SANTA ANA, Calif. (CN) – A federal grand jury returned a 36-count indictment against attorney Michael Avenatti on Thursday, adding to bank and wire fraud charges filed last month alleging he stole millions from clients, lied on his income tax returns and tried to hide assets from the federal government.
The U.S. Attorney’s Office says Avenatti stole over $12 million in settlements from several clients, using their money to finance his coffee company, a racing team and a $5 million Honda jet he co-owned. The jet was seized Wednesday, according to U.S. Attorney Nick Hanna.
Prosecutors say Avenatti stole a $4 million settlement a client received from Los Angeles County in January 2015. The client, who became a paraplegic after the county violated his constitutional rights, never saw any of the money. Instead, Avenatti used the settlement to fund his now-defunct coffee business and to pay his personal expenses – and then concealed that he received the money, prosecutors say.
Avenatti offered periodic advances of the settlement in about $2,000 increments and paid the client’s rent in an assisted living facility, according to the indictment.
While Hanna declined to characterize what Avenatti is accused of as a Ponzi scheme, he said it fits the concept of one.
“Taking money from one scheme and using it to lull clients, string them along and to prevent them from going to authorities and taking money from different pots,” Hanna said.
Of the charges Avenatti faces, Hanna said: “All the crimes were linked to one another. They were used to further other crimes. Typically in payments that were used to string along victims so as to prevent Mr. Avenatti’s financial house of cards from collapsing.”
Avenatti, 48, was arrested last month in the Southern District of New York on extortion charges related to what prosecutors say was a scheme to shake down Nike for $20 million. The same day, prosecutors filed the initial fraud charges in the Central District of California.
The latest indictment by the federal grand jury expanded on the Internal Revenue Service’s investigation of Avenatti, which began in 2016. The IRS believes Avenatti embezzled millions of dollars in settlement payments from clients, did not file income tax returns and did not pay millions in taxes.
Prosecutors also say Avenatti lied to receive a roughly $4 million bank loan and tried to hide his assets during bankruptcy proceedings. Investigations into Avenatti’s finances began in 2016 when the IRS was looking into Tully’s Coffee, the now-defunct coffee chain Avenatti co-owned. Further, Avenatti lied to an IRS officer, opened a new bank account to receive funds related to credit card transactions for his coffee company to hide his assets during an audit, according to the indictment.
Avenatti also did not pay employee income taxes at the coffee chain, according to the indictment.
The federal investigations of Avenatti began long before he entered the national spotlight representing adult film star Stormy Daniels in her lawsuit against President Donald Trump.
Avenatti took to Twitter on Thursday to proclaim his innocence.
“Any claim that any monies due clients were mishandled is bogus nonsense,” he tweeted. “I intend to fully fight all charges and plead NOT GUILTY. I look forward to the entire truth being known as opposed to a one-sided version meant to sideline me.”
Avenatti is scheduled to appear later this month for arraignment. He faces 10 counts of wire fraud, four bankruptcy fraud charges, 19 tax-related offenses and two counts of bank fraud.
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