“Today a unanimous jury found Michael Avenatti guilty of misusing his client’s information in an effort to extort tens of millions of dollars from the athletic apparel company Nike.  While the defendant may have tried to hide behind legal terms and a suit and tie, the jury clearly saw the defendant’s scheme for what it was – an old fashioned shakedown.”

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the indictment today of MICHAEL AVENATTI on fraud and aggravated identity theft charges.  As alleged, AVENATTI used misrepresentations and a fraudulent document purporting to bear his client’s name and signature to convince his client’s literary agent to divert money owed to AVENATTI’s client to an account controlled by AVENATTI.  AVENATTI then spent the money principally for his own personal and business purposes.  The fraud and aggravated identity theft case is assigned to U.S. District Judge Deborah Batts of the Southern District of New York.

AVENATTI was separately indicted today on extortion charges, which were the subject of a previous Complaint and arrest of AVENATTI, relating to his alleged attempt to extract more than $20 million in payments from Nike, Inc., 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.  That case is assigned to U.S. District Judge Paul Gardephe of the Southern District of New York.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Michael Avenatti abused and violated the core duty of an attorney – the duty to his client.  As alleged, he used his position of trust to steal an advance on the client’s book deal.  As alleged, he blatantly lied to and stole from his client to maintain his extravagant lifestyle, including to pay for, among other things, a monthly car payment on a Ferrari.  Far from zealously representing his client, Avenatti, as alleged, instead engaged in outright deception and theft, victimizing rather than advocating for his client.”

According to the allegations in the Indictment unsealed today[1]:

From August 2018 through February 2019, AVENATTI defrauded a client (“Victim-1”) by diverting money owed to Victim-1 to AVENATTI’s control and use.  After assisting Victim-1 in securing a book contract, AVENATTI allegedly stole a significant portion of Victim-1’s advance on that contract.  He did so by, among other things, sending a fraudulent and unauthorized letter purporting to contain Victim-1’s signature to Victim-1’s literary agent, which instructed the agent to send payments not to Victim-1 but to a bank account controlled by AVENATTI.  As alleged, Victim-1 had not signed or authorized the letter, and did not even know of its existence.

Specifically, prior to Victim-1’s literary agent wiring the second of four installment payments due to Victim-1 as part of the book advance, AVENATTI sent a letter to Victim-1’s literary agent purportedly signed by Victim-1 that instructed the literary agent to send all future payments to a client trust account in Victim-1’s name and controlled by AVENATTI.  The literary agent then wired $148,750 to the account, which AVENATTI promptly began spending for his own purposes, including on airfare, hotels, car services, restaurants and meal delivery, online retailers, payroll for his law firm and another business he owned, and insurance.  When Victim-1 began inquiring of AVENATTI as to why Victim-1 had not received the second installment, AVENATTI lied to Victim-1, telling Victim-1 that he was still attempting to obtain the payment from Victim-1’s publisher.  Approximately one month after diverting the payment, AVENATTI used funds recently received from another source to pay $148,750 to Victim-1, so that Victim-1 would not realize that AVENATTI had previously taken and used Victim-1’s money.

Approximately one week later, pursuant to AVENATTI’s earlier fraudulent instructions, the literary agent sent another payment of $148,750 of Victim-1’s book advance to the client account controlled by AVENATTI.  AVENATTI promptly began spending the money for his own purposes, including to make payments to individuals with whom AVENATTI had a personal relationship, to make a monthly lease payment on a luxury automobile, and to pay for airfare, dry cleaning, hotels, restaurants and meals, payroll, and insurance costs.  Moreover, to conceal his scheme, and despite repeated requests to AVENATTI, as Victim-1’s lawyer, for assistance in obtaining the book payment that Victim-1 believed was missing, AVENATTI led Victim-1 to believe that Victim-1’s publisher was refusing to make the payment to the literary agent, when, as AVENATTI knew, the publisher had made the payment to the literary agent, who had then sent the money to AVENATTI pursuant to AVENATTI’s fraudulent instructions.

*                *                *

AVENATTI, 48, of Los Angeles, California, is charged in the fraud and aggravated identity theft indictment with one count of wire fraud, which carries a maximum penalty of 20 years in prison, and one count of aggravated identity theft, which carries a mandatory term of imprisonment of two years in addition to the sentence imposed for the wire fraud charge. 

AVENATTI is charged in the extortion indictment with one count of conspiracy to transmit interstate communications with intent to extort, which carries a maximum penalty of five years in prison, one count of conspiracy to commit extortion, which carries a maximum penalty of 20 years in prison, one count of transmission of interstate communications with intent to extort, which carries a maximum penalty of two years in prison, and one count of extortion, which carries a maximum penalty of 20 years in prison.  

The maximum potential sentences in both cases are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Mr. Berman praised the work of the FBI and the Special Agents of the United States Attorney’s Office for the Southern District of New York, and noted that the investigation is ongoing.

The cases are being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Matthew Podolsky, Robert L. Boone, and Robert B. Sobelman are in charge of the prosecutions.

 



[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the arrest today of MICHAEL AVENATTI on federal extortion and interstate threat charges.  As alleged, AVENATTI, an attorney, attempted 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.  AVENATTI was simultaneously arrested on separate charges brought by the U.S. Attorney’s Office for the Central District of California.  AVENATTI will be presented today in Manhattan federal court before U.S. Magistrate Judge Katharine H. Parker.   

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Avenatti used illegal and extortionate threats for the purpose of obtaining millions of dollars in payments from a public company.  Calling this anticipated payout a retainer or a settlement doesn’t change what it was – a shakedown.  When lawyers use their law licenses as weapons, as a guise to extort payments for themselves, they are no longer acting as attorneys.  They are acting as criminals, and they will held responsible for their conduct.”

FBI Assistant Director in Charge William F. Sweeney Jr. said:  “As alleged, Michael Avenatti approached Nike last week with a list of financial demands in exchange for covering up allegations of misconduct on behalf of the company.  The lofty price tag included a $1.5 million payoff for Avenatti’s client and upwards of tens of millions of dollars for the legal services of his firm – services Nike never requested. This is nothing more than a straightforward case of extortion.  In the event anyone needs to be reminded, this type of behavior is illegal and it will not be tolerated – especially when committed by a lawyer who is supposed to use his license to practice law, not to willfully violate it.”

According to the allegations in the Complaint unsealed today[1]:

Background to the Extortion Scheme 

In a scheme that unfolded in less than a week, AVENATTI and a co-conspirator not named as a defendant in the Complaint (“CC-1”) used threats of economic and reputational harm to extort NIKE, Inc. (“Nike”), a multinational corporation engaged in, among other things, the marketing and sale of athletic apparel, footwear, and equipment.  Specifically, AVENATTI threatened to hold a press conference on the eve of Nike’s quarterly earnings call and the start of the annual National Collegiate Athletic Association (“NCAA”) men’s basketball tournament at which he would announce allegations of misconduct by employees of Nike.  AVENATTI stated that he would refrain from holding the press conference and harming Nike only if Nike made a payment of $1.5 million to a client of AVENATTI’s in possession of information damaging to Nike (“Client-1), and further agreed to “retain” AVENATTI and CC-1 to conduct an “internal investigation” – an investigation that Nike did not request – for which AVENATTI and CC-1 demanded to be paid, at a minimum, between $15 and $25 million.  Alternatively, and in lieu of such a retainer agreement, AVENATTI and CC-1 demanded a total payment of $22.5 million from Nike to resolve any claims Client-1 might have and additionally to buy AVENATTI’s silence.

The March 19 Meeting With Avenatti

As alleged, AVENATTI first met with representatives of Nike last Tuesday, March 19, 2019, in New York, New York.  At that meeting, AVENATTI claimed to represent a coach of an amateur youth travel basketball team sponsored by Nike, i.e., Client-1.  AVENATTI claimed the team coached by Client-1 had recently lost its sponsorship with Nike, one worth approximately $72,000 a year, and that his client had information that Nike employees had been engaged in illicit payments to the families of high school student athletes.  AVENATTI further stated that he planned to hold a press conference the next day announcing allegations of misconduct at Nike, and made clear that he had approached Nike now because he knew that the annual NCAA tournament – an event of significance to Nike and its brand – was about to begin, and further because he was aware that Nike’s quarterly earnings call was scheduled for March 21, 2019, thus maximizing the potential financial and reputational damage his press conference could cause to Nike.

AVENATTI further stated that he would refrain from holding that press conference and damaging Nike if Nike agreed to two demands: (1) Nike must pay $1.5 million to Client-1 as a settlement for any claims Client-1 might have regarding Nike’s decision not to renew its contract with the team coached by Client-1; and (2) Nike must hire AVENATTI and CC-1 to conduct an internal investigation of Nike, with a provision that if Nike hired another firm to conduct such an internal investigation, Nike would still be required to pay AVENATTI and CC-1 at least twice the fees of any other firm hired.  AVENATTI made clear that Nike would have to agree to accept those demands on a very short time frame.  Nike immediately contacted the United States Attorney’s Office for the Southern District of New York, which launched an investigation in conjunction with the FBI.

The March 20 Call With Avenatti

In a follow-up call on March 20, 2019, recorded by law enforcement, AVENATTI reiterated both his threat, stating, in substance and in part, that unless Nike immediately agreed to his financial demands, he would hold his press conference and, as AVENATTI threatened: “I’ll go and I’ll go take ten billion dollars off your client’s market cap.  But I’m not fucking around.”  During the same call, AVENATTI made clear that his demands included not simply that he and CC-1 be paid for an “internal investigation,” but that he be paid more than $9 million.  As AVENATTI stated during the call:  “I’m not fucking around with this, and I’m not continuing to play games. . . .  You guys know enough now to know you’ve 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.  I’m just being really frank with you.  So if that’s what, if that’s what’s being contemplated, then let’s just say it was good to meet you, and we’re done.  And I’ll proceed with my press conference tomorrow. . . .  I’m not fucking around with this thing anymore.  So if you guys think that you know, we’re gonna negotiate a million five, and you’re gonna hire us to do an internal investigation, but it’s gonna be capped at 3 or 5 or 7 million dollars, like let’s just be done.”

The March 21 Meeting With Avenatti

On March 21, 2019, at the direction of law enforcement, representatives of Nike met again with AVENATTI and CC-1.  During the meeting, AVENATTI reiterated his demand for a

$1.5 million payment for his client and, with respect to his demand to be retained for an internal investigation, AVENATTI stated, in substance and in part, that he and CC-1 would require a $12 million retainer to be paid immediately and to be “deemed earned when paid,” with a minimum guarantee of $15 million in billings and a maximum fee of $25 million, “unless the scope changes.”  When informed by an outside attorney for Nike (“Attorney-1”) that Attorney-1 has never received a $12 million retainer from Nike and never done an investigation for Nike “that breaks $10 million,” AVENATTI responded, in substance and in part, by asking whether Attorney-1 has ever “held the balls of the client in your hand where you could take five to six billion dollars market cap off of them?”

When Attorney-1 asked, in substance and in part, whether Nike could resolve the demands just by paying Client-1, rather than retaining AVENATTI and CC-1, AVENATTI and CC-1 conferred privately.  AVENATTI then stated:  “If [Nike] wants to have one confidential settlement and we’re done, they can buy that for twenty-two and half million dollars and we’re done. . . .  Full confidentiality, we ride off into the sunset. . . .”  AVENATTI then laid out again his threat of harm to Nike, adding that “as soon as this becomes public, I am going to receive calls from all over the country from parents and coaches and friends and all kinds of people – this is always what happens – and they are all going to say I’ve got an email or a text message or – now, 90% of that is going to be bullshit because it’s always bullshit 90% of the time, always, whether it’s R. Kelly or Trump, the list goes on and on – but 10% of it is actually going to be true, and then what’s going to happen is that this is going to snowball . . . and every time we got more information, that’s going to be the Washington Post, the New York Times, ESPN, a press conference, and the company will die – not die, but they are going to incur cut after cut after cut after cut, and that’s what’s going to happen as soon as this thing becomes public.”

Shortly after the March 21, 2019, meeting ended, and consistent with the threats AVENATTI communicated, AVENATTI posted a message to Twitter writing, in reference to an article about a prior prosecution involving employees of a rival company:  “Something tells me that we have not reached the end of this scandal.  It is likely far far broader than imagined…”  

*                *                *

AVENATTI, 48, of Los Angeles, California, is charged with one count of conspiracy to transmit interstate communications with intent to extort, which carries a maximum penalty of five years in prison, one count of conspiracy to commit extortion, which carries a maximum penalty of 20 years in prison, one count of transmission of interstate communications with intent to extort, which carries a maximum penalty of two years in prison, and one count of extortion, which carries a maximum penalty of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Mr. Berman praised the work of the FBI and the Special Agents of the United States Attorney’s Office for the Southern District of New York, and noted that the investigation is ongoing.

The case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Matthew Podolsky, Robert L. Boone, and Robert B. Sobelman are in charge of the prosecution.

 



[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.

There will be a press conference today at 2:30 p.m. to announce charges against attorney Michael Avenatti for 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 press conference will be livestreamed on Facebook @USAOSDNY.  Relevant documents are attached.

WHO: Geoffrey S. Berman, United States Attorney for the Southern District of New York

          William F. Sweeney, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation                       

WHAT: Press Conference

WHEN: Monday, March 25, 2019 at 2:30 p.m.

WHERE:  U.S. Attorney’s Office, Southern District of New York

             1 St. Andrew’s Plaza

              New York, NY 10007

CONTACT:    James Margolin, Nicholas Biase, Dawn Dearden

(212) 637-2600

NOTE:  Due to construction/renovation of the lobby-level entrance, entry is through the ground floor parking-level entrance.  Please allow extra time for entry and screening.  Please silence all cell phones, PDAs, and pagers before start of press conference.