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United States v. Avenatti

United States District Court, S.D. New York

January 14, 2020

UNITED STATES OF AMERICA
v.
MICHAEL AVENATTI, Defendant.

          MEMORANDUM OPINION & ORDER

          Paul G. Gardephe United States District Judge

         Indictment (S1) 19 Cr. 373 charges Michael Avenatti with transmitting interstate communications with intent to extort, in violation of 18 U.S.C. § 875(d) (Count One); Hobbs Act extortion, in violation of 18 U.S.C. § 1951 (Count Two); and honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346 (Count Three). The Government charges that Avenatti - who is licensed to practice law in California - transmitted in interstate commerce threats “to cause financial harm to Nike and its reputation if Nike did not agree to make multimillion dollar payments to Avenatti”; “used threats of economic and reputational harm in an attempt to obtain multimillion dollar payments from Nike”; and used interstate communications to “engage[] in a scheme to obtain payments for himself from Nike based on confidential information provided to AVENATTI by Client-1 for the purpose of furthering AVENATTI's representation of Client-1, without Client-1's knowledge or approval, ” thereby depriving Client-1 of the “duty of honest services” he was owed. ((S1) Indictment (Dkt. No. 72) ¶¶ 20, 22, 24) (emphasis in original).

         Avenatti has moved to dismiss all three counts of the (S1) Indictment on the grounds that “that he was targeted for prosecution in this case for unconstitutionally vindictive and selective reasons.” In the alternative, Avenatti seeks discovery and an evidentiary hearing concerning these defenses. (Def. Br. (Dkt. No. 29) at 7, 48-49; see also Def. Mot. (Dkt. No. 28))[1] For the reasons stated below, Avenatti's motion to dismiss will be denied.

         BACKGROUND

         I. THE (S1) INDICTMENT'S FACTUAL ALLEGATIONS AND CHARGES

         The (S1) Indictment alleges that Client-1 - since identified as Gary Franklin - is the director and head coach of an amateur youth basketball program (the “Basketball Program”) based in California. “For a No. of years, the Basketball Program . . . had a sponsorship program with Nike[, ] pursuant to which Nike paid the program approximately $72, 000 annually.” ((S1) Indictment (Dkt. No. 72) ¶ 5) In March 2019, Franklin sought legal assistance from Avenatti “after [Nike informed] the Basketball Program . . . that its annual contractual sponsorship would not be renewed.” (Id. ¶ 8)

         Avenatti and Franklin met on March 5, 2019. “During that meeting and in subsequent meetings and communications, [Franklin] informed AVENATTI . . . that [he] wanted Nike to reinstate its $72, 000 annual contractual sponsorship of the Basketball Program.” “During the [March 5, 2019] meeting, [Franklin] [also] provided AVENATTI with information regarding what [Franklin] believed to be misconduct by certain employees of Nike involving the alleged funneling of illicit payments from Nike to the families of certain highly ranked high school basketball prospects.” (Id. ¶ 9) (emphasis in original).

         At the March 5, 2019 meeting, Avenatti told Franklin “that [he] believed that he would be able to obtain a $1 million settlement for [Franklin] from Nike. . . .” However,

at no time during the March 5, 2019 meeting or otherwise did AVENATTI inform [Franklin] that AVENATTI also would and did seek or demand payments from Nike for himself in exchange for resolving any potential claims made by [Franklin] and not causing financial and reputational harm to Nike, or that AVENATTI would and did seek to make any agreement with Nike contingent upon Nike making payments to AVENATTI himself. Furthermore, at no time did AVENATTI inform [Franklin] that AVENATTI intended to threaten to publicize the confidential information that [Franklin] had provided to AVENATTI, nor did AVENATTI obtain [Franklin's] permission to publicize any such information.

(Id. ¶ 10) (emphasis in original).

         The Indictment goes on to allege that during a March 19, 2019 meeting with Nike's lawyers, Avenatti told Nike that

he represented Franklin, “a youth basketball coach, whose team had previously had a contractual relationship with Nike, but whose contract Nike had recently decided not to renew”;
Franklin “had evidence that one or more Nike employees had authorized and funded payments to the families of top high school basketball players and attempted to conceal those payments”;
Avenatti “intended to hold a press conference the following day to publicize the asserted misconduct at Nike, which would negatively affect Nike's market value”; and
Avenatti “would refrain from holding that press conference and damaging Nike if Nike agreed to two demands: (1) Nike must pay $1.5 million to [Franklin] as a settlement for any claims [Franklin] might have regarding Nike's decision not to renew its contract with the Basketball Program; and (2) Nike must hire AVENATTI and Attorney-1 to conduct an internal investigation of Nike, with a provision that if Nike hired another firm to conduct such an internal investigation, Nike would still be required to pay AVENATTI and Attorney-1 at least twice the fees of any other firm hired.”

(Id. ¶ 11) (emphasis in original).

         In a March 20, 2019 telephone call with Nike's counsel, Avenatti reiterated that he expected to “get a million five for [Franklin]” and to be “hired to handle the internal investigation, ” for which he demanded a “multimillion dollar retainer” in exchange for not holding a press conference. (Id. ¶ 13(a)-(b)) According to Avenatti, “3 or 5 or 7 million dollars” would not be sufficient for his retainer. Unless Nike agreed to a larger retainer, Avenatti would hold a press conference that would “take ten billion dollars off [Nike's] market cap” (Id. ¶ 13(c)) Avenatti also stated that “he expected to be paid more than $9 million” by Nike. (Id. ¶ 13(d)) At the end of the call, Avenatti agreed to meet with Nike's lawyers the next day. (Id. ¶ 13(e))

         On March 21, 2019, Avenatti met with Nike's lawyers in Manhattan. (Id. ¶ 14) At that meeting, Avenatti demanded “a $12 million retainer to be paid immediately and to be ‘deemed earned when paid,' with a minimum guarantee of $15 million in billings and a maximum of $25 million, ‘unless the scope changes.'” (Id. ¶ 14(a)) Nike's counsel asked Avenatti whether Nike could simply pay Franklin, “rather than retaining AVENATTI. AVENATTI responded that he did not think it made sense for Nike to pay [Franklin] an ‘exorbitant sum of money . . . in light of his role in this.'” (Id. ¶ 14(b)) (emphasis in original) Avenatti agreed to meet with Nike's counsel “on March 25, 2019, to hear whether Nike was willing to make the demanded payments. AVENATTI stated that Nike would have to agree to his demands at that meeting or he would hold his threatened press conference.” (Id. ¶ 14(f)) (emphasis in original).

         According to the (S1) Indictment, Avenatti did not “inform [Franklin] that Nike had offered to resolve [Franklin's] claims without paying AVENATTI. Nor did AVENATTI inform [Franklin] that AVENATTI had continued to threaten to publicize confidential information provided to AVENATTI by [Franklin], or that AVENATTI had continued to use that information to demand a multimillion dollar payment for himself.” (Id. ¶ 14(g)) (emphasis in original).

         About two hours after the March 21, 2019 meeting, and without consulting Franklin, Avenatti posted the following message on Twitter:

         (Image Omitted)

         (Id. ¶ 15; see also @MichaelAvenatti, Twitter (Mar. 21, 2019, 3:52 p.m.), https://twitter.com/MichaelAvenatti/status/1108818722767163392) The article linked in the March 21, 2019 tweet refers to a prosecution brought by the Government against employees of Adidas - a competitor of Nike. (Id. ¶ 16)

         On March 25, 2019, after Avenatti learned that law enforcement officers had approached Franklin, Avenatti posted the following message to Twitter:

         (Image Omitted)

         (Id. ¶ 18; see also @MichaelAvenatti, Twitter (Mar. 25, 2019, 12:16 p.m.), https://twitter.com/MichaelAvenatti/status/1110213957170749440)

         Later that day, Avenatti was arrested as he approached Nike's counsel's office complex in Manhattan for the scheduled March 25, 2019 meeting. (Id. ¶ 17)

         The (S1) Indictment charges Avenatti with: (1) transmitting interstate communications with intent to extort, in violation of 18 U.S.C. § 875(d), in that “AVENATTI, during an interstate telephone call, threatened to cause financial harm to Nike and its reputation if Nike did not agree to make multimillion dollar payments to AVENATTI”; (2) attempted extortion, in violation of 18 U.S.C. § 1951, in that “AVENATTI used threats of economic and reputational harm in an attempt to obtain multimillion dollar payments from Nike, a multinational public corporation”; and (3) honest services wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346, in that he “engaged in a scheme to obtain payments for himself from Nike based on confidential information provided to AVENATTI by [Franklin] . . . without [Franklin's] knowledge or approval, and used and caused the use of interstate communications to effect the scheme.” (Id. ¶¶ 20, 22, 24) (emphasis in original).

         II. DEFENDANT'S MOTION TO DISMISS ON GROUNDS OF VINDICTIVE AND SELECTIVE PROSECUTION

         Avenatti contends that the charges against him must be dismissed because “he was targeted for prosecution in this case for unconstitutionally vindictive and selective reasons.” (Def. Br. (Dkt. No. 29) at 7) In support of his motion, Avenatti makes the following arguments:

1. The initial charges against Avenatti were premised on an inadequate investigation “that lasted less than four business days” and that was conducted at “breakneck speed.” (Id. at 7, 11; see also id. at 9 (the U.S. Attorney's Office “arrested Mr. Avenatti before conducting a real investigation of Coach Franklin's claim”); id. at 32 (the U.S. Attorney's Office “never bothered to seriously investigate the facts before charging Mr. Avenatti”)).
2. At a press conference conducted on the day of Avenatti's arrest - and in a press release issued that day - U.S. Attorney Geoffrey Berman stated that (a) “when lawyers use their law licenses as weapons, as a guise to extort payments for themselves, they are no longer acting as attorneys. They are acting as criminals, and they will [be] held responsible for their conduct.”; and (b) at that same press conference, the U.S. Attorney stated that “Avenatti's conduct had nothing to do with zealous advocacy for a client or any other kind of legitimate legal work.” (Id. at 7-8 (quoting Srebnick Decl., Ex. A (Dkt. No. 30-1) (Press Release) at 2; March 25, 2019 USAO-SDNY Press Conference Video at 00:31-00:39;)[2] Avenatti asserts that these comments reflect Berman's personal animus and malice towards him, and violate Local Criminal Rule 23.1(d)(7), which bars lawyers and “government agents” from offering “[a]ny opinion as to the accused's guilt or innocence or as to the merits of the case or the evidence in the case.” (Id. at 8 n.3 (citing L.R. Crim. P. 23.1(d)(7)).
3. Mark Geragos - the “Attorney-1” referenced in the (S1) Indictment, and the unindicted co-conspirator in the original indictment - was not prosecuted, even though he initiated contact with Nike's counsel, and attended meetings at which Avenatti presented his demands to Nike. “Mr. Geragos and Mr. Avenatti advocated in unison and shared the same strategy, ” and yet only Avenatti was charged. (Id. at 9-11, 24-25, 30-32)
4. No. “John Doe” attorney who committed comparable conduct would have been prosecuted by the U.S. Attorney's Office. (Id. at 47)
5. Franklin's contemporaneous text messages and emails show that “Avenatti's demand to spearhead an investigation of Nike was consistent with, and in furtherance of, the expressly-stated and legitimate litigation objectives that Coach Franklin sought to pursue long before he first contacted Mr. Avenatti.” (Id. at 10 (emphasis in original); see also id. at 29 n.14).
6. The personal animosity between President Trump and Avenatti arising from Avenatti's prior representation of porn star Stephanie Clifford, a/k/a Stormy Daniels demonstrates that this is a vindictive prosecution. According to Avenatti, President Trump's personal lawyer Michael Cohen orchestrated a $130, 000 payment to Daniels in order to secure her silence concerning her alleged affair with President Trump. Cohen came under investigation by the Southern District U.S. Attorney's Office for “alleged campaign finance violations, ” and U.S. Attorney Berman recused himself from that investigation. “President Trump hired Rudy Giuliani, USA Berman's former law partner, as his personal counsel in connection with the Cohen investigation.” (Id. at 33-34)
Southern District prosecutors pursuing the Cohen investigation scheduled an interview with Avenatti's then client Daniels, but prosecutors cancelled the meeting the night before, “accusing Mr. Avenatti in an e-mail of leaking to the press the fact and location of the meeting.” (Id. at 34)
Avenatti asserts that “[w]hile the FBI was conducting its criminal investigation into the illegal payment to Daniels, Mr. Avenatti was President Trump's chief antagonist in the civil arena and in the court of public opinion. Mr. Avenatti represented Daniels in connection with two lawsuits against Trump. . . . Mr. Avenatti was interviewed on television hundreds of times about President Trump's behavior and became, in many ways, the foil for President Trump. . . . President Trump did not take kindly to Mr. Avenatti's advocacy for his client. . . .” (Id. at 34-35)
In a September 26, 2018 tweet, President Trump said the following about Avenatti:
Avenatti is a third[-]rate lawyer who is good at making false accusations, like he did on me and like he is now doing on Judge Brett Kavanaugh. He is just looking for attention and doesn't want people to look at his past record and relationships - a total low-life!
(Id. at 36)
On October 16, 2018, after Daniel's defamation case against Trump was dismissed, President Trump issued a tweet celebrating the victory, and saying, “now I can go after Horseface and her 3rd rate lawyer. . . .”
(Id. (emphasis omitted))

         7. The relationship between President Trump and U.S. Attorney Berman demonstrates that this is a vindictive prosecution. Avenatti notes that Berman was interviewed for his current position by President Trump, was appointed to his current position by Attorney General Sessions, was never confirmed by the Senate, and is currently serving as U.S. Attorney pursuant to 28 U.S.C. § 546(d) and order of the judges of the Southern District of New York. Avenatti further notes that Berman was formerly a partner in Greenberg Traurig - the same law firm in which Giuliani was briefly a partner; that Berman served on Trump's presidential transition team; and that he donated $5400 to the Trump campaign. (Id. at 37-38)

         Avenatti contends that these facts and circumstances require that the charges against him be dismissed on grounds of vindictive and selective prosecution. In the alternative, Avenatti asserts that he is entitled to broad discovery from the U.S. Attorney's Office concerning these defenses, and to an evidentiary hearing. (Def. Br. (Dkt. No. 29) at 7, 48-49; see also Def. Mot. (Dkt. No. 28)) As to discovery from the U.S. Attorney's Office, Avenatti contends that he is entitled to the following:

1. All internal documents, including memoranda, notes, e-mails, and text messages that, in any way, reference the reasons why Mr. Avenatti was arrested and/or charged in this case;
2. All internal documents, including memoranda, notes, e-mails, and text messages that, in any way, reference the reasons why Mark Geragos was not arrested or charged in this case;
3. A list of all cases in the last 25 years in which a lawyer was charged with extortion for settlement demands made in connection with the representation of a client;
4. All oral and written communications, including but not limited to memoranda, emails, text messages, and the like, between the USAO-SDNY and the Department of Justice regarding the decision to arrest and charge Mr. Avenatti;
5. All oral and written communications, including but not limited to memoranda, emails, text messages, and the like, written by members of the USAO-SDNY expressing negative personal feelings about Mr. Avenatti, in connection with the instant investigation, the investigation that led to his arrest in United States v. Avenatti, No. 19-374-cr-DAB, or the Michael Cohen investigation;
6. All oral and written communications, including but not limited to memoranda, emails, text messages, and the like, between the USAO-SDNY and the Department of Justice regarding the decision not to arrest or charge Mr. Geragos; and
7. All oral and written communications, including but not limited to memoranda, emails, text messages, and the like, between the USAO-SDNY and/or the Department of Justice and the White House, President Trump, or anyone on his behalf (e.g., his personal counsel), regarding Mr. Avenatti.
8. All documents reflecting any communication regarding Mr. Avenatti between the USAO-SDNY and/or the Department of Justice and the White House, President Trump, or anyone on ...

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