Michael Avenatti. (AP Photo/Mark Lennihan)

Attorney Michael Avenatti is facing criminal charges on both coasts, after prosecutors in Los Angeles and Manhattan unveiled separate indictments accusing the high-profile attorney of attempting to extort athletic apparel giant Nike and multiple financial fraud claims related to embezzlement of a client’s money as well as bank fraud.

Avenatti was arrested early Monday afternoon in Manhattan, a spokesman for the U.S. Attorney’s Office for the Southern District of New York told the Law Journal.

According to Manhattan prosecutors, Avenatti and an unnamed co-conspirator attempted to shake down Nike over allegations of misconduct being lodged by a client of Avenatti. Federal authorities claim that Avenatti and the unnamed co-conspirator met with attorneys for Nike on March 19 in New York.

This included outside counsel from Boies Schiller Flexner, the company confirmed. The co-conspirator was identified as attorney Mark Geragos in news reports. While Geragos has not been charged, he is being represented in the matter by attorney Benjamin Brafman, according to a source with knowledge of the situation.

Los Angeles federal prosecutors charged Avenatti with embezzling from clients and misleading a bank about his income in order to get a loan.

In the alleged extortion scheme, Southern District of New York prosecutors claim Avenatti told Nike representatives that his client, a basketball coach in California, had evidence Nike employees had made payments to top high-school basketball players. The evidence was supposedly similar to the kind that led to recent prosecutions against Adidas in the Southern District.

Avenatti threatened to hold a press conference about the alleged misconduct by Nike ahead of this year’s annual National Collegiate Athletic Association men’s basketball tournament and a quarterly corporate earnings call around the same time, thus maximizing the potential damage to the company, according to prosecutors.

The press conference could be avoided if Nike paid the basketball coach $1.5 million as part of a settlement over claims in an unrelated dispute over a sponsorship deal of the coach’s team, prosecutors claim Avenatti informed the company. Additionally, Avenatti and the co-conspirator would need to be hired to conduct an internal investigation of Nike, and if they hired a different firm, the company would still need to pay the pair of attorneys at least twice the fees of any firm that was hired, prosecutors allege.

In a follow-up call March 20 that law enforcement was monitoring, the attorneys for Nike tried to push back the deadline for deciding about the arrangement. Another call later in the day that was also monitored included Avenatti. On the call, federal authorities claim Avenatti made it clear he was expecting to be paid at least $10 million by Nike to keep the press conference from happening.

“I’ll go and I’ll go take $10 billion dollars off our client’s market cap,” federal authorities quote Avenatti as stating to the attorneys for Nike. “But I’m not fucking around.”

The following day, at an in-person meeting with attorneys for Nike that was recorded, Avenatti allegedly said a $12 million retainer needed to be paid immediately, which would go toward a minimum of $15 million in billings, that could go as high as $25 million ultimately unless, as Avenatti is claimed to have said, “the scope changes.” Avenatti also appeared to suggest that if the company was willing to pay $22.5 million as part of a confidential settlement with his client, he and the co-conspirator would “ride off into the sunset.”

Avenatti had been scheduled to meet again with the Nike attorneys on Monday.

In a statement, U.S. Attorney Geoffrey Berman of the Southern District of New York said that regardless of how Avenatti wanted to characterize the payouts by Nike, it was in reality 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,” Berman said. “They are acting as criminals, and they will held responsible for their conduct.”

In a statement sent by a spokesman, the company acknowledged it was in communication with federal authorities in Manhattan related to the investigation into college basketball payments for over a year. When the company became aware of the current matter, it says it immediately flagged it for federal authorities.

“Nike will not be extorted or hide information that is relevant to a government investigation,” the company statement said. “Nike firmly believes in ethical and fair play, both in business and sports, and will continue to assist the prosecutors.”

In California, Avenatti faces wire and bank fraud charges related to a failed coffee business venture. According to prosecutors in the Central District of California, Avenatti allegedly dodged a $1.6 million settlement with a client over the previous misappropriation of funds to pay for expenses for the operation of Tully’s Coffee stores in California and Washington state. The settlement was due in January 2018, but prosecutors claim Avenatti never actually paid.

Avenatti is further alleged to have submitted false tax returns to a bank in Mississippi in 2014 in order to obtain more than $4.1 million loans for his law firm and coffee business. Avenatti sent the bank tax returns that authorities claim he never actually filed, showing he made tens of millions of dollars between 2011 and 2013, while also paying millions in taxes. Officials say Avenatti still owed the IRS more than $850,000 in back taxes at the time.

In a press conference streamed over Facebook on Monday, Los Angeles US Attorney Nick Hanna noted that Avenatti’s Twitter handle says that he is an “Attorney, Advocate, Fighter for Good.” Hanna said that the allegations in the complaint, however, reveal him to be “a corrupt lawyer who instead fights for his own selfish interests.”

Hanna also made clear the Manhattan and Los Angeles prosecutions were “two completely separate” cases and that they were coordinated for arrest purposes.

Avenatti rose to national prominence for his legal representation of adult film actress Stephanie Clifford, who performed under the name Stormy Daniels, in her claim she was paid thousands of dollars during the 2016 presidential campaign to keep quiet about an earlier sexual affair with Donald Trump. Avenatti rode the visibility in the case to position himself as a public nemesis to Trump and his then-attorney and “fixer,” Michael Cohen.

An attorney for Avenatti could not be immediately reached for comment. Avenatti himself did not respond to a request for comment.

Avenatti is expected to appear U.S. Magistrate Judge Katharine Parker later on Monday.

 

Read the CDCA Complaint:

Read the SDNY Complaint:

Additional reporting by Ross Todd.