Michael Avenatti's problems just keep piling up.
A law firm owned by Stormy Daniels' attorney, Michael Avenatti, was slapped with a $10 million judgment Tuesday in U.S. bankruptcy court after he failed to pay $2 million to a former colleague, according to the Los Angeles Times.
Judge Catherine Bauer of U.S. Bankruptcy Court in Santa Ana ordered the Eagan Avenatti law firm to pay the $10 million to Jason Frank, a lawyer who used to work at the Newport Beach firm. -LA Times
"At this point, that's what's appropriate," Bauer said at a brief hearing.
Avenatti had personally guaranteed Frank that the $2 million would be paid last week, however neither he nor his firm paid him.
In a settlement of his firm's bankruptcy case, Avenatti personally promised to pay Frank $4.85 million, starting with the $2 million that was due last week.
Avenatti agreed that if he missed the deadlines for turning over the money, he would accept a Bankruptcy Court judgment ordering his law firm to pay Frank $10 million, including the $4.85 million that he'd personally guaranteed.
Frank had initially tried to collect the money through arbitration.
The three retired judges who oversaw the arbitration ordered Eagan Avenatti to give Frank the tax returns and financial records that he needed to calculate the exact amount he was owed. -LA Times
At the bankruptcy hearing, U.S. Attorney Najah Shariff told Judge Bauer that the federal government would also file a motion soon demanding payment of $2.4 million in back taxes, penalties and interest, according to court records. Almost $1.3 million of that was for payroll taxes that his firm withheld from employees but did not turn over to the government.
Avenatti has paid at least $1.5 million of what was due, according to the U.S. attorney's office in Los Angeles. But he and his firm missed an installment that was due last week, Shariff told the court.
Avenatti, who has blamed the unpaid taxes on an unnamed payroll company, accused The Times of "purposely confusing me with a separate legal entity that has no role in the Daniels case."
A furious Avenatti responded to the Los Angeles Times, calling the story "irrelevant" and "Over blown. Sensational reporting at its finest. No judgment against me was issued nor do I owe any taxes."
Avenatti notably said "nor do I owe any taxes," failing to mention that it's actually his business at question - of which he is the lead equity partner.
Nonsense. Completely different law firm - no ties to Daniels case. Irrelevant. Over blown. Sensational reporting at its finest. Check the facts next time please and report accurately.— Michael Avenatti (@MichaelAvenatti) May 22, 2018
The Times notes, however, that Avenatti "has repeatedly sent emails to The Times about the Daniels case from an Eagan Avenatti email address, with Eagan Avenatti below the signature line."
After leaking the financial records of President Trump's personal attorney, Michael Cohen (along with two unrelated Michael Cohens he wrongly accused "possibly fraudulent" payments), people began digging into Avenatti's past - only to discover a train-wreck of shady business dealings, unpaid taxes, a state-bar complaint, and dozens of lawsuits in the wake of a failed venture in the coffee industry.
And as various media outlets have begun to cover Avenatti - from his dodgy past to criticisms of his legal strategy behind the Stormy Daniels case, the balding bulldog attorney seems to have come a bit unglued.
Last Monday, he sent an "insane" email to The Daily Caller's Peter Hasson after he and Joe Simonson reported on a variety of questionable business dealings - using publicly available information, such as a complaint to the California bar claiming his now-defunct venture into the coffee industry dodged millions in taxes after he mislead a business partner (who sued).
Avenatti's threats received an immediate pushback - with CNN's Ryan Lizza commenting "It seems fair and well-reported to me. If there is something specific that is false Avenatti should point that out rather than threatening the reporters."
48 hours later, Avenatti was at it again - allegedly calling the Hollywood Reporter's Eriq Gardner an "asshole" before demanding to speak with Gardner's editor over an unflattering article questioning the soundness of his legal strategy in the Daniels case.
M]any lawyers believe Avenatti's strategy is risky. His argument — Trump didn't sign the contract with the nondisclosure agreement, so it isn't valid — isn't terrible, but it's no slam dunk. After all, Daniels did accept $130,000 for her silence and hasn't returned any of it. But if Avenatti ends up losing, the cost to Daniels could be ruinous. One court document suggested the damages might reach $20 million, and that was based on the first leg of the media tour. It could be higher now.
And even as he takes risks for his client, Avenatti seems to be positioning himself for a bright future. Vanity Fair reported that he approached MSNBC president Phil Griffin about getting his own show, although Avenatti later claimed it was the other way around — networks approached him. Regardless, Avenatti's profile-boosting posturing certainly will be a win for him. "This ceased being about 'the law' and 'her rights' about three seconds after they filed the lawsuit," says Robert Schwartz, a litigation partner at Irell & Manella. "There is no meaningful downside. The coverage will drive business to him for years." -Hollywood Reporter
Gardner said that as he was in the middle of composing the article, Avenatti contacted the Hollywood Reporter "to express concern."