Judge revokes bail for Avenatti, cites new crime evidence
SANTA ANA, Calif. (AP) — A California judge revoked attorney Michael Avenatti’s bail Wednesday, forcing a delay of his New York extortion trial set for next week after prosecutors said he was hiding assets from creditors to live lavishly.
U.S. District Judge James Selna said Avenatti, best known as the brash lawyer for porn actress Stormy Daniels, likely committed the new financial crimes and was a threat to engage in other crimes if he remained free.
In New York, U.S. District Judge Paul G. Gardephe said the disruption had thrown a trial scheduled to start in a week into chaos, and he noted that California prosecutors used evidence largely gathered last summer to make the surprising move.
The New York trial, in which Avenatti is charged with trying to extort up to $25 million from Nike, was supposed to begin with formal questioning of prospective jurors next Wednesday after they filled out questionnaires Tuesday.
Gardephe said he wants the trial to start no later than Jan. 27. Avenatti has pleaded not guilty and cited his skirmishes with President Donald Trump as proof that prosecutors targeted him.
Defense lawyers complained that they may need a longer delay because they have no money for trial now that Avenatti’s finances are viewed suspiciously.
Selna was asked to revoke Avenatti’s $300,000 bail and he did. “I believe the danger to the community is real and palpable,” Selna said in court.
Prosecutors described several schemes orchestrated by Avenatti to hide his assets from a client, a former legal partner and an ex-wife while living in an $11,000-a-month apartment, being chauffeured in a Mercedes and staying at luxury resorts.
He pocketed $1 million in legal fees during the period and then shifted the money around to conceal the payment despite mounting debts that surpassed $20 million, prosecutors said. After receiving the money, he even sought legal representation from a public defender while declining to provide a financial affidavit to show his ability to afford a lawyer.
Defense lawyers contested the evidence, saying Avenatti didn’t hide funds, has been paying his bills and posed no threat. Attorney H. Dean Steward said Avenatti was making it difficult for creditors but didn’t commit any crime.
“I suggest it doesn’t go over the line,” Steward said.
Federal prosecutors said Avenatti would be transferred by Friday to New York, where Gardephe scheduled a conference for Tuesday for lawyers to tell him where things stand.
Avenatti was arrested by IRS agents at a state bar court hearing Tuesday, where he was facing suspension of his license to practice for allegedly stealing from a client, said Thom Mrozek, spokesman for the Los Angeles U.S. Attorney’s office. He was collared during a break in his testimony.
“Completely innocent,” Avenatti said as he was being led out of the Los Angeles courthouse, according to the Daily Beast.
Prosecutors were seeking to hold Avenatti behind bars for allegedly committing new acts of wire and mail fraud, both federal offenses, as well as possible state crimes in California and Washington state.
The alleged new crimes follow a pattern of misconduct since 2011 and appear to mirror crimes he is charged with committing in a 36-count indictment, prosecutors said.
“Defendant’s extensive pattern of criminal conduct and the overwhelming evidence supporting those charges demonstrate that defendant is a substantial danger to the community,” prosecutors wrote in a court document. “If allowed to remain on bond, defendant will almost certainly continue to engage in further fraudulent and obstructive conduct.”
Avenatti faces trial in May in California for dozens of charges alleging he defrauded clients of millions of dollars, stiffed the IRS and committed bank fraud.
He has pleaded not guilty to those charges, along with the Nike extortion allegations and a separate case charging him with ripping off ex-client Daniels of book deal proceeds.
The arrest of Avenatti marks a new low for the attorney who was flying high a year ago while in the spotlight championing Daniels’ case against Trump.
Daniels, whose real name is Stephanie Clifford, went to court to tear up a $130,000 hush money deal she said she made to cover up an affair with Trump before he was president.
Although Trump has denied the affair, he chose not to challenge that effort, so she effectively won what she was seeking. But the president won a judgment for his legal expenses after successfully challenging a related defamation case Daniels brought against him.
Avenatti had positioned himself as a Trump troll of sorts, attacking the president on Twitter frequently, and even flirted with running for president at one point, making appearances in Iowa and New Hampshire.
Despite losing the Daniels defamation case, Avenatti had claimed he would eventually prevail and win her even larger lawyer fee judgement than the nearly $300,000 she owed Trump. But Daniels hired a new lawyer to take the case, and Avenatti’s own criminal legal problems began with his arrest in New York in March.
While free on bond, prosecutors said Avenatti funneled $717,000 from $1 million he earned in a legal settlement to an account his first wife set up. She then returned $500,000 to him and used some of the remaining balance to buy her ex-husband a used Mercedes for $50,000.
Avenatti maintained his membership at Exclusive Resorts, a Colorado-based company billed as as the “world’s elite private vacation club,” according to prosecutors. He paid over $35,000 to the club last summer and stayed at the club’s resorts four times in California, Florida and New York between August and November.
His girlfriend, who is not named in the court papers, also stayed as his guest at one at an Exclusive Resort in Tuscany, Italy, prosecutors said.
Melley reported from Los Angeles. Associated Press writer Larry Neumeister reported from New York.