LOS ANGELES _ Michael Avenatti hid millions of dollars from the court overseeing his law firm's bankruptcy and used much of the money for personal compensation, a former partner alleges in new court records.
The firm, Eagan Avenatti, was required by law to file monthly reports on its income and spending during the year when it was under U.S. Bankruptcy Court protection from its creditors, starting in March 2017. Avenatti signed the reports under penalty of perjury as the firm's managing partner and majority owner.
But the reports did not disclose that Avenatti opened six bank accounts that received millions of dollars in legal fees during the bankruptcy, his former partner claims in court documents filed Tuesday night.
The reports also divulged nothing about the personal compensation to Avenatti, which would have required permission from the bankruptcy trustee, the court papers allege.
Avenatti used some of the money for personal expenses such as $14,236 in rent for his Century City apartment, a $3,640 payment on his Ferrari, $16,000 to Passport 420, an Avenatti company that owns a Honda jet, and tens of thousands of dollars in bills for his troubled coffee company, Global Baristas, the records show.
The court documents were filed by Jason Frank, a former lawyer at Eagan Avenatti who has been trying for eight months to collect a $10 million judgment he won against the firm. Frank's court papers allege that Avenatti's bank maneuvers were an unlawful effort to dodge his firm's creditors.
"This includes brazen acts of bankruptcy fraud," Frank's lawyer, Scott H. Sims, wrote in the court papers.
Avenatti denied wrongdoing.
"Every dollar has been properly accounted for and reported as required and as previously set forth in numerous accountings," he said by email. "This is much to-do about nothing."
Avenatti, best known for tormenting President Donald Trump as he represented porn actress Stormy Daniels in a hush-money scandal, said the bankruptcy court did not require all of his legal fees to be paid through Eagan Avenatti.
"There has never been any misdeeds or fraud _ any claim to the contrary is politically motivated, completely bogus and driven by Jason's own personal demons and vendetta," he said.
Avenatti is scheduled to appear Thursday in federal court in Santa Ana for an interrogation by Frank's lawyers on the firm's failure to pay the $10 million judgment.
In the new court papers, Frank asked U.S. District Judge Virginia A. Phillips to appoint a receiver to seize Eagan Avenatti and stop the firm from dissipating its assets. Eagan Avenatti was recently evicted from its Newport Beach offices after skipping monthly rent payments.
Last month, Frank asked the judge to hold Avenatti and the firm in contempt of court for defying a subpoena for some of the firm's financial records. He urged the judge to put Avenatti in jail to compel compliance. She has not yet scheduled a hearing on the request.
Through subpoenas to banks, Frank obtained records that detail millions of dollars in lawsuit settlement payments, legal fees and other funds that Avenatti collected during the bankruptcy but did not disclose to the trustee, the new court records show.
In one case, Eagan Avenatti was representing ticket holders who sued the National Football League in connection with seating snafus at the 2011 Super Bowl in Arlington, Texas.
After the case was closed, a Texas lawyer told Avenatti in a May 2017 email that he was ready to transfer $1.4 million to Eagan Avenatti, the court records show.
Avenatti responded with wiring instructions that split the money, with $409,000 directed to a firm account that was disclosed to the bankruptcy trustee and $953,000 to an undisclosed account controlled by Avenatti.
Over the next two months, Avenatti moved nearly all of the $953,000 in seven transactions to another undisclosed account, according to the bank records that Frank filed in court. He then shifted it all again in seven transactions of almost identical amounts to Avenatti & Associates, his personal corporation.
Avenatti & Associates used much of the money to pay his personal expenses during those two months, the documents show.
Avenatti said he and his company were entitled to reimbursement for more than $1 million in out-of-pocket expenses in litigating the case against the NFL.
