The California State Bar filed a lengthy petition Monday to place Michael Avenatti on “involuntary inactive status.” The State Bar also issued a consumer alert on its website warning that Avenatti’s “conduct poses a substantial threat of harm to clients or the public.” Avenatti continues to claim he will be cleared of all wrongdoing.
The State Bar petition lays out the case that Avenatti’s provided false documents to and hid money from a former client named Gregory Barela. Barela hired Avenatti in 2014 to get a settlement in an intellectual property dispute. Avenatti filed a case and won a total settlement of $1.9 million. When Barela went to sign a settlement agreement in December of 2017, the agreement said a payment of $1.6 million would be made in March of 2018. What Barela did not know is that the documents he signed were false. The settlement agreement Avenatti actually reached required the company to pay $1.6 million in January of 2018. Avenatti received that money as planned but didn’t tell his client about it. Barela then spent the rest of 2018 asking Avenatti when the settlement would be paid and, as the year dragged on, suggesting Avenatti sue the company that had (as far as he knew) violated the agreement. Meanwhile, Avenatti kept giving him small “advances” on the money.
A full year later, Barela began shopping around for a $100,000 loan to keep his two businesses going. Avenatti caught wind of it and encouraged him not to pursue it. Instead, he promised he could provide Barela a “loan” with interest. Meanwhile, Avenatti was set to collect another payment of $100,000 from Barela’s settlement in January of 2019. Finally, Barela hired another attorney to sue the company which (as far as he knew) had refused to make the settlement payment. His second attorney quickly found out the bulk of the settlement ($1.6 million) had already been paid to Avenatti.
The site Law & Crime provided this summary of the allegations:
(1) on December 28, 2017, respondent provided Mr. Barela with a fabricated settlement agreement;
(2) between January 5, 201 8, and March 14, 201 8, respondent concealed the status 0f Mr. Barela’s settlement funds and intentionally and dishonestly misappropriated nearly $840,000 of Mr. Barela settlement funds for respondent’s own personal use;
(3) between March 10, 201 8, and November 201 8, respondent repeatedly responded to Mr. Barela’s inquiries concerning the status of his settlement funds with lies and evasions;
(4) respondent never provided Mr. Barela with an accounting of Mr. Barela’s settlement funds despite Mr. Barela’s multiple requests; and
(5) to date, respondent still owes Mr. Barela approximately $710,000.
As Fox News points out, this isn’t the only alleged fraud case Avenatti is facing:
Avenatti has separately been arraigned on charges that he stole nearly $300,000 from adult film actress Stormy Daniels, the client who rocketed him to national prominence. He was also arraigned on charges that he tried to extort up to $25 million from athletic apparel giant Nike by threatening to expose claims that the shoemaker paid off high school basketball players to steer them to Nike-sponsored colleges.
In the Nike case, Avenatti is charged with one count of extortion, one count of sending interstate communications with intent to extort and two counts of conspiracy. In the Stormy Daniels case, he is charged with one count of wire fraud and one count of aggravated identity theft.
If Avenatti had been successful in getting several million dollars out of Nike he might have been able to pay back the money he (allegedly) took from these other clients. It’s worth remembering that his threat against Nike was premised on his ability to leverage his celebrity to “take ten billion dollars off” the company’s value by badmouthing them unless they agreed to his terms. Where did Avenatti’s celebrity come from? Primarily from CNN and other networks that had him on TV constantly to talk about Stormy Daniels and President Trump. The anti-Trump media gave this guy the juice to attempt extortion. Funny you don’t see much deep reflection on that from the networks or from other media outlets. I suspect if Fox News had propped up an anti-Obama talking head who was stealing from clients and using his celebrity to attempt extortion it would be a much bigger story.
Finally, here’s Avenatti’s claim he’ll be exonerated:
Reached by Fox News late Monday, Avenatti responded, “The action by the CA State Bar is nothing more than a ‘pile-on’ and was entirely expected in light of the pending charges. I offered to cooperate with the Bar and instead they decided to issue a press release as a stunt. I look forward to being fully exonerated by the facts.”
If you read even a portion of the State Bar document, it’s very hard to see how Avenatti is going to square that circle.