Michael Avenatti client embezzlement trial opens

July 21, 2021 6:35 PM PT

Alexis Gardner was living out of her car in West Hollywood when she hired Los Angeles lawyer Michael Avenatti in 2016 to reach a settlement with her ex-boyfriend, pro basketball player Hassan Whiteside.

Avenatti quickly cut a deal, but prosecutors say he stole Whiteside’s initial $2.75-million payment to Gardner and spent most of it on a private jet.

Avenatti covered up the theft, they say, by telling his client that Whiteside, then with the NBA’s Miami Heat, would send her monthly payments of $16,000 for eight years.

Gardner complained in a text to Avenatti more than a year later that Whiteside had fallen behind with the payments.

“????” Avenatti responded. “I will find out what the hell is going on.”

The alleged deception was laid out Wednesday by assistant U.S. Atty. Brett Sagel in opening statements at Avenatti’s fraud trial in Santa Ana. Prosecutors say he embezzled nearly $10 million in settlement funds from Gardner and four other clients.

The criminal trial is the second of four for Avenatti, a testament to how far he has fallen from his days as a celebrity lawyer for porn actress Stormy Daniels in her lawsuits against former President Trump.

Avenatti, 50, was sentenced in New York two weeks ago to 30 months in federal prison for trying to extort as much as $25 million from Nike Inc. and for defrauding another client, Gary Franklin, a former coach of a Los Angeles youth basketball program.

In the third trial, also in Santa Ana, Avenatti will face federal charges of bank fraud, failure to file tax returns, bankruptcy fraud, perjury and related crimes.

In the fourth, in federal court in New York, he is charged with stealing from Daniels by skimming money from her deal to write a memoir detailing her alleged sexual tryst with Trump.

The criminal charges have cost Avenatti his California law license, but U.S. District Judge James V. Selna has nonetheless allowed him to represent himself pro se at the fraud trial.

“Let me be clear: No crime was committed by me, and I never intended to steal or defraud any client of any money at all,” Avenatti told the jury on Wednesday. “Not last week, not last month, not last year. Never.”

The trial opened with Sagel telling jurors that Avenatti stole the $2.75 million that Whiteside, now a player for the Sacramento Kings, sent to his firm as part of the $3-million settlement.

Sagel did not explain why Gardner sought the settlement, but she and Whiteside said in a joint statement in 2019 that it “reflected Alexis’ investment of time and support over a number of years as Hassan pursued a career in the NBA.”

As soon as Avenatti got the money, Sagel said, he put $2.5 million of it into the purchase of a Honda HA-420 jet. Federal authorities seized the plane at the Santa Barbara Airport in 2019.

The prosecutor showed the jury some of the text messages showing Avenatti misleading Gardner about Whiteside’s payments, saying he lied in similar ways to the other clients whose money he stole.

“You will see and hear throughout this trial the false statements defendant made to his clients,” Sagel said.

One of Avenatti’s other clients, Geoffrey Ernest Johnson, was a mentally ill paraplegic on disability. He won a $4-million settlement from L.A. County in 2015 after suing over his treatment at the Twin Towers Correctional Facility.

Johnson jumped twice from an upper floor of the jail in suicide attempts, injuring himself so badly the second time that he can never walk again.

Sagel told the jury that Johnson hoped to use the settlement money to buy a handicapped-accessible home and van to “make living life in a wheelchair easier.”

The prosecutor said Avenatti obtained the $4-million check, concealed the payment from Johnson and spent “the entire amount” on himself and his businesses. Avenatti later challenged that remark when Patrick McNicholas, a fellow lawyer on the case, testified that his firm received a fee of more than $350,000 from the settlement.

In his opening remarks, Avenatti described himself as a fighter for “the little guys.”

He recalled meeting Gardner at a Starbucks in West Hollywood and hearing her story of sleeping in her car in a supermarket parking lot and “hoping that the security officers would not knock on her window in the middle of the night and tell her to leave.”

“I was horrified,” he said. He and his firm “immediately made sure she had a place to lay her head at night,” Avenatti said.

As for Johnson, he said that he and his firm, Eagan Avenatti, now defunct, had paid for his living accommodations and his “extremely expensive” medical care.

Avenatti also accused the government of failing to take into account all of the out-of-pocket expenses that he said were rightfully deducted from his clients’ settlements, such as travel costs and fees to buy transcripts of testimony.

The investigation and prosecution “has been plagued by sloppiness,” he said. “We will show that it is smoke and mirrors.”