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AZHARI LLC BLOG

Apr. 19 2019

Why Stormy Daniels’ Ex-Lawyer Is Facing Federal Fraud Charges

Posted By: Sami Azhari

Top-tier attorney Michael Avenatti first came onto the national spotlight when he represented adult film star Stormy Daniels in her legal battles against President Donald Trump. In fact, at one time he was even considering challenging Trump in his re-election bid.

Well, Avenatti has again found himself in the national spotlight, but this time it’s for far less auspicious reasons. He has been charged with extortion and several forms of fraud by federal judges in the states of New York and California.

Avenatti was first arrested in the state of New York in late March, appeared in federal court, and was released on a $300,000 personal recognizance bond. The indictment alleges that Avenatti and a co-conspirator attempted to extort Nike for nearly $20 million.

He allegedly claimed to have evidence that Nike had funneled illegal payments to top-tier high school basketball prospects and their families, and demanded payment in exchange for not making these allegations public. Nike subsequently contacted the US attorney’s office to report the alleged extortion attempt, which later resulted in his arrest and indictment.

Avenatti’s problems didn’t stop in New York, though.

He now faces escalated charges in a Santa Ana, California federal court. He was initially charged with fraud for allegedly filing bogus tax returns to fraudulently obtain $4 million in bank loans, and embezzling $1.6 million from a client’s settlement fund.

However, last Thursday Avenatti’s case drastically escalated, and he has now been indicted on three dozen counts. Prosecutors allege that he stole millions of dollars from five clients, and lied repeatedly about his businesses and income, including to an IRS collection agent, creditors, a bankruptcy court, and a bankruptcy trustee.

Avenatti’s new charges in California now include wire fraud, bank fraud, tax fraud, and bankruptcy fraud. If he is convicted of all of these crimes, he could face a maximum prison sentence of 333 years. And federal authorities are calling for a long prison sentence.

Why?

Because high-profile cases such as Avenatti’s are used to set an example for the public, demonstrating, in the words of one IRS investigator, that “We will investigate all individuals, including high-profile attorneys who violate tax laws.”

What about the rest of us? Do regular people often face federal charges such as fraud and extortion?

The answer is a resounding “yes.” In fact, it is absolutely possible to face federal charges for much lower-level offenses. Let’s take a look at how you could potentially end up facing these charges.

Fraud

Federal law defines fraud as making an intentional deception or misrepresentation for the purpose of benefitting yourself or someone else. The US Attorney’s Offices penalizes various types of fraud specifically identified under federal laws. Each type of fraud has specific associated penalties.

Chicago Fraud Attorney

Wire fraud. Under federal law, it is illegal to use wire communications technology, including the internet, as part of a defrauding scheme. Because of this law’s broad nature, wire fraud is commonly charged in a wide range of cases. For example, paying a bribe using the internet would be considered wire fraud.

Tax fraud. Federal tax fraud, commonly referred to as tax evasion, occurs when a taxpayer attempts to avoid paying federal income taxes. This can take many forms, such as overestimating business expenses, underreporting income, or neglecting to file a tax return at all. Tax fraud is extremely common, and the IRS estimates that approximately $2 trillion of unreported income goes untaxed annually.

Bankruptcy fraud. In bankruptcy fraud, the debtor attempts to avoid paying debts in the course of bankruptcy proceedings. Most commonly, the debtor conceals assets so that they cannot be liquidated by creditors.

Bank Fraud. In bank fraud, the defendant uses illegal means to obtain money, assets, or other property from a financial institution. This often includes lying about income and assets in order to fraudulently obtain a line of credit.

Federal fraud crimes are typically prosecuted as felonies, which have a prison sentence of a year or more in federal prison. Depending on the type and monetary amount of fraud, defendants could face anywhere from six months to 20-30 years in prison per violation. Importantly, federal prisons do not allow parole or conditional release, so the entire sentence will be served in a federal prison.

Extortion

The use of force or the threat of force to obtain money or anything else of value from another party is considered extortion. Generally, extortion involves a threat of harm, which can include physical harm, financial harm, destruction of property, destruction of reputation, or abuse of official power. Under federal law, extortion requires the use of interstate communications to make a threat.

Rolling Meadows Extortion Defense Lawyer

The punishment for extortion depends on whether actual force was used to extort money or property from the victim. Under federal law, extortion carries a prison sentence of up to 20 years if convicted.

As you can see, these crimes are treated with the utmost seriousness – even if you’re not a famous lawyer. That’s why it’s important to understand what, exactly, constitutes a federal offense and how to fight back if charged.

 

About the Author

Sami Azhari has been working as a lawyer since 2007, after receiving his Juris Doctor from the Michigan State University College of Law. He has handled numerous state and federal cases, and is known throughout the Chicago and Rolling Meadows area for providing his clients with high-quality, skilled representation. He has been recognized by SuperLawyers, the National Trial Lawyers Association, and other notable organizations, and has spoken at a number of legal conferences.