Avenatti Sentenced to 14 Years Federal Prison for Tax, Wire Fraud

Avenatti Sentenced to 14 Years Federal Prison for Tax, Wire Fraud
California attorney Michael Avenatti leaves a courthouse in New York following a hearing on May 28, 2019. (Seth Wenig/AP Photo)
City News Service

SANTA ANA, Calif.—Suspended attorney Michael Avenatti, who rose to fame representing adult film actress Stormy Daniels in her litigation against former President Donald Trump, was sentenced in Orange County Dec. 5 to 14 years in federal prison for tax and wire fraud.

U.S. District Judge James V. Selna said Avenatti’s sentence would run consecutively—or on top of—the five years he is already serving for convictions in New York for an extortion scheme against Nike, and for stealing from Daniels. That brings his total time to about 19 years in prison for the 51-year-old, who will have to serve at least 85 percent of the sentence.

Federal prosecutors in Santa Ana had asked Selna to impose a 17 1/2-year term, while Avenatti was arguing for only six years. Avenatti also argued, unsuccessfully, that his sentence in Orange County run concurrently with the punishment he is already serving for the New York cases.

He made an “open plea” to resolve most of the charges against him in Santa Ana, meaning he had no guarantee what punishment prosecutors would seek. It is a rare move for defendants because they have no idea what punishment they may face.

“I am deeply sorry and remorseful for my criminal conduct,” Avenatti told Selna Monday.

He said the victims “were not only my clients, but my friends ... and I inexplicably later took them in.”

Avenatti’s voice cracked as he pleaded for “mercy” from Selna for “another chance to be a father of my daughters and my young son, who is 8 and deserves a father.”

Avenatti added, “A total combined sentence of 14 years at my age will not give me a meaningful chance” to be a parent and right some of his wrongs.

“I am not an evil or vile man,” he said, referring to how prosecutors characterized him.

Avenatti said he helped a rape victim in Palm Springs while he was out on bail in the case. He also pointed to other major litigation he won, such as a lawsuit against a personal protective equipment manufacturer.

He said he offered the cases, not as an excuse, but to address the criticism from Assistant U.S. Attorney Brett Sagel, who said Avenatti’s remorse was “of a recent vintage,” and that as much as he characterized his law career as a David battling Goliaths, “He doesn’t fight for anyone but himself. We know what’s the most important thing to him—himself.”

One of Avenatti’s victims, Alexis Gardner, recalled a David vs. Goliath speech from her former attorney.

“He was the Goliath. He was the person stepping on the smaller people,” Gardner told Selna.

She noted how Avenatti took her settlement money to help put a final payment on a private jet.

She said she struggles with “nightmares. I feel unsafe, stalked... It’s constantly troubling, depressing.”

Another victim, Geoffrey Johnson, who Avenatti represented when he became a paraplegic while in jail, told Selna how reluctant he was to come to court on Monday because of the “abusive” way he was cross-examined by Avenatti, who acted as his own attorney in the trial.

“Next to being paralyzed, meeting Michael was the next worst thing that ever happened to me,” Johnson said.

He recalled how in 2017 Avenatti “led me on a wild goose chase to buy a house ... when in reality he had already spent all of my funds.”

Johnson, like Gardner, said they have trouble trusting anyone now.

“As is the case with most human beings, there is the ability to do great good on an individual level,” Selna said. “But there is also the ability to do great evil.”

Selna acknowledged that Avenatti has done “noble and good things in his life... But he has also done great evil for which he must answer. His actions in this case and in the relevant conduct show an abandonment of some of the most basic principles of fairness. ... It is now time for him to pay his debts to his victims, the government, and society in general.”

Selna ordered Avenatti to pay $10.8 million in restitution to four clients and for the back taxes he failed to pay to the IRS.

Avenatti spent a great deal of time during the sentencing challenging the restitution order, arguing that prosecutors failed to calculate the amounts correctly or provide the required proof.

Prosecutors dismissed the remaining case against Avenatti, who asked Selna for a recommendation to be placed in the prison in Lompoc “so I can be near my family.” Selna agreed to make the recommendation.

Avenatti, who won a mistrial motion last year when Selna found prosecutors had withheld evidence the attorney was seeking to use in his trial, said he made the open plea to spare the five victims another trial, the court system the expense, and because he could not reach an agreement on a plea deal with prosecutors.

In their sentencing recommendation, federal prosecutors said Avenatti’s schemes followed a “general pattern” in which he “would lie about the true terms of the settlement agreement he had negotiated for the client, conceal the settlement payments that the counterparty had made, secretly take and spend the settlement proceeds that belonged to the client, and lull the client into not complaining or investigating further by providing small ‘advances’ on the supposedly yet-to-be-paid funds.”

Prosecutors also said he was a “tax cheat,” and cited his failure to pay payroll taxes after his firm acquired Tully’s Coffee in bankruptcy and then obstructed the IRS when the agency attempted to collect the amount due.

Prosecutors argued that Avenatti stole $12.35 million from his clients, failed to pay about $3.2 million in payroll taxes from the coffee company, and $1.6 million in payroll taxes from his law firm.

The prosecutors argued that his convictions in New York federal courts should also boost his punishment.

Avenatti argued that the sentence was more than what has been handed down in similar white-collar fraud cases.

He painted a picture of a difficult childhood that led him to believe he had to “work hard and rely solely on himself to achieve success and contribute to society,” his advisory counsel, Dean Steward, wrote in the sentencing brief.

He said he started working at 15, including at a McDonald’s and in retail stores, and that when he was 17 he worked at an “athletic complex” in St. Louis, “where he managed five employees and umpired over 500 baseball games.”

Avenatti had to work full-time to pay for his college education and was the first in his family to earn advanced degrees. He earned a law degree from George Washington University Law School, moved to California and passed the Bar on his first try, and settled in Newport Beach in 2000.

Avenatti also argued that his jailing in New York City while awaiting trial there in “horrendous conditions” should lead to a lesser sentence. He filed a claim with the government alleging he was placed in solitary confinement as punishment for being a prominent critic of former President Donald Trump. The claim was denied.

During the pandemic, Selna ordered Avenatti to serve under home confinement with a friend in Venice as he awaited his trials.

While in custody at Terminal Island, Avenatti has a “spotless disciplinary record, has been a model inmate, and currently has a security classification of minimum,” Steward wrote.

Avenatti was also admitted into a treatment program and is active in Alcoholics Anonymous. In addition, he has been taking courses to “prepare him for a life after prison” as the suspended attorney will soon surrender his law license and will not be able to ever practice the law again, Steward noted.

While the government argued there was no way the two cases in New York could be combined, Avenatti said they should have been. He argued that had that been done, he would not be facing the prospect of a past criminal history that boosted his exposure in the Santa Ana case.

Avenatti had no prior criminal history before his convictions in New York.

He argued federal prosecutors forced him to defend three cases on both coasts and could have combined them all into one case.

Avenatti said, “This highly unusual decision resulted from the defendant’s notoriety, the government’s desire to have three high-profile prosecutions of the defendant, and an internal `turf' battle within the Department of Justice.”

He added, “This is improper and highly prejudicial.”

Avenatti quoted former Southern District of New York U.S. Attorney Geoffrey Berman’s book on his efforts to work out the so-called turf battle with former Central District of California U.S. Attorney Nichola Hanna.

U.S. Attorney Martin Estrada, however, denied there was any turf battle or any attempt to enhance punishment for Avenatti.

“We operate in a way that is not just compliant with the law but also ethics, so in no way did we prosecute this case or act in a matter to somehow violate Mr. Avenatti’s rights,” Estrada told reporters after the hearing.

Assistant U.S. Attorney Ranee Katzenstein added that the judge in Avenatti’s Nike case “rejected” the same argument from the defendant.