LOS ANGELES—United States District Court Judge James V. Selna ordered today that Stormy Daniels’ ex-attorney Michael Avenatti remain in federal custody for possible violation of his conditions of pretrial release and be transported “forthwith” to New York, where he will stand trial next week.
The judge found there was probable cause Avenatti had committed crimes in violation of the terms of his bond and ordered the embattled celebrity attorney detained without bond. Avenatti will continue to be held in an Orange County jail pending transfer to New York and will remain in custody “for the foreseeable future,” according to Thom Mrozek, a spokesman for the U.S. Attorney’s Office for the Central District of California.
Prosecutors in California say that since Avenatti was released on bond after a not-guilty plea to federal charges in March, he has engaged in a scheme to defraud victims—ranging from former colleagues and clients to two ex-wives—by concealing funds and “structuring” currency transactions to amounts below the $10,000 amount that w0uld automatically trigger reporting by the bank to the government.
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As The Daily Beast first reported, the pugnacious lawyer was arrested by federal authorities on Tuesday evening during an appearance at State Bar Court in Los Angeles, during a disciplinary hearing in which the State Bar of California claimed Avenatti had scammed a client out of hundreds of thousands of dollars.
In New York, Avenatti faces federal charges that he attempted to extort millions out of Nike in order to keep mum on the sports company reportedly paying out high-school basketball players.
“I’ll go take ten billion dollars off your client’s market cap,” Avenatti allegedly threatened Nike’s legal team.
He also faces wire fraud and bank fraud charges in California, over allegedly misappropriating a client’s settlement money. If convicted, he could face decades in prison.
A court filing by the government, which the Santa Ana court unsealed on Wednesday after the arrest, alleges that Avenatti committed a slew of state and federal offenses during the 10 months since he was granted pretrial release in California—including mail fraud, wire fraud, and money laundering. By Judge Selna's estimate, Avenatti engaged in more than 20 cash transactions in excess of $5,000 since he was arraigned in March.
In remanding Avenatti into custody, Judge Selna declared that the former media darling’s release on pretrial bond posed an “economic danger to the community.”
He ruled in favor of federal prosecutors who argued that Avenatti lied to investigators and directed money he was obligated under judicial order to pay to creditors, using it instead to fund a lavish lifestyle that included an $11,000-a-month apartment, expensive artwork and vacations, membership in an exclusive private club, and a luxury car.
Other allegations of fraudulent activity from the court filing include arranging for his first ex-wife, Christine Avenatti Carlin, to use a portion of a $717,000 payment to purchase a $50,000 Mercedes Benz in her name that he and his personal driver repeatedly used to transport him. Avenatti, the document says, completed the paperwork to purchase the Mercedes in his own name on May 6, 2019, but returned days later with Carlin to purchase the car in her name.
Carlin and her current husband, Brian Carlin, are the third-party sureties for Avenatti’s March release on an unsecured $300,000 appearance bond pending trial in the California case. In court, Assistant U.S. Attorney Brett A. Sagel raised the possibility that Carlin received as much as $200,000 in payment from Avenatti in return for serving as his third-party surety. “He paid her to be a surety to the tune of a couple hundred thousand dollars, minus the $50,000 for the car she bought for him,” Sagel told the court. Afterward, a spokesman for the U.S. Attorney's Office declined to say if Carlin or her husband were currently under federal investigation.
Prosecutors also allege that Avenatti used nearly half the proceeds from a $33,000 cashiers check to buy back a piece of art work at auction, despite standing judicial orders to use such money to pay back his numerous creditors.
According to court filing, Avenatti owes roughly $5 million to a former law partner pursuant to a judgment issued in the LA Superior Court; roughly $2.2 million to a former client pursuant to a judgment issued in Santa Barbara Superior Court; roughly $2.5 million to his second wife, Lisa Storie Avenatti, pursuant to spousal and child support orders issued in Orange County Superior Court; and approximately $1.5 million to the Washington State Department of Revenue pursuant to a tax warrant.
Another client who is a star witness in the California criminal case alleges that Avenatti stole nearly $840,000 from him, funneling money from a lawsuit settlement fund to his own personal use.
Lawyers for Avenatti argued that the purchases referenced in the government's filing were properly reported to the court's Pretrial Services Officer. Due to the rapid pace of events that have unfolded since Avenatti’s unexpected arrest, the pretrial officer has not yet made a determination in the matter, the court said.
Avenatti’s attorney Dean Steward downplayed the government’s case, calling the 59-page filing an “attempt to collect debts through the U.S. Attorney's Office.” Steward argued that Avenatti’s attempts to “make it harder” on his numerous creditors is not a crime, and that there is “no law or statute that says he has to pay [his creditors] in any particular order.” He also disputed a number of the more attention-grabbing purchases, insisting that the Mercedes belongs to Avenatti’s ex-wife, and stressing that dues paid to maintain private club membership were “valuable and transferrable.”
At one point in the hearing, Steward leveled an inflammatory accusation against Assistant U.S. Attorney Sagel, claiming the prosecutor was acting out a personal animus against Avenatti because one of Avenatti’s alleged victims is being represented by high-profile former U.S. federal prosecutor Andrew Stolper. “Are you accusing Mr. Sagel of misconduct?” the judge asked him. “Of course, absolutely, without a doubt,” Steward replied. Sagel called the accusation “sad,” and said Steward had heard it from “an individual sitting four feet away” from him, referring to Avenatti, who was seated at the defense table.
Avenatti received the judge’s ruling with a stony expression and was quietly escorted from court in the custody of a federal marshal. He is currently being held in a jail in Santa Ana, which has a contract with the federal government to house prisoners.
Prior to his arrest, Avenatti had been making plans to board a flight to New York in preparation for his trial scheduled to begin on Tuesday. With today’s ruling, he will be transported by authorities and remain in custody while he awaits to the start of his trial.
