Attorney Michael Avenatti was arrested Monday and is facing federal charges on both coasts of bank fraud, misappropriating client funds, and trying to extort Nike.
Prosecutors in the Southern District of New York allege that Avenatti tried to extract more than $20 million from Nike, and said that if the company did not pay him, he would hold a press conference attacking the company.
“I’ll go take 10 billion dollars off your client’s market cap,” Avenatti allegedly said. “I’m not f—ing around.”
Nike’s attorneys called federal authorities on March 19 to report the alleged extortionate demands. Avenatti’s subsequent conversations with Nike were recorded by the FBI.
Avenatti was expecting to have a final meeting with Nike’s representatives on Monday in New York, where was arrested. At a press conference announcing the charges, U.S. Attorney Geoffrey Berman said that Avenatti used the legal guise of a settlement negotiation to gain money for himself.
“A suit and tie doesn’t mask the fact that at its core, this was an old-fashioned shakedown,” Berman said.
Avenatti tweeted Monday morning that he would hold a press conference on Tuesday “to disclose a major high school/college basketball scandal perpetrated by @Nike that we have uncovered. This criminal conduct reaches the highest levels of Nike and involves some of the biggest names in college basketball.”
Avenatti is expected to make an initial appearance on the charges in New York on Monday.
Prosecutors in Los Angeles announced that Avenatti is also facing two federal charges of bank fraud and wire fraud. (Read the complaint here.) Avenatti is accused of misappropriating a $1.6 million client settlement to fund his coffee business, Global Baristas US LLC, which operated Tully’s Coffee stores in Washington and California. He is also accused of using the funds to pay personal expenses. Avenatti faces bank fraud charges for allegedly obtaining $4.1 million in loans from a Mississippi bank by submitting false tax returns.
At a press conference Monday morning in Los Angeles, U.S. Attorney Nick Hanna said the charges “paint an ugly picture of lawless conduct and greed,” and described Avenatti as “a corrupt lawyer who fights for his own selfish interests.” Hanna said that Avenatti never paid federal taxes for the years 2011 to 2013.
In the New York case, Avenatti faces charges including extortion, conspiracy to commit extortion, and transmitting interstate communications with intent to extort. (Read it here.) According to the charges, Avenatti represents an Amateur Athletic Union basketball coach. The coach had a deal with Nike, which the shoe company decided not to renew. The coach claims to have evidence that Nike employees made illicit payments to the families of top high school basketball players.
Avenatti allegedly threatened to disclose this information unless Nike paid the coach $1.5 million and hired Avenatti’s firm to conduct an internal investigation. He allegedly threatened to time the disclosure to coincide with the NCAA basketball tournament and Nike’s quarterly earnings call in order to inflict maximum damage.
Prosecutors allege that Avenetti teamed with a co-conspirator who was not charged or named in the complaint. The Wall Street Journal identified the co-conspirator as Mark Geragos, citing sources familiar with the case. Geragos did not respond to a request for comment. His attorney, Benjamin Brafman, confirmed that he represents him in the matter but gave no further comment.
In 2017, federal prosecutors charged an Adidas executive with funneling money to high school athletes in exchange for a commitment to attend Adidas-sponsored universities. In a statement on Monday, Nike said it had been cooperating with a government investigation into NCAA basketball for over a year. The company also said it had reported the coach’s allegations to federal authorities when it first heard them.
“Nike will not be extorted or hide information that is relevant to a government investigation,” the company said in a statement. “When Mr. Avenatti attempted to extort Nike over this matter, Nike with the assistance of outside counsel at Boies Schiller Flexner, aided the investigation. Nike firmly believes in ethical and fair play, both in business and sports, and will continue to assist the prosecutors.”
Avenatti rose to fame representing adult film actress Stormy Daniels in her effort to void a hush-money agreement pertaining to her liaison with President Donald Trump. Last year, Avenatti flirted with running for president before deciding against it.
Daniels issued a statement on Monday, saying she was “saddened but not shocked” by the news. “I made the decision more than a month ago to terminate Michael’s services after discovering that he had dealt with me extremely dishonestly and there will be more announcements to come,” she said.
At the Los Angeles press conference, Hanna was asked if the timing of the criminal complaint was connected to the completion of the report on Russian election interference from Robert Mueller. “It had nothing to do with anything political,” Hanna said. “We had no idea when the Mueller report was going to come down.”
Berman echoed those remarks: “This office doesn’t take politics into account when it decides to charge a case,” he said.