenatti, a vehicle for Avenatti to extract millions from Nike. But Mr. Avenatti did more than hijack his client's claims for his own financial gain. He outright betrayed his client....He had become someone who operated as if the laws and rules that apply to everyone else didn't apply to him.”
•July 29, 2019: State Bar disciplinary charges were filed. Avenatti was placed on interim suspension on June 4, 2020 based on his Feb. 14, 2019 conviction in the Nike case.
Disbarment is inevitable.
The lawyer handled a number of high-profile cases, including representation of Daniels—whose actual name is Stephanie Clifford—in her actions against then-President Donald Trump in an effort to skirt a 2016 nondisclosure agreement she signed in connection with a $130,000 pay-off to her for agreeing not to talk publicly of their 2006 affair. Avenatti also handled her action against the then-president for defamation.
In 2018, he took preliminary steps toward launching a presidential bid that year but decided against running.
