Los Angeles, CA - Internal Revenue Service (IRS) agents arrested beleaguered attorney Michael Avenatti on Tuesday during a break in a disciplinary hearing before the California bar association.
Avenatti was before a judge because the State Bar of California wanted to stop him from practicing law because of the “threat of substantial harm to the public,” Forbes reported.
The attorney has been accused of stealing millions of dollars in settlement money that was paid to his clients to fund his own lavish lifestyle and business ventures.
IRS agents arrested Avenatti outside State Bar Court at about 6 p.m. on Jan. 14, FOX News reported.
When the hearing resumed, attorneys for Avenatti told the judge their client wouldn’t be returning to the courtroom because of circumstances related to criminal charges he is facing in Orange County.
Avenatti has been charged with fraud and aggravated identity theft for allegedly bilking Stormy Daniels, whose legal name is Stephanie Clifford, out of the book advance she got from her publisher, NBC News reported.
He represented the porn star in two lawsuits against President Donald Trump, but in November of 2018 Daniels accused Avenatti of filing a defamation suit against the President without her permission.
She also accused Avenatti of setting up crowdfunding accounts for her without her knowledge or consent.
Daniels lost both lawsuits against the President and was ultimately ordered to pay him $293,000 for legal fees.
Her book, “Full Disclosure,” was released just a month before she fired her attorney.
Federal prosecutors said Avenatti used a "fraudulent document purporting to bear his client’s name and signature to convince his client’s literary agent to divert money owed to Avenatti's client to an account controlled by Avenatti.”
The indictment said Daniels’ agent made two payments of over $148,000 to Avenatti and that so far, his client has only received half of it, NBC News reported.
Prosecutors said the attorney used Daniels’ money to pay his employees, prop up his failing coffee business, and to pay for personal luxuries like his Ferrari and his dry cleaning.
Avenatti has denied the allegations and pleaded not guilty in court.
The spokesman for the U.S. Attorney's Office in Los Angeles, Thom Mrozek, said Avenatti had been picked up by IRS agents for allegedly violating the terms of his pre-trial release, FOX News reported.
"I do expect him to appear in federal court in Santa Ana tomorrow," Mrozek said.
The prosecutor claimed the documents related to the arrest were under seal, according to FOX News.
“I can confirm that he was arrested by federal agents," Dean Steward, an attorney for Avenatti, told reporters as he left the building "I anticipate a bail hearing at 2 p.m. tomorrow in Magistrate's Court in Santa Ana. I haven't seen the details of the warrant but should have it later this evening.”
Steward said the matter was likely tied to financial matters because Avenatti owed millions of dollars in civil judgements, according to NBC News.
"It's my understanding it has something to do with a bail violation, but I don't have the warrant," he said. “Exactly what the details are I don’t know. But I’m almost positive it has something to do with finances.”
The U.S. Attorney’s Office for the Central District of California announced a 61-page federal indictment on April 11 that detailed how Avenatti allegedly embezzled and hid millions of dollars from his clients, ABC News reported.
The thefts took place over a 10-year period and, if he’s found guilty, could land the attorney in federal prison for more than 300 years.
“The money was used to fuel a lavish lifestyle that had no limits, including making mortgage payments on a multi-million dollar home in Laguna Beach," Acting Special Agent in Charge of Internal Revenue Service Criminal Investigation Ryan Korner said at the press conference to announce the indictment.
U.S. Attorney Nick Hanna detailed allegations that Avenatti had stolen from at least five clients, including a paraplegic client who won a $4 million settlement from Los Angeles County, NPR reported.
“Mr. Avenatti received money on behalf of clients into client trust accounts, misappropriated the money, and lied to the clients about receiving the money,” Hanna explained.
Court documents said Avenatti, who had already received the settlement on behalf of paraplegic Geoffrey Johnson, would occasionally dole out “advance” payments to him not to exceed $1,900.
Prosecutors also said the attorney undermined Johnson’s attempt to buy a house and risked his Social Security payments when he failed to submit paperwork, according to NPR.
“Mr. Johnson is the victim of an appalling fraud perpetrated by the one person who owned him loyalty and honest most of all: his own lawyer,” Johnson’s attorney, Josh Robbins, told ABC News in a written statement. “His actions have left Mr. Johnson destitute.”
Hanna said Avenatti followed the same pattern with at least four other clients.