Avenatti Enters Plea Before OC Judge on Client Embezzlement Charges

LOS ANGELES (CNS) - Combative Southern California attorney Michael Avenatti appeared today before a federal judge in Santa Ana and pleaded not guilty to federal charges of embezzling millions of dollars from a mentally ill paraplegic and other clients, hiding assets from a bankruptcy court and failing to pay taxes.

Avenatti initially made an appearance without an attorney, so Amy Karlin, the head of the Public Defender's Office in the Central District of California, was assigned as his legal representative.

It appears Avenatti may apply for a public defender, meaning he would have to file a financial affidavit with the court to show whether he lacks enough money to pay for his own attorney. The case was assigned to U.S. District Court Judge James Selna, who would determine if Avenatti qualifies for a public defender.

Avenatti pleaded “not guilty to all charges” in a 36-count indictment -- returned by a Santa Ana grand jury and unsealed April 11 -- that expanded previous bank and wire fraud charges alleging he embezzled a $1.6 million settlement from a client's trust account and provided false tax records to obtain $4.1 million in business loans from a bank in Mississippi.

In a related action, federal authorities on April 10 seized a Honda jet that was allegedly purchased, in part, with money Avenatti embezzled from a client, according to the U.S. Attorney's Office.

Avenatti, 48, is also charged with conspiracy and attempting to extort more than $20 million from Nike Inc. in a separate federal case in New York.

Outside the courtroom this morning, Avenatti directed reporters to a statement he posted on Twitter this morning.

“The right to a presumption of innocence and the right to a jury trial are two fundamental rights that our founding fathers demanded when this country was formed over 200 years ago,” he wrote. “As a citizen of this country, I am entitled to both, I expect both, and I demand both. We don't convict someone in America based on a one-sided argument and a press conference. Even when he is one of the biggest enemies of the president and his son.”

Avenatti previously wrote in a tweet the day the indictment was announced that he was looking “forward to the entire truth being known as opposed to a one-sided version meant to sideline me.”

Avenatti's next court date in the case is a June 17 status hearing. A June 25 trial date was also set.

In its probe, the Internal Revenue Service allegedly uncovered a “tangled web of financial lies” which were used “to fund a lavish lifestyle that had no limits,” according to Ryan L. Korner, acting special agent in charge with IRS Criminal Investigation division in Los Angeles.

At an April 11 news conference, Korner alleged that Avenatti “failed to meet his obligations to the government, stole from his clients, and used his ill-gotten gains to support his racing team, the ownership of Tully's coffee shops, and a private jet.”

The indictment alleges four areas of criminal conduct, all of which relate to the theft or illegal concealment of funds, said U.S. Attorney Nick Hanna of the Central District of California.

The three-dozen charges “are all linked to one another because money generated from one set of crimes appears in other sets -- typically in the form of payments to lull victims and to prevent Mr. Avenatti's financial house of cards from collapsing,” Hanna alleged.

Avenatti faces multiple counts of wire fraud related to more than $12 million allegedly received on behalf of clients as a result of settlements in lawsuits and other negotiations. While entitled to attorney's fees, Avenatti stole millions of dollars from client trust accounts, misappropriated the money, and lied about receiving the money or, in one case, claimed that the funds had already been sent to the client, the indictment alleges.

Hanna said that such alleged conduct violates the principles of “lawyer 101 -- do not steal your clients' money.”

Avenatti responded in a tweet that allegations “that any monies due clients were mishandled is bogus nonsense.”

The investigation stems from 2016, when Avenatti came to national attention as the attorney for adult-film actress Stormy Daniels in a lawsuit accusing President Donald Trump of invalidating a non-disclosure agreement stemming from their alleged affair, and of defaming Daniels. The high-profile complaint was subsequently dismissed, leaving Daniels owing nearly $300,000 to Trump's legal team.

In a case outlined by prosecutors, Avenatti allegedly “drained” a $4 million settlement paid by Los Angeles County to a paraplegic -- and illegally used the money to fund a coffee business and pay personal expenses.

Avenatti strongly denied the accusations, tweeting that for decades he has represented “Davids vs. Goliaths and relied on due process and our system of justice,” and suggested that he was being targeted by Trump's supporters in the U.S. Department of Justice.

“Along the way, I have made many powerful enemies,” he wrote. “I am entitled to a FULL presumption of innocence and am confident that justice will be done once ALL of the facts are known.”

Hanna denied that political pressure played any role in the prosecution.

“Nothing could be further from the truth,” Hanna told reporters earlier this month, stressing that Avenatti is “presumed innocent -- unless convicted in court.”

Photo: Getty Images


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