Michael Avenatti Pleads Guilty to Fraud, Tax Charges After Swindling Clients out of Millions of Dollars

By Katabella Roberts
Katabella Roberts
Katabella Roberts
Katabella Roberts is a reporter currently based in Turkey. She covers news and business for The Epoch Times, focusing primarily on the United States.
June 17, 2022 Updated: June 17, 2022

Convicted lawyer Michael Avenatti on Thursday pleaded guilty in a federal court in Southern California to multiple fraud charges in a case in which he is accused of stealing nearly $10 million from multiple clients.

Avenatti pled guilty to four counts of wire fraud and one count of endeavoring to obstruct the administration of the Internal Revenue Code, and admitted to misappropriating funds from four of his legal clients, the Justice Department announced.

The four counts of wire fraud each related to one of the four matters in which the disgraced lawyer embezzled money that should have been paid to clients.

Avenatti admitted to the conduct charged in the four counts against him which included “receiving money on behalf of clients into client trust accounts, misappropriating the money, lying to the clients about receiving the money, and in one case, claiming that the money had already been sent to the client,” the DOJ said.

“I misappropriated and misused certain of their settlement funds,” Avenatti, who has been suspended by the State Bar of California, told the court.

With regards to the one count of endeavoring to obstruct the administration of the Internal Revenue Code, Avenatti told prosecutors he “corruptly obstructed and impeded the IRS’s efforts to collect unpaid payroll taxes” which the government says amounts to $5 million in unpaid payroll taxes for a company he operated known as Tully’s Coffee.

U.S. District Judge James V. Selna set Avenatti’s hearing for Sept. 19. The 51-year-old lawyer faces a maximum sentence of 83 years behind bars.

However, Avenatti, who is representing himself in the case, told prosecutors that he believes the final figure owed in restitution is “drastically less” than the $9 million stated by the government.

In addition to the five charges he pleaded guilty to in federal court on Thursday, Avenatti also faces a total of 31 counts, including six wire fraud charges, 18 tax-related charges, two counts of bank fraud, one count of aggravated identity theft, and four counts of bankruptcy fraud, if the government decides to pursue those charges.

Officials are currently reviewing the case to “determine how it will move forward after today’s guilty pleas,” the DOJ said. If the government does decide to move forward with those counts, Judge Selna will vacate the September sentencing date.

Stormy Daniels
Adult film actress Stormy Daniels, left, stands with her then-lawyer Michael Avenatti during a news conference outside federal court in New York, on April 16, 2018. (Mary Altaffer/AP Photo)
Avenatti
Attorney Michael Avenatti arrives at federal court in New York on Dec. 17, 2019. (AP Photo/Mark Lennihan)

“Michael Avenatti finally admitted what the IRS criminal investigation and the U.S. attorney’s office has been saying for several years now: that he committed audacious acts to steal money from his clients to line his own pockets,” Assistant U.S. Attorney Brett Sagel told reporters.

“Today is step one before the government decides what to do on the remaining counts, and he will now be sentenced at least on his conduct of violating his duties to his clients and his duties as a taxpayer.”

Avenatti is currently serving a five-year prison sentence for two convictions in two separate trials in New York: for attempting to extort up to $25 million from shoemaker Nike and for stealing books proceeds amounting to $300,000 in cash from his former client, Stormy Daniels.

During the Daniels trial earlier this month, District Judge Jesse Furman said that Avenatti’s conduct was “so brazen and egregious” and said that he “took advantage of a vulnerable victim given her unorthodox career and somewhat unorthodox beliefs,” referring to the adult film star Daniels.

The lawyer was also ordered to pay $148,750 to Daniels.

Avenatti rose to prominence while representing Daniels in her lawsuit to break a confidentiality agreement with former President Trump over their alleged one-night affair in 2006. He featured heavily on MSNBC and CNN as one of Trump’s leading adversaries.

The lawyer had failed to reach a deal with federal prosecutors last week but said in court papers filed over the weekend in the U.S. District Court for the Central District of California that he wanted to change his plea “in order to be accountable” adding that he had “brought embarrassment and ridicule upon myself and innocent third parties, including my family.”

Assistant U.S. Attorney Brett Sagel praised Thursday’s guilty plea in a statement to reporters on Thursday.

“Michael Avenatti finally admitted what the IRS criminal investigation and the U.S. attorney’s office has been saying for several years now: that he committed audacious acts to steal money from his clients to line his own pockets,” Sagel said. “Today is step one before the government decides what to do on the remaining counts, and he will now be sentenced at least on his conduct of violating his duties to his clients and his duties as a taxpayer.”

Katabella Roberts is a reporter currently based in Turkey. She covers news and business for The Epoch Times, focusing primarily on the United States.