Avenatti allegedly drained a $4 million settlement he negotiated in 2015 on behalf of Geoffrey Johnson, who was paralyzed after trying to kill himself in the Los Angeles County jail, the indictment said.
"Mr. Johnson is the victim of an appalling fraud perpetrated by the one person who owed him loyalty and honesty most of all: his own lawyer", said attorney Josh Robbins. The charges say he used a similar method to steal $2.75 million from another client. Johnson was referred to as "Client 1" in the indictment, but was named at a recent court hearing involving the money Avenatti was ordered to pay his former partner. He's now free on bail. Along the way, I have made many powerful enemies.
In New York, Avenatti said last month that the case was pushed by Nike in an attempt to distract attention from what he called its crimes. An indictment in that case is expected soon.
As the private jet was seized by federal authorities on Wednesday (April 10), it's been alleged that most of the money for the paraplegic client was funneled to a company that managed Avenatti's race-car team, as well as to his coffee company, Global Baristas.
Two years after the settlement was reached, Avenatti allegedly helped Johnson find a real estate agent to buy a house. Shortly after his arrest in New York City, the Department of Justice announced he was also facing criminal charges in California for wire fraud and bank fraud.
Avenatti was also charged with submitting fraudulent tax returns to get more than $4 million in loans from The Peoples Bank in Biloxi, Mississippi, in 2014.
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According to the indictment, Avenatti embezzled money from five of his clients and shuffled the money to cover up the theft. But when Johnson was in escrow to purchase the property, Avenatti falsely said he had not received the settlement funds, the indictment said. Avenatti continued to lie to his client through last month, according to the indictment.
He has denied wrongdoing, and says the truth will come out.
The U.S. attorney's office in the Central District of California scheduled a press briefing in conjunction with the IRS to "announce the filing of a 36-count indictment naming Michael Avenatti".
The indictment also accuses Avenatti of various tax crimes. He responded "no" when he was asked whether Eagan Avenatti had received legal fees when it was representing ticket holders who sued the National Football League over seating snafus at the 2011 Super Bowl in Texas.
The indictment claimed that he lied to an IRS revenue officer, opened a new bank account to receive funds related to credit card transactions at the coffee shops, and directed employees to deposit cash receipts into a bank account belonging to a auto racing outfit that Avenatti owned.
In addition to Client 1, Hanna said, Avenatti followed a similar pattern with four other clients.