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Star Attorney Michael Avenatti Touted Himself As A Protector Of The Little Guy, But Then Came A Dramatic Fall From Grace

Michael Avenatti became a household name going toe-to-toe with President Donald Trump over his alleged affair with adult film star Stormy Daniels, but soon Avenatti would find himself on the wrong side of the law.

By Jill Sederstrom

Michael Avenatti touted himself as a defender of down-trodden, swooping in to save a struggling coffee franchise, securing a rightful settlement for a man left permanently paralyzed and—most famously—going head-to-head with Donald Trump while representing Trump’s alleged mistress and adult film star, Stormy Daniels.

But prosecutors allege that the brash attorney was secretly stealing from those he had pledged to protect, funneling money into his own accounts to pay for the law firm and lavish life he had grown to love, according to Monday’s season 14 premiere of “American Greed” on CNBC.

“Perhaps his heart was in the right place at the beginning,” said Kate Briquelet, a reporter for The Daily Beast who followed attorney’s meteoric rise to fame. “I think he was an adrenaline junkie. I think he thrived on winning. He took it way too far. I think he definitely flew too close to the sun.”

Avenatti was convicted in February 2020 of extortion, attempted extortion and wire fraud after threatening athletic apparel giant Nike that he'd reveal the company’s practice of paying amateur basketball players unless they paid him millions of dollars to keep quiet.

He’s also facing charges in New York for allegedly embezzling $300,000 from Daniels, as well as another three dozen criminal counts in California—including tax evasion, bank fraud and embezzling money from four other clients—while supposedly representing his clients’ best interests.

His fall from grace has been swift, but Avenatti’s law career began full of promise.

“He was an impressive young man,” Avenatti’s former boss Mike Plante told “American Greed.” “A standout. One of those people that you meet and you kind of immediately know this person is going someplace.”

Avenatti graduated number one in his class from George Washington University law school before heading west to Los Angeles to work with Daniel Petrocelli—the attorney who famously won a wrongful death civil suit against O.J. Simpson in 1997.

Avenatti took aim at his own set of celebrities, once suing Trump in a intellectual property theft case connected to “The Apprentice” and settling a defamation case against Paris Hilton.

He soon formed his own law firm, known as Eagan Avenatti, and made headlines after winning a $454 million lawsuit against Kimberly Clark on behalf of hospital workers and patients for allegedly selling defective hospital gowns and other personal protective equipment.

Corrupt Coffee Dealings?

When he swooped in to rescue the Seattle-based coffee chain Tully’s—alongside “Grey’s Anatomy” heart-throb Patrick Dempsey—in 2013 his reputation as an aggressive protector of the little guy seemed to be secured.

“When we heard that Patrick Dempsey was descending from the heavens to help us out, that he and this lawyer from LA were going to swoop in and buy Tully’s … we were very optimistic,” Robert Sifuentez, a former Tully’s store manager, told producers.

But as “American Greed” uncovered, Avenatti’s motives may not have been as altruistic as they appeared.

Just seven months after Dempsey and Avenatti bought the coffee chain, Dempsey abruptly pulled out of the deal saying that Avenatti hadn’t lived up to his promise to put enough cash into the struggling business and instead had saddled the company with high-interest debt.

David Nold, an attorney for Kemper Development, one of Tully’s landlords, said the company stopped paying some of its bills. Nold helped Kemper Development eventually win several judgments against the coffee company for unpaid rent and contractors' liens totaling, $1.1 million, but collecting the money proved to be difficult.

“We would send people down to buy a cup of coffee and write a check for S3.52 because that’s what a tall vanilla latte at Tully’s cost and they would write a check. Why? I wanted to see where that check was going to be deposited,” Nold said, adding that the next day he’d instruct someone to garnish that bank account.

According to Sifuentez, Tully’s employees were instructed to stop taking daily cash deposits to their usual bank and instead were told to deposit the money at another bank, which Sifuentez believed “added to the speculation he was having us take cash to other bank accounts to avoid garnishment.”

Avenatti’s practices also caught the eye of federal prosecutors, who have alleged that he was skimming state and federal tax withholdings from every employee’s paycheck.

“That employer has an obligation to immediately turn that over to the government, there’s no gray area,” Nold said. “You have to turn it over.”

But federal authorities said he owed the IRS a total of $5.2 million and was using multiple bank accounts and shell corporations with different employer identification numbers to make it more difficult to track where the money was going.

Authorities allege he used $2.5 million of the money he owed to the IRS for his own law firm, another $200,000 to pay rent at his Newport beach home, and funneled money to support his racing hobby.  

Without money to support the business, vendors stopped supplying coffee beans and Tully’s stores were eventually forced to close their doors.

“We served coffee for as long as we could,” Sifuentez said. “We served every last bean and then once we were done, then we didn’t know what else to do, other than close the store because no one could get ahold of Avenatti, so we were just like ‘OK, I guess we’ll go home now.’”

In emails to “American Greed,” Avenatti called Sifuentez’s claims “baseless and ridiculous” and said the former manager “know[s] nothing about me or the facts.”

Avenatti said Sifuentez had been fired from the organization for theft—an allegation that Sifuentez told “American Greed” was not true.

Accusations of Embezzlement

As the coffee chain was floundering, Avenatti was finding new-found success as the attorney for Daniels.

Daniels alleged that she had an affair with Trump, a claim the president has denied. However, Trump did agree to pay Daniels $130,000 as part of a non-disclosure agreement between the pair. She kept her silence for a time, but in 2018 she wanted to tell her story.

“Things had changed,” former federal prosecutor Ken White told “American Greed.” “Donald Trump and whether or not he had done wrong things were very much in the news, but she was limited by this hush money agreement.”

For help, Daniels turned to Avenatti, who went on a media blitz to attack the legitimacy of the non-disclosure agreement, arguing that the agreement had never actually been signed by Trump, who allegedly used the alias David Dennison on the document.

Avenatti appeared on cable news more than 250 times, often making brash attacks against the president and his character.

“He became this ubiquitous presence; you couldn’t escape him. Anytime you turn on TV, Michael Avenatti was on. He literally just exploded on the scene,” Briquelet said.

His popularity reached such epic proportions that he began to discuss his own possible bid for the presidency.

But behind the scenes, his law firm was facing financial troubles.

“Unfortunately, what a lot of people do is they get out in front of their skis a lot,” Brian Kabateck, former president of Consumer Attorneys of California, tells “American Greed.” “They have a good month or a good year and they make an awful lot of money and suddenly they have an Italian sports car in their garage.”

Prosecutors allege that Avenatti sought to solve his financial problems through his own clients.

He’s accused of embezzling $300,000 from Daniels, who he'd helped negotiate a book deal.

“When the payments came due for that book deal, instead of giving them to Stormy Daniels, Michael Avenatti took them, put them into his client trust account and paid himself, all the while lulling Stormy into thinking ‘The money is on it’s way, the money is on its way’ when allegedly it had already been paid and spent,” NBC legal analyst Daniel Cevallos said of the federal allegations against him in New York.

In response to the allegations, Avenatti’s attorneys told “American Greed” that Avenatti’s contract with Daniels specifically stated that he would receive a portion of any book deal. They said the attorney is anxious for Daniels “credibility to be tested in trial.”

But, Daniels isn’t the only client Avenatti is accused of taking advantage of. Federal prosecutors in California have also accused him of embezzling money from four clients there, including Geoffrey Johnson, a man who served time in the Los Angeles County Jail for a crime he said he didn’t commit.

While behind bars, Johnson tried to take his own life twice by jumping off a balcony onto the concrete floor below. On the second suicide attempt, Johnson broke his back, severed his spinal cord and became paralyzed from the waist down.

Johnson turned to Avenatti for help in 2012. Avenatti sued Los Angles County for negligence, arguing that the staff allowed him to attempt suicide while he was in full view of the guards.

“Actually, he did a fine job, he recovered a settlement and that’s where things broke down,” Dan Callahan, who represents Johnson now, told “American Greed.”

Callahan said the county issued a $4 million check to compensate Johnson as part of the settlement agreement. But although the check was cashed on Jan. 26, 2015, Johnson did not receive the bulk of the money.

“After getting the check in January of 2015, he told the client several lies,” Callahan said. “He told the client that the money would come in over ten years and be paid quarterly. That was a lie. Mr. Avenatti had the payment within five days. He told Mr. Johnson the settlement would be confidential. He couldn’t tell anybody. That was a lie.”

Callahan said Avenatti withheld the money for four years, continually saying the money was on its way.

“He made periodic payments to Mr. Johnson between $900 and $1900 basically monthly for a total of $124,000 and Mr. Johnson knew no better,” Callahan said. “He believed and trusted Mr. Avenatti.”

Legal counsel for Avenatti said the government’s claims against the attorney are “categorically false.”

“The government fails to account for all the monies that were spent for years by Mr. Avenati supporting Mr. Johnson’s most basic needs,” Avenatti’s lawyers told “American Greed.” “They also fail to account for the enormous out-of-pocket costs of pursuing the case.”

Extorting An Athletic Apparel Giant

While privately Michael Avenatti was struggling financially, publicly he still appeared to be the epitome of success—but that came to a sudden halt when Avenatti was arrested by the FBI and accused of extorting athletic apparel giant, Nike.

Avenatti had been hired by Gary Franklin, who ran the highly successful youth basketball program California Supreme. Franklin built the business with help from corporate sponsor Nike, who allegedly instructed him to give cash to his top players to buy their loyalty with the shoe brand.

“Gary felt uneasy about this from the get-go,” Jeffrey Auerbach, a friend of Franklin, told “American Greed.”

Franklin wanted to blow the whistle on Nike and the pair began to gather evidence to support his claims; and when Adidas executives were arrested for fraud and bribery in September 2017 in a similar scheme, they knew they had to act and reached out to Avenatti.

“Of course, I at the time had seen him on TV and watched him go toe-to-toe with Donald Trump and I was very impressed with his drive and his abilities, so I thought he would be a good choice,” Auerbach said.

Franklin was hoping Avenatti could help him achieve three things: compensation; the firings of the Nike executives involved; and he wanted his team back.

Avenatti told Franklin that he believed he could get a settlement somewhere in the $1 million range and immediately arranged a meeting with Nike’s legal team in New York. But when the meeting took place, it was apparent that Avenatti wasn’t only looking to gain a settlement for his client, he also wanted money for himself.

Avenatti demanded a $1.5 million settlement for Franklin, but also sought an unspecified amount for himself to perform an “internal investigation” into the alleged corruption at Nike.

“It’s not going to be cheap,” he warned, according to notes taken by one of the firm’s associates.

Avenatti believed the initial meeting went well, but what he dien’t realize is that Nike’s legal firm, Boies Schiller Flexner, reached out to the FBI after the meeting took place.

The FBI recorded a call between the law firm and Avenatti the following day, in which Avenatti once again threatened to go to the press if he wasn’t compensated.

“You guys know enough now to know you got a serious problem and it’s worth more in exposure to me to just blow the lid on this thing. A few million dollars doesn’t move the needle for me,” Avenatti said on the call according to “American Greed,” while reiterating that he was not “f---ing around.”

They agreed to meet two days later and this time the FBI has rigged a hidden camera to capture the settlement discussions between Avenatti, Mark Gerago—a defense attorney Avenatti has asked to consult with him—and Scott Wilson, who represented outside counsel for Nike.

Wilson told Avenatti that the $1.5 million settlement for Franklin won’t be a “stumbling block” but he questioned whether there’s a way to avoid paying Avenatti to do the internal investigation—which Avenatti is now demanding to receive up to $25 million for.

Wilson suggested instead that Nike increase the amount of the settlement given to Franklin and Avenatti would be able to get his cut from that, but Avenatti appeared to scoff at the idea.

“I mean, perhaps but why, why would you want to do that?” he said in the recording. “I don’t think it makes any sense for Nike to be paying an exorbitant sum of money to Mr. Franklin in light of his role in this.”

White said it appeared in the recorded conversations that Avenatti was essentially telling Nike that “whatever you pay my client, I get extra money, tens of millions of it and it doesn’t matter what you pay my client.”

That’s where the crime occurred that ultimately brought the brash lawyer down, he said.

On Monday March 25, 2019, when Avenatti arrived at the legal offices, he was arrested by the FBI.

His attorneys argued in court that Avenatti was simply providing the aggressive persona that Franklin and Auerbach wanted.

“Any claim now that Mr. Franklin and Mr. Auerbach did not want Mr. Avenatti to be aggressive with Nike and use his media platform is ridiculous—that’s like hiring Beyonce to perform at a party and then later claiming you didn’t want her to sing and dance,” his legal counsel told “American Greed.”

But a jury would disagree and after two days of deliberation they convicted Avenatti of extortion, attempted extortion and wire fraud.

“After the verdict was read, he looked pretty crestfallen, He didn’t have that cockiness, the trademark Micahel Avenatti cockiness. He looked like he was in disbelief that he had fallen so hard,” Briquelet said.

Avenatti is currently under house arrest as he awaits sentencing for the crimes later this year.

To learn more about cases like Avenatti's, watch “American Greed” on CNBC, Mondays at 10 p.m. ET/PT.

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