SANTA ANA, Calif. (CN) – A federal judge in California ordered embattled attorney Michael Avenatti held without bail on bank and wire fraud charges until he can be transported to New York next week to stand trial on extortion charges there.
Avenatti appeared before U.S. District Judge James Selna on Wednesday in Southern California. Selna found probable cause to believe Avenatti poses an economic danger to the public and denied bail. Avenatti faces 36 counts of mail and bank fraud in the Central District of California. In the Southern District of New York, he faces trial on charges of trying to extort tens of millions of dollars from Nike.
In the U.S. Attorney’s request for an arrest warrant, federal prosecutors argued Avenatti violated his supervised release following his March 2019 arrest on the California charges. Prosecutors believe he has been purchasing numerous cashier’s checks in an effort to evade creditors and forfeiture, and the terms of his release prohibit him from spending or transferring more than $5,000 without notifying pretrial services.
Prosecutors say Avenatti hid a $1 million fee payment to his law firm Avenatti & Associates this past May by transferring the funds into a new bank account he opened the same day he received the money. He then transferred over $700,000 to his ex-wife Carlin, who returned $500,000 which he deposited into another bank account opened later that month, according to prosecutors.
During his appearance before Selna, Avenatti’s attorney H. Dean Steward claimed the government’s actions might be legal but are unfair. He questioned the timing of his client’s arrest.
Steward accused prosecutors of working to collect debt on behalf of Avenatti’s former employee Jason Frank, who is owed a $10 million judgment stemming from the bankruptcy filing of Avenatti’s now defunct law firm Eagan Avenatti.
During the hearing, Selna asked Assistant U.S. Attorney Brett Sagal if Avenatti reported all these transactions to the federal government. Sagal said Avenatti has violated both state and federal law by trying to hide his assets from the people he owes court-ordered money to.
Avenatti does not think his actions are wrong and he will continue to carry out his scheme, said Sagal.
Prosecutors say Avenatti used the money to purchase a Mercedes-Benz and pieces of art, to rent a lavish home and pay for a luxury resort membership – all money that should have gone to his creditors.
Throughout the hearing Avenatti sat quietly, a stark contrast to his outbursts during a California State Bar involuntary inactive status hearing the day before.
Internal Revenue Service agents arrested Avenatti on Tuesday evening after a hearing in the state bar proceeding in which he testified to claims by a former client that he stole a $1.6 million settlement payment.
Prosecutors say Avenatti has many creditors – including two ex-wives – who he’s trying to avoid by transferring large sums of money elsewhere.
Steward told Judge Selna all the financial transactions Avenatti has made since he posted bond were above board and he that even sought legal advice on his transactions.
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