Avenatti Assets Probed in Heated Debtor Examination

FILE – In this Thursday, May 10, 2018 file photo Michael Avenatti, is interviewed in New York. (AP Photo/Mark Lennihan, File)

LOS ANGELES (CN) – Attorney Michael Avenatti forced a delay of a debtor’s examination at Los Angeles Superior Court on Friday after he accused a reporter of recording the public hearing meant to evaluate his personal assets to enforce a settlement.

Avenatti berated a Los Angeles Times reporter outside a courtroom for what he called the paper’s unfair coverage of his personal and professional life. He then delayed the examination when he claimed the reporter was recording him with a phone.

“I have not consented to have you record me here. This is a two-party consent state. You’re also in a courthouse and not permitted to record,” said Avenatti. “Did you get permission to record?”

After the hearing resumed, Avenatti revealed he pays $11,000 in rent and has less than $100,000 in his bank accounts.

Previously, Avenatti represented adult film star Stormy Daniels in her efforts to dissolve a hush agreement over an alleged affair with President Donald Trump in 2006.

Attorney Jason Frank sued Avenatti and his former Newport Beach law firm Eagan Avenatti in Los Angeles Superior Court this past May over a missed $2 million payment that was owed as part of a settlement of a lawsuit. In the suit, Frank claimed Avenatti and the firm owed him millions for unpaid work as an independent contractor.

Following the filing of that suit, U.S. Bankruptcy Judge Catherine Bauer granted a $10 million judgment Frank sought. Bauer barred the public from the courtroom during that proceeding as Avenatti disclosed his law firm’s assets and debts.

This past October, a Los Angeles Superior Court judge ordered Avenatti to pay $4.85 million to Frank that he personally guaranteed. Frank has since accused Avenatti of hiding assets by diverting legal fees from the former law firm Eagan Avenatti to a new law firm, Avenatti and Associates. Frank has also asked a federal judge to appoint a receiver to seize Eagan Avenatti’s assets, including case files and bank accounts, and Avenatti has agreed to the receivership.

On Friday, prior to the debtor’s exam, Avenatti’s attorney Ronald Hodges of Shulman Hodges & Bastian asked the court to close the hearing to protect the interests of third parties, like clients represented by Avenatti.

Hodges accused Frank’s attorney Andrew Stolper of inviting the media to the hearing and making a spectacle of the examination. Stolper then accused Avenatti of delay tactics, including filing for a protective order after court hours the day before the hearing.

Superior Court Judge Edward Moreton Jr. kept the proceedings open to the public.

During the exam Stolper asked Avenatti about his rent, personal expenses, and payments made to debtors from his personal bank accounts and the bank accounts of his former law firm.

At one point during the examination, Avenatti said he would not answer how many people worked for his new law firm.

Hodges accused Stolper of asking questions unrelated to Avenatti’s assets and Moreton was called back into the chambers to hear the objection.

“They don’t need to accept your version of events. It’s discovery,” said Moreton. “He’s entitled to conduct broad discovery.”

When asked again, Avenatti said there were four to five employees at the law firm but said he didn’t remember who loaned the firm money that paid his employees.

In court documents, Frank claimed Avenatti transferred collected attorney fees into separate bank accounts to avoid having to pay his debtors.

When asked about payments and fees sent to his law firm, Avenatti said, “Every payment I have collected has been proper. Are you here to represent your client or are you here to try and embarrass me?”

Often Avenatti said he could not recall when companies or entities he owned were created. He also said other assets were now the property of his soon-to-be ex-wife.

Stolper asked about limited liability companies owned by Avenatti, including one that operated a racing team and another entity, Passport 420, that owned Avenatti’s Honda jet airplane.

The attorney also asked Avenatti if Stormy Daniels ever owed Passport 420 money, which Avenatti said was privileged information though he later added she owed the company for travel expenses.

During the exam, Stolper asked, “Mr. Avenatti, do you have a job,” to which Avenatti responded “Don’t I work for you and Mr. Frank” before adding: “My job is to advocate on behalf of my clients.”

He said he has no paying clients and is currently representing women who claim they were sexually abused by R&B singer R. Kelly.

Also Friday and in the same courthouse, a judge awarded Avenatti $12,500 in attorney’s fees in a separate case. Avenatti had asked for about $68,000. 

Frank asked the court to award him the fees but Moreton told him to file a motion for the money. Avenatti is scheduled to appear in federal bankruptcy court on May 8 over debts owed to creditors, including Frank.

Before the two lawsuits Stormy Daniels, real name Stephanie Clifford, filed against Trump were thrown out of court, Avenatti became a regular fixture on cable news shows as he advocated for his client and publicly accused Trump’s former attorney Michael Cohen of arranging the $130,000 in hush money paid to Daniels ahead of the 2016 presidential election.

That payment and another to former Playboy playmate Karen McDougal became the focus of federal prosecutors in the Southern District of New York looking into possible violations of campaign finance law by the Trump campaign.

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