Celebrity attorney Michael Avenatti was on Monday arrested in New York on charges of attempting to extort more than $20 million from Nike (NYSE: NKE) and embezzling a client’s money to pay expenses for his coffee company. Prosecutors said he threatened to reveal claims that Nike employees authorized payments to the families of top high school basketball players.
According to court documents filed by the Southern District of New York, Avenatti and a co-conspirator claimed they had proof that Nike employees had channeled funds to recruits on the condition that they were going commit to college teams sponsored by the company. Avenatti then threatened to release the evidence on the eve of Nike’s quarterly earnings call and the start of the NCAA tournament, unless the company paid him at least $22.5 million.
Allegations of misconduct by Nike employees would have damaged the image and market cap of the athletic footwear giant. The complaint says that in a follow-up call with Nike’s attorneys on March 20, Avenatti vowed to take ten billion dollars off Nike’s market cap if the company ignored his demands.
Prosecutors have also charged him for using fraudulent tax returns in order to secure millions of dollars in bank loans. Prosecutors say he allegedly defrauded a Mississippi bank by providing false tax returns to the bank in order to receive three loans totaling $4.1 million for his coffee business and law firm in 2014.
Avenatti, 48, is best known for representing porn actress Stormy Daniels in lawsuits against U.S. President Donald Trump. Daniels claims she had an affair with the President years ago. The President has repeatedly denied having a relationship with the adult film maker. Daniels, whose real name is Stephanie Clifford, released a statement on her Twitter account saying she was “saddened but not shocked” over Avenatti’s arrest.
The embezzlement case against Avenatti was brought by the U.S. attorney’s office in Los Angeles, while the Nike case was brought by the U.S. attorney’s office in Los Angeles. Prosecutors revealed the charges shortly after Avenatti tweeted that he would hold a press conference tomorrow (Tuesday) to announce “a major high school/college basketball scandal” that reached “the highest levels of Nike.”
Avenatti would face up to 50 years in federal prison if convicted on both charges. U.S. Attorney Nick Hanna said, “A lawyer has a basic duty not to steal from his client. Mr. Avenatti is facing serious criminal charges alleging he misappropriated client trust funds for his personal use and he defrauded a bank by submitting phony tax returns in order to obtain millions of dollars in loans.”
Federal prosecutors said that the alleged financial crimes that Avenatti committed helped fund his lavish lifestyle that included owning a $5 million home in Laguna Beach.