Incarcerated lawyer Michael Avenatti was sentenced to a 14-year prison term on Monday for defrauding former clients out of millions of dollars and trying to stop the Internal Revenue Service (IRS) from taking payroll taxes from a coffee shop he owned.
In the California case, Avenatti defrauded four clients out of around $7.6 million from lawsuits that he won for them, only to steal the money to fund a lavish lifestyle, according to federal authorities.
According to the Department of Justice, Avenatti stole money from client trust accounts after receiving it on their behalf, lied to them about receiving it, or in one instance, claimed that it had already been given to them.
He also obstructed and impeded the IRS from collecting more than $3.2 million in unpaid payroll taxes by lying to an IRS revenue officer, directing employees to stop depositing cash receipts, and changing the company name, Employer Identification Number, and bank account listed with his credit card processing company to avoid IRS levies, according to the DOJ.
U.S. District Judge James Selna said Avenatti “has done great evil for which he must answer.”
Selna mandated that the 14-year sentence run concurrently with two different sentences the former lawyer is already serving, which totals five years, that had been imposed in federal cases in the Southern District of New York.
Avenatti, who was once seen as a rising star in the Democratic Party, was also ordered to pay over $10.8 million in restitution to the IRS and four clients.
The Internal Revenue Service (IRS) building in Washington on Feb. 19, 2014. (Jim Watson/AFP/Getty Images)
The DOJ said that according to a sentencing memorandum submitted by the prosecution, Avenatti carried out his scam by lying about the actual terms of the settlement agreements he had negotiated for the clients.
He would cover up the counterparty’s settlement payments, steal and spend the client’s settlement money, and mislead the client into not objecting or looking into it further by offering tiny “advances” on the ostensibly unpaid funds, according to the sentencing memorandum.
U.S. Attorney Martin Estrada called Avenatti a “corrupt lawyer” who deceitfully claimed he fought for the “little guy” while serving his own interests.
“He stole millions of dollars from his clients—all to finance his extravagant lifestyle that included a private jet and race cars,” Estrada said in a statement.
“As a result of his illegal acts, he has lost his right to practice law in California, and now he will serve a richly deserved prison sentence.”
Celebrity attorney Michael Avenatti walks out of a New York court house after pleading not guilty Tuesday in federal court, New York, on May 28, 2019. (Spencer Platt/Getty Images)
Tyler Hatcher, the special agent in charge of IRS Criminal Investigation at the Los Angeles field office, said Avenatti used the money he stole from his clients to pay for a lavish lifestyle “that had no limits.”
“While today’s sentencing concludes the government’s case against Mr. Avenatti, the enormous damage left behind will be felt by his former clients for quite some time,” Hatcher said.
“It is our sincere hope that his victims will take some solace in the fact that he has been held accountable for his criminal actions.”
This latest sentence comes after Avenatti entered guilty pleas to four counts of wire fraud and one count of attempting to obstruct the Internal Revenue Code’s administration on June 16.
Avenatti, who rose to prominence after he represented adult film actor Stormy Daniels in her 2016 lawsuit against former President Donald Trump, has been in federal prison since Feb. 7.
The former lawyer was already serving a four-year term after being convicted of wire fraud and aggravated identity theft by a Manhattan federal jury in February for taking approximately $300,000 in book sales from Daniels.
“Full Disclosure,” a memoir by adult film actor Stormy Daniels, is offered for sale at a Barnes & Noble store in Chicago, Illinois, on Oct. 2, 2018. (Scott Olson/Getty Images)
Daniels testified in February that the former lawyer “took from me and lied to me.” In September, U.S. District Judge Jesse Furman ordered Avenatti to pay approximately $148,000 in restitution to Daniels.
Additionally, the disgraced lawyer was found guilty in 2020 of trying to extort millions of dollars from Nike, and he is serving a two-and-a-half-year sentence for that conviction.