LOS ANGELES -- Federal prosecutors painted a picture of attorney Michael Avenatti on Thursday as a scheming operator who stole millions of dollars from clients, cheated on his taxes, lied to investigators and tried to hide money from debtors in bankruptcy proceedings.
A 36-count indictment returned late Wednesday in U.S. District Court in Santa Ana, California, offered the most damning and detailed account to date of Avenatti's apparent fall from grace a year after he seized the spotlight while crusading for porn actress Stormy Daniels in her legal battles against President Donald Trump.
Avenatti embezzled settlement funds and proceeds from other matters he handled for five clients and doled out small portions, sometimes labeling them as "advances" to prevent thefts from being discovered, prosecutors said.
"Money generated from one set of crimes was used to further other crimes," U.S. Attorney Nick Hanna told reporters. "Typically in the form of payments designed to string along victims so as to prevent Mr. Avenatti's financial house of cards from collapsing."
Avenatti denied the charges on Twitter, saying he had made powerful enemies and would plead not guilty and fight the case. "I look forward to the entire truth being known as opposed to a one-sided version meant to sideline me," he tweeted.
The new charges do not include a New York extortion case alleging Avenatti demanded millions to stay quiet about claims he planned to reveal about Nike paying high school players.
Avenatti, 48, was arrested March 25 in New York on the Nike charge. Federal prosecutors at the time announced he also faced single counts of wire and bank fraud in Southern California, where he lives and practices law.
The 61-page Southern California indictment adds dozens of counts and details charges that carry a potential prison sentence of 335 years, prosecutors said. Even if convicted of all counts, such a term is highly unlikely.
Avenatti faces 10 counts of wire fraud for stealing from a paraplegic man and four other clients he allegedly deceived by taking their money and using it to fund a lifestyle that included living in multimillion-dollar homes, sponsoring an auto racing team and flying in his own private jet, authorities said. The jet was seized Wednesday by federal agents.
He was also charged with 19 tax counts, including lying to an Internal Revenue Service officer, not paying personal income taxes since 2010, failing to pay taxes for his businesses, including two law firms, and pocketing payroll taxes from the Tully's Coffee chain that he owned, the indictment said.
Between September 2015 and January 2018, Global Baristas US, the company that operated Tully's, failed to pay the IRS $3.2 million in payroll taxes, including nearly $2.4 million withheld from employees, the indictment said.
When the IRS later put tax levies on coffee company bank accounts to collect more than $5 million, Avenatti had Tully's employees deposit cash receipts in a little-known account for his auto racing team, authorities said.
Avenatti was also charged with submitting phony tax returns to get more than $4 million in loans from The Peoples Bank in Biloxi, Mississippi, in 2014. The tax returns he presented to the bank were never filed to the IRS, prosecutors said.
The charges are the latest blow to a career that took off when Avenatti represented Daniels in her lawsuit to break a confidentiality agreement with Trump to stay mum about an affair they allegedly had.
Avenatti became one of Trump's leading adversaries, attacking him on cable news programs and Twitter. At one point, Avenatti even considered challenging Trump in 2020.
Back home, his business practices had come under scrutiny from the IRS and a former law partner owed nearly $15 million by Avenatti and the Eagan Avenatti firm, which filed for bankruptcy.
Avenatti made false statements in bankruptcy proceedings by submitting forms that under-reported income such as a $1.3 million payment his firm received, the indictment said.
As prosecutors outlined the charges, Avenatti appeared briefly in Los Angeles Superior Court to answer questions about money he owes attorney Jason Frank for legal work he performed.
With the prospect of facing questions about money he's charged with stealing from clients, Avenatti asserted his 5th Amendment right against self-incrimination and didn't testify, according to attorneys and the court record.
Andrew Stolper, the lawyer who represents Frank, said Avenatti told his client he won't get paid now that federal authorities seized his private jet.
The most glaring example of deception and fraud was described in the indictment as scheming Avenatti allegedly did to deprive clients of money they were due from court settlements, legal negotiations or sales of stock and actions he took to cover his tracks.
Avenatti on Thursday called theft allegations "bogus nonsense" on Twitter.
Prosecutors said that in one case, Avenatti funneled a $2.75 million settlement into his bank accounts and spent $2.5 million for the private jet he co-owned.
Although Avenatti was due a portion of the more than $12 million he received for the five clients, the charges said he turned over only a fraction.
"It is Lawyer 101: do not steal your client's money," Hanna said.
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.
Avenatti only provided $124,000 to Johnson, the indictment said.
Two years after the settlement was reached, Avenatti allegedly helped Johnson find a real estate agent to buy a house. But when Johnson was in escrow, Avenatti falsely said he had not received the settlement funds, the indictment said.
In November, when the Social Security Administration requested information to determine if Johnson should continue to receive disability benefits, Avenatti said he would respond, but didn't because he knew it could lead to the discovery of his embezzlement, the indictment said. The failure to respond led to Johnson's disability benefits being cut off in February.
After Avenatti was questioned about the alleged embezzlement during a judgment-debtor examination in federal court on March 22, the indictment said he fabricated a defense for himself.
Avenatti had Johnson sign a document afterward saying he was satisfied with his representation, which the lawyer told him was necessary to get the settlement that had in fact been paid four years earlier, the indictment said.
Avenatti's posted a "client testimonial" Thursday from Johnson on Twitter that praised Avenatti as "an exceptional, honest and ethical attorney and I feel fortunate to have had him represent me."
Johnson, who is now destitute, only realized after Avenatti's arrest the following week that he had been a victim of fraud, said attorney Joshua Robbins, who now represents him.
Robbins, a former federal prosecutor, said he was surprised Avenatti posted the statement.
"This is the first time I've seen someone tweet out incriminating evidence in their own case the same day they were indicted," Robbins said.