Beginning of the trial for embezzlement of lawyer Michael Avenatti

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Sentenced Orange County attorney Michael Avenatti “stole” settlement money from several clients to help bail out his law firm from bankruptcy, ward off creditors and spend for himself, said A federal prosecutor to jurors on Wednesday for the defendant’s embezzlement trial, but Avenatti said the government has failed in keeping track of its spending and has done nothing wrong.

Avenatti, who rose to prominence during a dispute with Donald Trump over a nondisclosure agreement between the former president and an adult film actress, won the right on the eve of the trial to stand represent himself in the trial, so he personally made an opening statement to the jury. His lawyer, Dean Steward, assists him as co-counsel in the case.

Avenatti is accused of scamming at least five clients of nearly $ 10 million in settlement funds between January 2015 and March 2019. Earlier this month, Avenatti was sentenced to 30 months in prison for attempting to extort about $ 25 million from Nike, in a case that went to New York.

Avenatti is indicted in an indictment of 36 counts with 10 counts of electronic fraud and failure to file tax returns, eight counts of inadmissibility and payment of taxes withheld in too many, two counts of bank fraud, three counts of misrepresentation in bankruptcy and one count for each aggravated identity theft and false testimony under oath in bankruptcy. But he is currently on trial on just 10 counts of wire fraud, with the remainder of the case to be tried at a later date.

The case revolves around the settlements Avenatti negotiated for clients Geoffrey Johnson, Alexis Gardner, Gregory Barela and Michelle Phan.

Avenatti negotiated a $ 4 million settlement for Johnson, who became paraplegic following a suicide attempt while in the Los Angeles County jail.

“In 2011, Geoffrey Johnson was in a very bad situation,” Assistant US Attorney Brett Sagel told jurors Johnson was “confined to a wheelchair for the rest of his life” and had hired Avenatti to sue in court against Los Angeles. County. Johnson wanted money to buy a special house and a van to help him with his disability, Sagel said.

Avenatti did not notify Johnson of the settlement and deposited the money into an attorney-client account and “spent all that money on himself and his businesses,” Sagel alleged.

“You will learn that Geoffrey Johnson was the first of several clients” to suffer the same fate, Sagel told the jury. “In each of them, he stole all or part of their money.”

In Johnson’s case, Avenatti sent him payments ranging from $ 1,000 to $ 1,900 and paid rent at various assisted living facilities for Johnson which the attorney said were “advances” on the settlement, according to Johnson. prosecutors.

Avenatti tricked Johnson into telling him the county would not be making lump sum payments, which they did in this case, and then suspended him for years, claiming the settlement had not yet been ‘finalized’, Sagel said.

Two years after the settlement, Avenatti told Johnson he could pay for a house in “cash” but then delayed buying the house with “excuse after excuse” until he tried to buy a house with a loan first in one’s own name and then on behalf of the client, Sagel alleged.

On March 22, 2019, at a public hearing in which Avenatti was accused of stealing Johnson’s settlement money, he went to the client’s home and presented him with more documents to sign for receive his settlement money, Sagel said.

Avenatti also cheated on client Alexis Gardner in his January 2017 deal with ex-boyfriend Hassan Whiteside of the Sacramento Kings as they ended their relationship, Sagel claimed.

According to the prosecutor, Gardner was “essentially homeless” when she hired Avenatti, who negotiated $ 3 million for her in mediation. Avenatti did not tell him the “real terms” of the settlement and “falsely” told him that Whiteside would pay him $ 15,000 per month for the next eight years when in fact he agreed to pay $ 2.75 million. dollars upfront with the rest by November. January 1, 2020, said Sagel.

Instead of handing the money over to his client, Avenatti kept it to himself, Sagel said.

“The accused simply stole the $ 2.75 million and used it for himself and to buy a private plane and pay for business expenses,” the prosecutor said.

When Gardner repeatedly followed up, saying she hadn’t received her monthly payment, Avenatti texted her back that he would solve it, according to Sagel. In one case, he wrote: “Always? … I am there”, according to Sagel. Another time, he texted her, “It’s a problem. Let me find out what’s going on, “and another time he wrote,” I’ll find out what’s going on, “Sagel said.

In total, Avenatti made 11 payments to Gardner for a total of approximately $ 194,000, according to Sagel.

The prosecutor said Avenatti negotiated a settlement for Gregory Barela in December 2017 in an intellectual property dispute with a Colorado-based company, Brock USA LLC. Barela owed an upfront payment of $ 1.6 million in January 2018, followed by three more payments of $ 100,000 each in January 2019, 2020 and this year.

Sagel alleged that Avenatti told Barela that the payments were due in March instead of January of each of those years and that in the meantime he asked her to “top up your credit cards” to start a new business. .

“The defendant did not pay any of the $ 1.6 million to Greg Barela,” alleged Sagel. “The defendant had already spent the money – everything but $ 600.”

When Barela followed up to see when he would be paid, Avenatti responded that Brock USA had not returned the money, Sagel said. At one point, Avenatti started sending “advances” to Barela from April 2018 to November 2018, which amounted to around $ 130,000, the prosecutor said.

Phan, who was another Avenatti client, was the founder of IPSY, a makeup company, and a pioneer “social media influencer,” Sagel said. Avenatti has represented Phan from August 2017, when she wanted to leave IPSY, Sagel said.

Avenatti has negotiated a share buyback agreement for Phan and its commercial director, Long Tran, Sagel said. The first payment was to be $ 27,478,940 of shares, followed later by additional shares worth $ 8,146,288, for a total of $ 35,625,228, Sagel said.

The company wired the $ 27 million into an attorney-client trust account managed by Avenatti in September 2017, the prosecutor said.

The company then wired the remaining $ 8 million to Phan in March 2018, but Avenatti pocketed that money, Sagel said. Avenatti was involved in bankruptcy proceedings for his company and wanted to get out of it, so he took $ 3 million of that money to pay off creditors, including the Internal Revenue Service, the prosecutor alleged.

Avenatti, however, said the evidence in the case would show his law firm was a “David vs. Goliath” deal that represented clients in emergencies and that he was entitled to be paid for various expenses he had prepaid before winning. any first instance settlement or judgment.

“Be clear, no crime has been committed by me and I never intended to steal or defraud customers at all – not last week, not last month, not last year, never “said Avenatti. “I pleaded not guilty for a reason, because I am not guilty.”

Avenatti said on March 31, 2019, investigators met with Johnson and he told special agents he signed the $ 4 million settlement agreement.

“Not only did he sign it, but it was brought to him – by me,” Avenatti said.

The deal came to Johnson while he was staying in an assisted living facility in West Hills that was paid for by Avenatti’s law firm for “a very long time,” the defendant said, telling jurors that the Sagel’s claim that he stole the money was “completely false”.

When Avenatti found out Gardner was living in his car, hoping the security of a West Hollywood grocery store wouldn’t notice her and force her to leave, he was “horrified” and made sure “she had. a place to lay your head ”. said the lawyer. He said these expenses have come out of the pockets of lawyers handling their clients’ cases.

He alleged that Barela had “a lot of criminal history” for “defrauding people”, and asked Avenatti’s company to perform a number of assignments outside of the Block case, which resulted in climb the costs.

When he founded his law firm in 2007, “we represented thousands of little guys,” Avenatti said. “We represented the Davids against the Goliaths. We were fortunate enough to do it well. We gave people who didn’t stand a chance a chance to fight.

Avenatti said his civil law firm had to pay all kinds of often “very expensive” fees, such as experts used in testimony, and that it was a bet his lawyers would win a settlement or judgment.

“We took all the risks,” he said. “If the business turned south and there was no payback, the customer would not lose anything. We – I – would lose hundreds of thousands of dollars and in some cases millions of dollars. In many cases, we were trying to make a chicken salad out of chicken scratches. We took cases that no one else would touch because they were too risky. We had the right to be paid our percentage, our fees, our expenses out of pocket.

Avenatti said federal prosecutors, for example, paid their experts $ 500,000 in attorney fees for this case.

Avenatti said the government expert had “failed” to properly account for his company’s expenses and fees.

“It doesn’t add up,” Avenatti said of the government’s claims. “They paid him over half a million dollars to do it right – to do it right – to the dollar. And the evidence will show that he failed.

Avenatti said prosecutors presented a case “plagued by neglect and lack of detail. We will show that it is all smoke and mirrors.

He predicted his acquittal.

“At the end of this matter, I will rise before you again and ask you to find me not guilty because that is exactly what I am,” Avenatti said.

Beginning of the trial for embezzlement of lawyer Michael Avenatti was last modified: July 21, 2021 through Contributing editor

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