Michael Avenatti Sentenced to 2.5 Years in Nike Fraud Case

By Jeralyn, Section Crime in the News
Posted on Fri Jul 09, 2021 at 08:29:00 AM EST
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Michael Avenatti, the former attorney for Stormy Daniels and self-created pundit, was sentenced in federal court in New York yesterday to 2.5 years in prison for his scheme to defraud Nike. On February 14, 2020, following a three week jury trial, he was convicted on all three of the charges against him.

The charges were: Transmitting interstate communications with intent to extort, in violation of 18 U.S.C. 875(d) (Count One); Hobbs Act extortion, in violation of 18 U.S.C. § 1951 (Count Two); and honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346 (Count Three).

The sentence was substantially less than the sentencing guideline range as calculated by Probation (135-168 months). [More...]

His lawyers had argued the guideline range was either 108-135 months or 8-14 months (depending on how the Court ruled on a hyper-technical "grouping" of offense issue and their argument that there was no loss to Nike because Nike would have had to pay a similar amount to other lawyers to conduct an internal investigation of Nike if it didn't hire Avenatti and lawyer Mark Geragos to do it. Avenatti's lawyers asked for a sentence of 6 months in prison and 12 on home confinement.

Geragos cooperated with the U.S. Attorney's office and was not charged. In this press release by DOJ today, he is referred to as "another individual".

Why Avenatti got such a light sentence compared to his guideline range:

But Gardephe added that Avenatti deserved a lighter sentence than the range recommended by federal guidelines — from nine years to 11-years and three months — because, the judge said that for the first time in the case, “Mr. Avenatti has expressed what I believe to be severe remorse today.”

The judge also cited the brutal conditions in which Avenatti was kept for several months in a Manhattan federal prison after his 2019 arrest.

And Gardephe sharply noted, in justifying the lower-than-recommended sentence, how federal prosecutors did not criminally charge Geragos in spite of what they have said was his active participation with Avenatti in the shakedown.

Avenatti has been out on a furlough (temporary release) due to COVID since April of 2020. He faces two more federal criminal trials, one in New York where he is charged with defrauding Stormy Daniels (United States v. Avenatti, 19 Cr. 374) and one in Santa Ana, CA where he is charged with:

...ten counts of wire fraud in violation of 18 U.S.C. § 1343, arising out of his alleged embezzlement and misappropriation of settlement funds relating to five clients he had represented;
eight counts of tax evasion in violation of 26 U.S.C. § 7202; obstruction of federal tax laws arising out of transfers among bank accounts to hide income; ten counts of willful failure to
file tax returns, in violation of 26 U.S.C. § 7203; two counts of bank fraud in violation of 18 U.S.C. §§ 1344(1); identity fraud in violation of 18 U.S.C. § 1028A(a)(1) arising out of his
providing false and fraudulent information to obtain loans from Peoples Bank; and four counts of filing a false declaration or making a false oath in a 2017 bankruptcy action relating to his
law firm.

Avenatti is still free, as he was not remanded into custody after his sentencing. But he must now make his way back to California for the start of jury selection on July 13 in his California trial. His lawyer in that case, who was originally retained by Avenatti but is now paid by the court since Avenatti is now indigent, asked for a continuance in May because he's in his 70's with medical issues and the volume of material is just too staggering to be prepared for trial by July 13, especially since he just finished a health care fraud trial (the first in the District since COVID restrictions were eased). He does have court-appointed paralegals assisting him, and so far, it looks like the California court is sticking to its schedule.

Avenatti's second New York trial (regarding his alleged fraud regarding Stormy Daniels) is not set until January, 2022. He's represented by the Federal Defender's office in that case.

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Michael Avenatti Sentenced to 2.5 Years in Nike Fraud Case | 39 comments (39 topical)

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Peter: Shorter version Part 2 (5.00 / 1) (#6)
by Jeralyn on Fri Jul 09, 2021 at 03:35:21 PM EST

Auerbach presented Franklin's claim to Nike's outside counsel, Andrew Michaelson at the law firm Boies Schiller.

On Feb. 28, Auerbach called Avenatti and he and Franklin met with Avenatti at his apartment in LA the next day (he had just lost his office and his law firm was working from home. His apartment had a conference room).

Neither Auerbach nor Avenatti mentioned the possibility of holding a press conference or of pressuring Nike to conduct an internal investigation. According to Auerbach, a press conference "would be damaging and
detrimental to reaching Gary's goals," which
included reestablishing his relationship with
Nike. As to an internal investigation, Auerbach
testified that "Gary knew what happened and
he didn't need an internal investigation."
Avenatti did not suggest that a resolution of
Franklin's dispute with Nike might include Nike
making payments to Avenatti.

Auerbach next spoke with Avenatti on March
2, 2020. In this twenty minute phone
conversation, there was likewise no discussion
of Avenatti holding a press conference, filing a
lawsuit against Nike, pressuring Nike to
conduct an internal investigation, or asking
Nike to retain Avenatti.

On March 4, 2019, Avenatti contacted Mark
Geragos...Avenatti told Geragos that he "got called on a very big case against Nike. This might make a lot of sense [to do] together." Avenatti was aware that Geragos had a relationship with Nike's general counsel and Avenatti and Geragos
agreed that they would approach Nike together
regarding Franklin's claims. Avenatti never told Franklin that he was working with Geragos on Franklin's claims against Nike.

Peter: Shorter Version Part 3 (5.00 / 1) (#7)
by Jeralyn on Fri Jul 09, 2021 at 03:46:22 PM EST

On March 5, Avenatti again met with Auerbach and Franklin at this apt. [F]rom Gary's point of view
he was coerced and pressured into making
payments to players' families, accepting
payments, wire payments from Nike to
then pass onto handlers and make
payments to the families of the players,
resubmitting fake invoices to Nike and
things of that nature. Franklin also complained
about being forced to surrender control over
his 17 and under team

Franklin explained he just wanted his team back and the two Nike guys fired. (Jamal James and Carlton DeBose), and also let me have some, you
know, some sort of restitution for . . . what I've
lost, the years, and also, you know get me
covered." By "covered," Franklin
meant whistleblower protection.

Franklin never signed a retainer agreement with Avenatti, had no idea he was working with Geragos, had never discussed filing a lawsuit against Nike with Avenatti.

At this meeting, Auerbach gave Avenatti a 41-page "memorandum of actions"] that Auerbach had prepared. It contained "all the
evidentiary documents," including "bank wires,
cash payments, invoices, and things of that
nature," showing Nike's improper payments to
players' handlers and parents.

Auerbach didn't expect Avenatti to turn it over to Nike without his consent. Franklin
did not want the documents to be made
public, because their disclosure could harm
the reputations of Nike, the players he had
coached and their parents, the Basketball
Program, and Franklin himself. Franklin
and Auerbach also discussed with Avenatti
certain recordings that Franklin had made of
conversations he had had with DeBose and
James.

Avenatti told Franklin at the March 5, 2019
meeting that Avenatti would serve as
Franklin's lawyer, and that Avenatti would seek
immunity for Franklin for his involvement in
making payments to players' families and in
falsifying invoices that were submitted to Nike
for payment. There was no discussion at the meeting about a retainer agreement, however, or about attorney's fees for Avenatti, or about Avenatti filing a lawsuit against Nike.
There was likewise no discussion of a press
conference, an internal investigation at Nike,
or Nike retaining Avenatti to conduct an
internal investigation.

For the next week, the three communicated by text and email, and Auerbach sent Avenatti a copy of the Addidas racketeering complaint. There was no talk of pressers, lawsuits or Nike paying Avenatti or an internal investigation.

Peter: Shorter Version Part 4 (5.00 / 1) (#8)
by Jeralyn on Fri Jul 09, 2021 at 03:58:38 PM EST

Enter Geragos: After speaking with Avenatti, on March 12, 2019, Geragos contacted Casey Kaplan, an
attorney in Nike's legal department, about
Franklin's claims. He was told to contant Boise Shiller. Avenatti told Geragos to insist
on dealing directly with Nike, in part because
Boies Schiller would "never step aside and allow [Avenatti and Geragos] to run an
investigation [at Nike]."

In a March 14, 2019 text message to Geragos,
Avenatti asked for a status report on "Nike and
whether I need to start arranging my presser."
Geragos told Kaplan that Avenatti insisted that
at least one lawyer from Nike's in-house department attend a meeting to discuss
Franklin's claims, and that Avenatti would not
meet with only Boies Schiller lawyers.

After speaking with Geragos, Kaplan
contacted Robert Leinwand, Nike's vice
president and chief litigation officer. He agreed to meet with Geragos and Avenatti.

In response to Geragos's communications with
Kaplan, Scott Wilson, a partner at Boies
Schiller, contacted Geragos via email
and by telephone. Geragos told Wilson that
the matter was too sensitive to discuss in
detail by telephone, but that he had seen
documents suggesting that "Nike might have
an Adidas problem." The two agreed to meet at Geragos's New York office on March 19, 2019, and that the meeting would be attended by Geragos, Avenatti, Wilson, and Leinwand.

On March 16, 2019, Avenatti contacted Rebecca Ruiz, a New York Times reporter. On March 17, 2019, Avenatti reported to Geragos that if the March 19, 2019 meeting with Nike "doesn't work out,"Avenatti had arranged for a press conference
on March 20, 2020, and a New York Times
story concerning Nike's corrupt influence on
youth basketball.

On March 18, Avenatti met with Franklin and Auerbach at his apartment in LA. Avenatti
told them that he had scheduled a meeting with Nike's lawyers in New York City for the next day.
Franklin and Auerbach were "shocked" by
Avenatti's announcement, because there had been no discussion of the strategy that would
be used in approaching Nike, and "no
indication that [Avenatti] had done anything on
[Franklin's] behalf since [the] first meeting.

Avenatti told Franklin that he was "going to first get you covered with some sort of whistleblower or
immunity, and we're going to get James and
DeBose fired. And I think I can get you a
million dollars." (Franklin said that he thought that a $1 million settlement was reasonable -- he had previously discussed this amount with
Auerbach. Auerbach testified that Avenatti also said that he would try to get Franklin's Basketball Program "back in with Nike and reestablish that relationship." Franklin testified that when he asked Avenatti whether he could regain control over his 17 and under team and obtain a new sponsorship agreement with
Nike, Avenatti replied, "[w]ell, after this, I don't think they're going to let you be back with
them." Franklin did not understand
that Avenatti would make no effort to persuade
Nike to permit Franklin to regain control over
his team, however.

There was no discussion at the March 18, 2019 meeting about Avenatti holding a press
conference, performing an internal
investigation at Nike, or being hired by
or paid by Nike. Moreover, Avenatti did not disclose to Franklin and Auerbach that he was working with Geragos on Franklin's claims.

This was the last meeting Avenatti had with Auerbach and Franklin.

Peter: Shorter Version Part V (5.00 / 1) (#9)
by Jeralyn on Fri Jul 09, 2021 at 04:08:29 PM EST

The Nike Meeting:

On March 19, 2019, Avenatti and Geragos met
with Leinwand, Wilson, and Benjamin Homes
-- a Boies Schiller associate -- at Geragos's
New York offices. Avenatti began by saying that he represented a whistleblower who had information about improper payments Nike had made to amateur
basketball players, including the top pick
in the 2018 NBA draft. According to Avenatti, his client was "the head of a program or a program director who had been involved in these payments in connection with the Nike employees making the payments."

Avenatti identified DeBose and James as the
Nike employees involved in the misconduct,
and he named several players who had
received improper payments. Avenatti added that he was aware that Nike had received a grand jury subpoena in 2017, and that he suspected Nike had not been fully forthcoming with the Government in
responding to that subpoena.

Avenatti told Nike's attorneys that "Nike was
going to do two things. Nike was going to pay
a civil settlement to his client, who he said had
breach of contract, tort, or other claims, and Nike was going to hire Mr. Avenatti and Mark Geragos to conduct an internal investigation into corruption in basketball." Leinwand likened Avenatti's
demand to the following: "somebody . . .
walk[s] into your store and they mess it up and
they say you need protection, you have to hire
me to protect you. And then you say who are
you going to protect us from, and they say me
. . . because if not, I'm going to destroy
your store." (my emphasis)

Avenatti told Nike's lawyers that "he was going
to blow the lid on this scandal, that it was
going to be a major scandal, that he had a
reporter, Rebecca Ruiz, at the New York
Times either on speed dial or on call and that
he could reach out to her and have her write a
story at a moment's notice." Avenatti said that if Nike did not comply with his demands, he would "hold a press conference the next day," during which "he could and would take billions of dollars off the company's market cap." Avenatti said nothing about filing a lawsuit.

Wilson or Leinwand sought more details
concerning Avenatti's claims, and Avenatti
eventually identified his client as Gary
Franklin. Avenatti also permitted Wilson to examine "a small package of documents." The documents appeared to be "a collection of e-mails, text messages, invoices, redacted bank statements
grouped behind a table of contents type, what I
call cover sheets. . . . They looked like they
were communications between Mr. Franklin
and a Nike employee [and a ] family member
of [the number one pick in the 2018 NBA
draft] from 2016. And then there were other
communications involving Mr. Franklin from2017.

They took a break in the meeting and Leinwand became more concerned about the threatened press conference than claims of improper payment. Wilson tried to stall for time.

Avenatti responded that the next day was important, both because it was "the eve of March Madness" and "the eve of a Nike earnings
call." Wilson, Leinwand, and Homes understood Avenatti to be saying that his threatened press conference would have a particularly damaging effect on Nike's stock price because of its timing.

Avenatti made it clear that both of his demands -- the settlement for Franklin, and the hiring of
Avenatti and Geragos to conduct an internal
investigation at Nike -- would have to be met
in order to forestall the threatened press
conference.

Peter: Shorter Version Part 6 (5.00 / 1) (#10)
by Jeralyn on Fri Jul 09, 2021 at 04:14:03 PM EST

As to the settlement for Franklin, Avenatti
demanded $1.5 million. As to the internal investigation, Avenatti said that if Nike hired another law firm to conduct the internal investigation, Avenatti and Geragos would have to "get paid two times the fees that Nike paid to that other law firm for actually doing [the] work."

A few hours after the meeting the Nike lawyers called the US Attorney's office to report what they were told about Nike's alleged misconduct and they provided a description of Mr. Avenatti's and Mr.
Geragos' conduct and the demands that they [had] made. (my emphasis)

Wilson also spoke with Geragos later that day.
Geragos stated that he had convinced Avenatti
to delay his press conference until March 21,
2019.

Avenatti spoke with Auerbach and Franklin after the meeting and told them "everything went great".
He said that and that Nike's lawyers wanted to meet again on March 21, 2019. During the call, Avenatti said nothing about a press
conference, an internal investigation at Nike,
or Nike hiring him to conduct an internal
investigation. Avenatti also did not disclose that Geragos was assisting him in representing Franklin.

From March 20, 2019 on, Wilson's calls with
Avenatti and/or Geragos were recorded by the
FBI

Peter: Shorter Version Part 7 (5.00 / 1) (#11)
by Jeralyn on Fri Jul 09, 2021 at 04:17:22 PM EST

On a recorded phone call on March 20 , Wilson told Avenatti, "we're not going to give you everything you want, but I think we can give you much of what you want." In response, Avenatti said:

[W]e're gonna get a million five for our guy,
and we're gonna be hired to handle the
internal investigation, and if you don't
wanna do that, we're done. . . . I wanna be
really clear with you. . . . I'm not fucking
around with this, and I'm not continuing to
play games. . . . You guys know enough
now to know you've got a serious problem.
And it's worth more in exposure to me to
just blow the lid on this thing. A few million
dollars doesn't move the needle for me. I'm
just being really frank with you. So if that's
what, if that's what is being contemplated,
then let's just say it was good to meet you,
and we're done. And I'll proceed with my
press conference tomorrow and I'll hang up
with you now and I'll call the New York
Times, who are awaiting my call. I-I'm not
f*cking around with this thing anymore. So
if you guys think that you know, we're
gonna negotiate a million five [for
Franklin], and we're gonna, you're
gonna hire us to do an internal investigation, but it's gonna be capped at 3 or 5 or 7 million dollars, like let's just be done. . . . And I'll go and I'll go take and I'll go take ten billion dollars off your client's market cap. But I'm not f*cking around.

Something you should all see (5.00 / 1) (#26)
by CaptHowdy on Thu Jul 15, 2021 at 08:04:10 PM EST

really. This is popping up everywhere.

Kremlin papers appear to show Putin's plot to put Trump in White House
Exclusive: Documents suggest Russia launched secret multi-agency effort to interfere in US democracy

There (none / 0) (#27)
by FlJoe on Fri Jul 16, 2021 at 04:25:44 AM EST

also seems to be a lot of skepticism out there. It does seem to be too good to be true, not that it matters that much difference one way or the other.


Depended on your definition (none / 0) (#28)
by CaptHowdy on Fri Jul 16, 2021 at 07:39:33 AM EST

Of "matters".

Will it snap the cult out of it? No. Nothing will. And we should stop thinking that even "matters".
But there is knowing it's all true, as we all have, and there is having documents signed by Putin that prove it.
That would matter. IMO. It would certainly add an interesting layer to the avalanche of horrible news coming out in book after book after book.

Who knows about the authenticity but if you're u read that Guardian piece it sure seems credible.

And why would it be so shocking that someone there would leak this?


The (none / 0) (#29)
by FlJoe on Fri Jul 16, 2021 at 07:58:42 AM EST

Guardian has been wrong before and I don't see other outlets picking up on this which is quite a tell.

There is more than a whiff of the Dan Rather letter that tanked his otherwise damming expose on W.

Other (none / 0) (#30)
by CaptHowdy on Fri Jul 16, 2021 at 08:04:40 AM EST

outlets


I my quick scan of that (none / 0) (#31)
by CaptHowdy on Fri Jul 16, 2021 at 08:12:46 AM EST

there's a couple urging caution. Fox News and Phillip Bump. As for me,I'm spreading it everywhere. If it's a fake that's on The Guardian. Meanwhile it will drive the cult nuts.


Wonder if (none / 0) (#32)
by KeysDan on Fri Jul 16, 2021 at 11:13:43 AM EST

this Kremlin "leak" is a peace offering to President Biden. Of course, with expectations of quid pro quo--e.g., sanction relief. tolerance for the German/Russian gas pipeline, or any number of concessions . A recognition that the former guy will remain the former guy.

Not all that much new content to our eyes and ears, except where it came from. Even the suggestion of Kompromat along the lines of the Steele dossier.


Year that (none / 0) (#33)
by CaptHowdy on Fri Jul 16, 2021 at 11:54:43 AM EST

also there is growing resistance to Putin. Considering the consequences easy to see why leaks are more rare there but leaks happen.
It seems like a pretty big limb The Guardian is out on. Or a small one. They did say it "appears" to prove it. It does.


On another subject (5.00 / 1) (#34)
by CaptHowdy on Fri Jul 16, 2021 at 11:55:48 AM EST

Jeralyn, I hope you are just really busy. Bad time to disappear. :(


: And, (5.00 / 4) (#35)
by KeysDan on Fri Jul 16, 2021 at 12:29:41 PM EST

hope all is well, including health-wise.

The Guardian heavily hedged its (none / 0) (#36)
by oculus on Fri Jul 16, 2021 at 03:10:21 PM EST

bets too.


Yes, but (none / 0) (#37)
by KeysDan on Fri Jul 16, 2021 at 04:41:59 PM EST

the question, it needs to underscored, is the veracity of a Kremlin leak not the essence of the information in the supposed leak. Even the Republican-majority senate committee revealed that the Trump campaign chairman (not some coffee boy) passed polling data to Russian Intel agents. And, of course, there is that other example of Trump calling out on television, for ... Russia if you are listening....and they did what he asked within hours.

Republicans find solace in that there was only collusion (which is not a federal crime) rather than conspiracy which is. Don't know if it is the job of Democrats to pooh pooh this. In any event the information will not affect the cult---even any salacious hotel room discovery. The Stormy story did nothing. But, maybe independents, if there still are any, will take note.


: Anybody (5.00 / 1) (#38)
by Ga6thDem on Fri Jul 16, 2021 at 05:07:19 PM EST

with half a brain pretty much suspects Trump is a Kremlin agent or useful idiot at this point. All they needed really was the treason summit where he praised Putin.

Is this about Avenatti? (none / 0) (#39)
by Jeralyn on Sun Jul 18, 2021 at 08:30:16 PM EST

There are open threads up if its not. Thanks!


An inconvenient truth (none / 0) (#1)
by CaptHowdy on Fri Jul 09, 2021 at 08:14:39 AM EST

"Avenatti burst into national prominence as the anti-Trump lawyer for porn star Stormy Daniels, and was rapidly embraced by many Democrats (not to mention many members of the news media). He was good at television and eager to be on show after show, telling critics of President Donald Trump things they wanted to hear. His demise wasn't a case of rank-and-file liberals realizing they shouldn't trust him, but of the law catching up to to him."
"Democrats shouldn't forget that short period of time when many of them (although of course not all) fell for Avenatti. At a time when Republicans seem to have been taken in by hoaxes, frauds and conspiracy theories, it's important to remember that everyone, Democrat and Republican, liberal and conservative and centrist, is susceptible to the appeal of such people and ideas."

: Our introduction to (none / 0) (#2)
by KeysDan on Fri Jul 09, 2021 at 12:38:36 PM EST

Michael Avenatti was his representation of Stormy Daniels in 2018 to get out of a non-disclosure agreement she signed before the 2016 election. That suit was eventually dismissed, but the episode led to further information provided by Trump's personal attorney, Michael Cohen, in sworn Congressional testimony that Trump payed off Stormy ($130,000) for her silence of their tryst during the end stages of the campaign--a potential crime . Cohen provided a check signed by Trump, himself, while in office, for partial payment/reimbursement.
Avenatti, at this point, did, in representation of Miss Daniels, provide information. It was not misinformation.
Moreover, it was the subsequent star-struck status that appears to have induced the weaponization of his celebrity in the Nike charges in March 2019--resulting in extortion/honest services fraud conviction as well as charges pending in other cases.
Mr. Bernstein's offers good advice on vetting newcomers to avoid being conned, but his opinion, in my view, suffers from "bothsiderism". It is one thing to be victimized by naivete or be hoodwinked by deliberate "misinformation", but yet another, to victimize the naivete or deliberately hoodwink with misinformation.
Of course, the twice-impeached retired guy in Florida, is the epitome of the con. And, most, if not all, Republicans know the difference and know their con man.
Jonathan Bernstein may be the only one who does not know the difference. Hence, I do not find the bulk of his admonition and cautionary advice for Democrats to be compelling.

Can anyone explain what genuine facts (none / 0) (#3)
by Peter G on Fri Jul 09, 2021 at 01:05:15 PM EST

lay behind the Nike "extortion"? Did Avenatti and Geragos have real clients who had an apparently legitimate claim to have really been defrauded or victimized by Nike in some way? If so, what exactly did Avenatti & Geragos do that is criminal, as opposed to any lawyer's aggressive but permissible effort to secure a favorable settlement for a client? This is a sincere question; I am not suggesting one thing or another. I really hadn't read up on the case.

: Peter: Shorter Version, Part 1 (5.00 / 1) (#5)
by Jeralyn on Fri Jul 09, 2021 at 03:26:49 PM EST

According to the Court order denying his motion for new trial:
Avenatti was consulted by a teen basketball coach named Gary Franklin who was coaching a team for years that in 2010 became a part of Nike's Elite Youth Basketball League (the
"EYBL"). The EYBL was a collection of travel teams made up of talented high school basketball players.
Some players from Franklin's Basketball Program went on to compete at Division I or Division II universities, and some went on to play professionally in the National Basketball Association (the "NBA") or overseas.
In 2016, Carlton Debose -- Nike's director of
Elite Youth Basketball ("EYB") -- and Jamal
James -- Nike's manager of EYB -- were two
of Franklin's primary contacts at Nike. According to Franklin, DeBose and James pressured him to
engage in misconduct, including making improper cash payments to players' families and submitting falsified invoices to Nike. After the 2018 season, Nike did not renew its sponsorship contract with Franklin. Franklin also lost control of the team
he had coached for boys who were 17 years
old and younger. Franklin believed that
DeBose and James displaced him from the 17
and under team in retaliation for Franklin's
refusal to select certain players for the
team.
Prior to terminating the sponsorship, Nike had
contributed $72,000 a year for Franklin's
Basketball Program. Of that sum, Franklin generally kept $30,000 to $35,000 as his salary for operating the program. (Tr. 1523) Nike also supplied Nike merchandise and other "gear" to the
Basketball Program. The total value of Nike'sponsorship of the Basketball Program
amounted to approximately $192,000 a year.
Franklin was disappointed that Nike had
decided to terminate its sponsorship of the
Basketball Program, and he blamed James
and DeBose for the lost sponsorship. In February 2018, Franklin spoke with Jeffrey Auerbach about trying to regain the sponsorship. Auerbach is a producer-writer and consultant
in the entertainment industry, and his son had
played on one of Franklin's basketball teams.
Franklin also told Auerbach about James and DeBose's misconduct, and about what Franklin
perceived as rampant corruption in Nike's
EYBL. Franklin wanted Nike to investigate James and DeBose, and to fire them. For more than a year, Franklin and Auerbach communicated about these issues in person, by telephone, and through text messages and email.

: Here is the complaint, (none / 0) (#4)
by KeysDan on Fri Jul 09, 2021 at 02:45:13 PM EST

USA v Avenatti. It appears that the case presented by the government was that Avenatti's aggressiveness crossed the line from settlement to extortion.
The client was a coach who claimed Nike employees corruptly offered money to some HS basketball playes. Avenatti and Geragos may have been seen as hijacking their client's claim (the client had been cut off of Nike funding) by attempting to shakedown Nike for $ millions for their benefit. But, the amount demanded (or Avenatti would hold a press conference that that would cause a drop in Nike stock)did seem to include the client. Not sure of the harm done, given the failed attempt. There were video tapes and other recordings of discussions.
Not sure why Mark Geragos, a co-conspirator, was let off the hook, other than the judge said he was very remorseful, early-on. Avenatti was remorseful at sentencing with consideration by the judge.
Know you will have a better take on this once you study the case.

Peter: Shorter Version Part 8 (none / 0) (#12)
by Jeralyn on Fri Jul 09, 2021 at 04:36:32 PM EST

Avenatti then asked Wilson what Boies Schiller
would "ask for, for an internal investigation of
this nature? . . . You tell me what Boies
Schiller would quote. . . ." Wilson responded
that Boies Schiller would "charge millions of
dollars for an internal investigation like that."
Avenatti responded that a number in the "single digit millions" -- "five, six, eight, nine million dollars" -- was "not in the ballpark" of what he was seeking for the internal investigation. He added, "do I think it's gonna be a hundred million? No. Do I think it's gonna be nine million? No."

Wilson and Avennati agreed to meet the next day at Geragos' office to do the paperwork on the agreement. Avenatti stated that "this is not gonna take longer than twenty-four hours to paper . . . . This is very straightforward. . . . I mean we're
talking about a settlement agreement . . . on a
million five with adequate releases etcetera,
and we're talking about an engagement letter."

On March 21, 2019, Avenatti and Geragos met
with Wilson and Homes at Geragos's New
York office. The FBI bugged the office.

Avenatti handed an agreement to Wilson. Avenatti told Wilson that -- for purposes of the
internal investigation -- he and Geragos
"want[ed] to report directly" to Leinwand, to
Nike's general counsel, or to an executive in
Nike's corporate hierarchy above Leinwand.
Avenatti further proposed that Nike's retention
of Avenatti and Geragos "remain confidential .
. . with the understanding that . . . over the
course of us conducting our internal
investigation we're gonna have to disclose that
we're working for Nike." Avenatti emphasized that any disclosure to the press would be determined by Nike,"[b]ecause Nike's our client."

As to financial terms, Avenatti demanded a "12
million dollar retainer upon signing. Evergreen.
Um, that's gonna be deemed earned when
paid, we'll cap it at 25 million dollars, minimum
of 15 million dollars, unless the scope
changes." When Wilson asked what Avenatti regarded as the scope of the internal investigation, Avenatti said that it was "payments made to players in order to route them to various colleges, or shoe contracts, prior to them being eligible to receive any such payments." As to billing rates and costs, Avenatti proposed
a blended hourly rate of $950 per hour for
attorneys, $450 per hour for paralegals, and
reimbursement of all out-of-pocket expenses.

Peter: Shorter Version Part 9 (none / 0) (#13)
by Jeralyn on Fri Jul 09, 2021 at 04:46:52 PM EST

Avenatti told Wilson that -- in addition to the
settlement agreement with Franklin -- the
parties would need to enter into "[a]
confidential retainer agreement." Wilson asked
"who would be the counterparty" in the retainer
agreement. Avenatti responded that the
"counterparty" would "be either my firm, or
Mark [Geragos's] firm, or a new entity that we
then form."

Wilson responded: "as I said before[,] I don't
think that the . . . settlement of Mr. Franklin's
civil claims for 1.5 million dollars is going
to be the stumbling block here. Is there a
way to avoid your press conference without
hiring you and Mark [Geragos] to do an
internal investigation?" Avenatti said, "I'm not gonna answer that question."

Wilson then asked if they could settle the whole thing by adding money to Franklin's settlement.

Avenatti said: "I don't think it makes any sense for Nike to be paying, um, an exorbitant sum of money to Mr. Franklin, in light of his role in this. . . . I mean, imagine that."

Wilson told Avenatti that it was difficult for him
to explain to the Nike executives "at the top of
the heap[] why is it that we have to both um,
do a civil settlement, and hire plaintiff's counsel and his colleague . . . to do legal work, for the company. . . . [T]hat's not something we've ever seen before." "I am struggling with how to sell, to my client, something that is outside of the civil settlement, that is instead a separate um, separate hiring of attorneys they don't know, to conduct an internal investigation, which is a very sensitive thing." Wilson also told Avenatti that he had "never gotten a 12 million dollar retainer from [Nike]."

Avenatti's response:

ave you ever held the balls of the client in your hand where you can take 5, 6 billion dollars in market cap off of 'em? This is
gonna be a major f*cking scandal, you said yourself, that you're surprised Adidas wasn't indicted -- I'm going tell ya, if we don't -- if we don't figure this out, from moment one, I'm gonna be asking, why Nike hasn't been indicted. I'm gonna break, I'm gonna bring the power of my platform to bear -- to expose what the f*ck is goin' on here appropriately[,] [i]f we can't reach a settlement in the next week.
. . . .[L]et me just explain something to you.
This is not gonna be a single press
conference, okay? . . . No, no this is gonna
be, no this is gonna be a scandal. This is
gonna be the biggest scandal in sports, in
a long time. That's what this is gonna be.

Avenatti added: if Nike wants to have one confidential settlement agreement -- and we're done, they can buy that for 22 and a half million
dollars. And we're done. . . . Fully
confidential, we can leave it to Nike and its
other lawyers to figure out what to do with
this and handle it appropriately -- and full
confidentiality, we ride off into the sunset, if
you need assistance from us as it relates
to Mr. Franklin, uh, we'd be happy to
provide that, obviously we're not gonna do
anything illegal -- or he's not gonna do
anything illegal -- . . . and we can be done

Avenatti concluded by saying, "I just wanna
share with you what's gonna happen, if we
don't reach a resolution":

As soon as this becomes public, I'm gonna
receive calls from all over the country, from
parents, and coaches, and friends, and all
kinds of people . . . and they're all going to
say, "I've got an email, or text message or .
. . . [N]ow 90% of that is gonna be bullshit.
. . . But 10% of it is actually going to be
true. And then what's gonna happen is, this
will snowball. And then it will be 5 players,
and then it will be 9, and then it will be 15,
and then it will be 25, and it's gonna
snowball -- and every time we get more
information, that's gonna be The Washington Post, The New York Times, ESPN, a press conference -- and the company will die, not die, but they're going
to incur, cut after cut after cut after cut, and
that's what's gonna happen. . . . I don't
know what they did relating to, responding
to that subpoena. I don't know what the
scope of that subpoena was. But, I mean,
that -- that could be a major f*cking problem.

Wilson said that he understood "the two
scenarios. There's the 1.5, plus the internal
investigation and the parameters you
described, or 22 and . . . a half.

Peter: shorter version Part 10 (none / 0) (#14)
by Jeralyn on Fri Jul 09, 2021 at 04:54:08 PM EST

Avenatti, Geragos, and Wilson agreed to meet
again at noon on Monday, March 25, 2019, at
Wilson's Boies Schiller office. He warned them they had to be ready to "paper" the deal Monday:

I don't wanna hear about somebody on a
bike trip, I don't wanna hear that somebody
has, somebody's grandmother passed
away or something, I don't look -- the dog
ate my homework, I don't wanna hear,
none of it is gonna go anywhere unless
somebody was killed in a plane crash. It's
going to go to zero, no place[,] with me

Avenatti gave Wilson a draft agreement at that meeting.

The draft settlement agreement did not reference any specific claims Franklin had, or believed he had, against Nike, nor did it refer to an internal investigation. The draft agreement had an effective date of March 25, 2019

Avenatti also sent out an ominous tweet after the meeting about Nike and "adidas. He called Franklin and Auerbach, for the last time.

Avenatti called Franklin and Auerbach "right
after" his March 21, 2019 meeting with Wilson.
Avenatti reported that the meeting with Nike's
lawyers "went great," and that Nike wanted to
have one more meeting on Monday, March 25, 2019, to "wrap things up." Avenatti emphasized that he was "not f*cking around with this." Because Avenatti "said everything was going well," neither
Franklin nor Auerbach questioned him, and
Avenatti did not provide any specific details as
to what had been discussed at the meeting.
During the call, Avenatti made no reference to a $22.5 million settlement, a press conference, an internal investigation, or Nike's retention of him to conduct an internal investigation.

Avenatti also did not seek Franklin and Auerbach's permission to publicly disclose the information they had provided to him. The March 21, 2019 call was the last time Auerbach and Franklin spoke with Avenatti.

Peter: Shorter Version 11 (none / 0) (#15)
by Jeralyn on Fri Jul 09, 2021 at 05:02:01 PM EST

On the morning of March 25, 2019, Franklin's
son told him that FBI agents were at Franklin's
front door. Franklin called Avenatti and asked what to do. Avenatti told Franklin to turn off his phone and not to speak with the FBI agents. Avenatti also said that he hoped that "Nike is not trying to f*ck you." Avenatti then told Franklin that he thought he would "go public." Avenatti hung up before Franklin -- who was confused and upset -- had an opportunity to respond.

At about 9:15 a.m. Pacific Time, Avenatti
tweeted that "[tomorrow] at 11 am [Eastern
Time], we will be holding a press conference to
disclose a major high school/college
basketball scandal perpetrated by @Nike that we have uncovered. This criminal conduct reaches the highest levels of Nike and involves some of the biggest names in college basketball."

Auerbach testified that he had never told Avenatti that there was criminal conduct at Nike that reached the highest levels of the company. Auerbach also believed that Avenatti's tweet was "[c]ompletely opposite" to Franklin's goals and objectives. Franklin likewise testified that he had never told Avenatti that there was criminal conduct at Nike that reached the highest levels of the company. Franklin also testified that he had
not discussed the tweet with Avenatti before it
was posted, and that Avenatti had not sought
his permission before posting the tweet.

After Avenatti posted his tweet, Nike's stock
price fell about a dollar a share, representing a
drop of "[s]omething like three hundred million
dollars or more" in the value of Nike's stock.

Franklin and Auerbach testified that -- throughout their interactions with Avenatti --he never discussed (1) an internal investigation at Nike, or the possibility that Nike would retain Avenatti to conduct such an investigation; (2) the possibility of a press conference; (3) the filing of a lawsuit against Nike; or (4) a $22.5 million settlement.

On March 25, 2020, Avenatti was arrested outside of Boise Shiller's New York Office (where they were going to "paper" the deal).

The end to Peter's question :)

Post-Script on Avenatti's Potential Motive (none / 0) (#16)
by Jeralyn on Fri Jul 09, 2021 at 05:06:22 PM EST

From the same court order denying Avenatti's motion for new trial:

Avenatti was in dire financial straits at the time
he was demanding that Nike pay him and
Geragos $15 to $25 million. The evidence
showed that Avenatti was approximately $11
million in debt , and that his law firm
had been evicted from its offices in November
2018 for a failure to pay rent. Since that time,
the lawyers and other firm employees had
been forced to work from home. Between March 15, 2019 and March 25, 2019, Avenatti told his office manager -- Judy Regnier -- that he was "working on something that could potentially provide [the firm with] a way to . . . resolve a lot of the debt that had currently been hanging over the law firm," and allow Avenatti to "start a new firm."

The defense case at trial:

Avenatti did not testify and he called no
witnesses. He introduced a number of exhibits
that purportedly went to his state of mind,
including travel team contracts, Auerbach's
"memorandum of actions," an article about the
Adidas bribery scandal, a PowerPoint presentation Auerbach had prepared, a memorandum from Auerbach concerning his call with [Nike Executive John] Slusher, and excerpts of Avenatti's web browsing and search history.

Wow, J, that is in (5.00 / 2) (#18)
by oculus on Sat Jul 10, 2021 at 01:58:25 PM EST

depth.

Getting Polanski flashback syndrome here.


Thanks much, J, although frankly that was (none / 0) (#19)
by Peter G on Sat Jul 10, 2021 at 06:58:05 PM EST

approx 8x more than I really meant to ask for. My take on it is that Avenatti and Geragos behaved egregiously unethically as lawyers, but honestly I am more opposed to hot-shots like the Boise Shiller lawyers using their connections to call in the FBI to treat as federal crimes what other adversaries in a business conflict would have to deal with as a civil matter.


Agreed. (none / 0) (#20)
by Donald from Hawaii on Sun Jul 11, 2021 at 02:52:00 AM EST

No doubt, Avenatti was incredibly reckless and foolhardy. But I defer to your judgment regarding whether it rises to the level of criminality.


Um, not so clear. (none / 0) (#40)
by scribe on Fri Jul 30, 2021 at 07:38:48 PM EST

The line between legitimate settlement negotiations and extortion is both (a) fuzzy at best and (b) easy to cross. Moreover the putative defendant, the person or entity to be sued for their wrongdoing, has every incentive to accuse the putative plaintiff's attorney of extortion. This tactic, merited or not, has a string of benefits to the putative defendant: it puts the plaintiff's attorney on the defensive, it can drive a wedge between the interests of he putative plaintiff and his attorney, it concentrates the attention not on the defendant's alleged wrongdoing but rather on the alleged wrongdoing by the plaintiff's attorney, and can be used to both minimize or eliminate the litigation risk to the defendant (i.e., save money that might have been paid in settlement) and possibly eliminate the plaintiff's lawyer by calling in the prosecutors.

Going back some years, you might remember the Bill O'Reilly sexual harassment suit, where Fox/O'Reilly went to court accusing the putative plaintiff(s) of extortion as a preemptive strike against their coming suit. Didn't work there, but it sometimes does.

Generally speaking the more florid, extravagant, forceful or threatening the settlement demands, the more likely it crosses the line. OTOH, a letter which in so many words says "enclosed please find a police report regarding the collision with my client [name] which occurred on [date] in which you are at fault. Please forward to your insurance carrier or attorney with instructions to contact me at the address above so this may be amicably resolved." is not going to rise to extortion liability.

In this case, Avenatti was apparently in desperate financial straits. I am not aware of his, or his firm, ever having conducted an internal investigation. (That doesn't mean he or his firm didn't. Rather, I just don't know. But I doubt he had the experience.) Conducting internal investigations is somewhat specialized, in that you're looking at going through a company or organization, tearing apart their books and email servers (page by page) and then asking hard questions of people who might have a lot to lose. A lot of times the lead attorneys are former prosecutors. Avenatti was not. He was a plaintiff's PI lawyer who was juggling a million balls at once (Tully's Coffee? Do one thing well...), spending a lot of time on TV ranting (and not practicing law. Do one thing well...) and broke, to boot. Moreover, if the allegations about misappropriation of funds have even the slightest shadow of truth to them, he had every reason to try to hustle up money.

So, I doubt he had the capability of doing the internal investigation.

By the time he came along to the conversations with Boies Schiller, they probably needed less than a minute to know who he was, what kind of work he did, and whether they had crossed paths with him in the course of any deep corporate law matters, like an internal investigation. It's really a small world doing that kind of work and the players are known to each other. By the time of the second phone conference they probably had figured out he was, in plain terms, a piker (or poseur) who didn't do internal investigations or serious corporate law but nonetheless could do some damage to their client with his press conference, seeing as he had a bit of a soapbox people would pay attention to. Or he was just a hustler looking for a quick score.

But, as I said, this is not so clear, and a lot of subtlety. I think he dragged Geragos along for the ride without Geragos knowing what was going on.

While Avenatti may have gotten a relatively light sentence in this case, the fact of two other pending cases cannot be excluded from the calculation. Short version: if he's convicted of the misappropriation charges, they're gonna hang him. One thing most lawyers and judges can't and won't tolerate is a crooked lawyer stealing from clients. Makes all the other lawyers look like crooks. And they aren't.


: "And they aren't." (5.00 / 1) (#41)
by oculus on Mon Aug 02, 2021 at 09:48:18 PM EST

Although the majority of lawyers disciplined by the State Bar of California seemed to have used client trust fund money for the lawyer's personal enrichment.

LOL! This certainly didn't age very well. (none / 0) (#17)
by Donald from Hawaii on Sat Jul 10, 2021 at 02:10:24 AM EST

Politico / September 14, 2018
Michael Avenatti Is Winning the 2020 Democratic Primary - "Avnatti won't be the nominee. But he's setting the terms of the debate -- and that could damage the rest of the field, and the country."

Honestly, could Politico's observation be any more obtuse? "Damage the country" is what occurs when the media deliberately cover politics as frivolous pop entertainment.

Aloha.

In many threads. (none / 0) (#23)
by oculus on Wed Jul 14, 2021 at 01:32:28 PM EST

Good thing (none / 0) (#24)
by CaptHowdy on Thu Jul 15, 2021 at 01:59:03 PM EST

There is nothing going on in the country worth talking about.

: Avenati (5.00 / 3) (#25)
by KeysDan on Thu Jul 15, 2021 at 02:29:44 PM EST

has been covered pretty well.