Michael Avenatti Lived the High Life While Owing Millions to IRS
As Michael Avenatti floats a 2020 presidential run, court records reveal the lawyer and his companies owed millions in unpaid taxes and judgments.
On the Fourth of July, Michael Avenatti suited up for a CNN interview and floated his name as a contender against President Trump in 2020.
Asked why he’d be qualified, Avenatti told anchor Jim Sciutto, “Because I have three things that this president lacks, Jim—brains, heart and courage. And I think I have those in spades compared to this president.”
Scuitto then told Avenatti he’d face scrutiny over his finances, including his former law firm’s then-unpaid $2.4-million bill to the IRS. “You know, look, I’ll be happy to put my tax records and background up against the president’s background and his tax records. Of course, he won’t release any of that information,” Avenatti replied, before changing the subject to his political platform.
Now Avenatti, the tenacious California litigator made famous for representing Stormy Daniels in her legal tangles with President Trump, is gearing up for a 2020 presidential run, stumping across the country and raising cash with his new political action committee, Fight PAC.
But the questions over his finances remain—and could become a sore spot on the campaign trail, as creditors pursue him and his former companies. Both the Eagan Avenatti law firm and a shuttered Seattle coffee chain, which Avenatti says he no longer owns, owe millions in unpaid taxes and judgments, according to court documents and filings with local recorder’s offices.
Tax liens filed in Orange County also show that Avenatti has personally owed at least $1.2 million in federal taxes on top of the corporate debts. One lien, filed in February 2018, was for $308,396, while another filed in August 2015 showed a balance of $903,987. The Daily Beast did not find records showing the liens were released, but Avenatti claims both debts were “fully paid.”
A String of Big Debts
Civil court filings paint a picture of Avenatti as a hard-charging attorney who enjoyed the luxe life—jetting around the world to race cars with a Saudi prince and treating his wife and their friends to luxury villas in Cabo San Lucas, Mexico. Yet he and his companies owed hundreds of thousands in unpaid taxes and in compensation to one former colleague, who claims Avenatti stiffed him out of millions in law-firm profits.
A review of court documents reveals that Avenatti, his former law firm Eagan Avenatti, and his former company Global Baristas, the majority owner of the Seattle-based Tully’s coffee chain, have owed millions in unpaid federal and state taxes in Washington and California, as well as hundreds of thousands in past-due rent to landlords.
A Newport Beach landlord began eviction proceedings last month against Eagan Avenatti in Orange County Superior Court. The real-estate entity claims Eagan Avenatti failed to make rent for three storage spaces and a 8,371-square-foot suite, totaling more than $107,415 for the months of July and August. (A lawyer representing the Irvine Company, which manages the rentals, declined to comment.)
On Oct. 18, the landlord filed court papers indicating Eagan Avenatti owes $213,253 in rent as of this month.
Avenatti told The Daily Beast he divested his interest in Eagan Avenatti within the last 12 months and that he now operates under Avenatti & Associates. “None of those obligations are my responsibility,” he said, when asked about the eviction case. Avenatti said he would forward this publication’s queries to the firm’s new owner, but declined to name them.
Yet in a Sept. 7 answer to the landlord’s complaint, signed by Avenatti himself, he claimed Eagan Avenatti made repairs to the suite and subtracted the cost from the rent. The firm offered to pay the rent due, Avenatti continued, but that the landlord “would not accept it.”
“Avenatti testified at a July 25 bankruptcy hearing (from which the media was barred) that Avenatti & Associates now owns a 100 percent stake in Eagan Avenatti.**”
Meanwhile, on Monday, a Los Angeles Superior Court judge is expected to rule on a separate case brought by Jason Frank, a former employee who in 2016 filed a demand for arbitration against Eagan Avenatti, claiming the firm owed him millions in unpaid compensation. Frank settled his case with Eagan Avenatti for $4.85 million, and records show Michael Avenatti personally guaranteed the payout.
After Avenatti failed to wire the first payment to Frank, a U.S. bankruptcy court judge entered a $10-million judgment against Eagan Avenatti.
Asked for comment on Monday’s hearing, Avenatti told The Daily Beast, “Nothing’s gonna happen on Monday, so you guys are wasting your time.”
“Jason’s claims are completely bogus,” Avenatti said, adding that “regardless of what happens on Monday, Jason owes me and my law firm over $10 million” for supposedly stealing clients.
Avenatti alluded to the alleged client-stealing in a January bankruptcy filing for Eagan Avenatti, claiming that Frank and two former colleagues were fired in May 2016 “after they were discovered to have been forming their own competing law firm” and “took substantial business with them” when they left. (A review of Eagan Avenatti’s settlement with Frank indicates that Avenatti and his current and former law firms cannot pursue claims against Frank.)
Eric George, an attorney for Frank, told The Daily Beast that Avenatti’s client-stealing claims had no merit.
“EA and Avenatti have avoided paying me and my company this money for years.”
— Jason Frank
“Mr. Avenatti’s comments are delusional, and should fool no one,” George said in a statement. “To return to reality, he negotiated and signed a written agreement that provided for $10 million to my client, and that released precisely the frivolous claims he’s concocting now. Mr. Avenatti can dissemble to the press as much as he wants—ultimately, he will lose this latest court proceeding.”
On Friday, Avenatti told The Daily Beast that he currently has no interest in Eagan Avenatti. In a July filing in Eagan Avenatti’s bankruptcy case, however, Avenatti indicated he owns the firm through Avenatti & Associates.
“The simple fact is that I have an ownership interests [sic] in two separate law firms,” Avenatti stated in one July declaration. “One is EA. The other is not. I maintain both of my office [sic] at EA’s Newport Beach office.”
Avenatti testified at a July 25 bankruptcy hearing (from which the media was barred) that Avenatti & Associates now owns a 100 percent stake in Eagan Avenatti, according to documents filed in Frank’s case.
Frank claims he hasn’t received a penny from Avenatti—who personally guaranteed the $4.85-million payout in two installments due in May and July of this year, as a condition of a U.S. bankruptcy court dismissing Eagan Avenatti’s Chapter 11 case.
In one August pleading, Frank said Avenatti’s law firm has owed him compensation from as far back as February 2014.
“Through various procedural maneuvers, such as the bankruptcy filing,” Frank stated, “EA and Avenatti have avoided paying me and my company this money for years.”
'We Enjoyed a Very Extravagant Marital Lifestyle'
Before Michael Avenatti became Donald Trump’s tweet-baiting nemesis, he was racking up a list of legal victories that resulted in a string of multimillion-dollar verdicts. On his website, Avenatti claims he’s won more than $1 billion on behalf of his clients.
His biggest win was a $454-million verdict—one of the largest in California history—against Halyard Health and Kimberly-Clark Corp. for allegedly misleading buyers about surgical gowns they claimed protected against diseases like Ebola and HIV. (Court records show a judge reduced the judgment to $25 million on appeal.)
These victories bankrolled a lifestyle that Avenatti’s second wife described as lavish in divorce pleadings.
Lisa Storie-Avenatti says the couple enjoyed a multimillion-dollar home in Newport Beach, international and domestic travel via private jet, and a collection of art and exotic cars.
In one declaration, filed in January, Storie-Avenatti said, “Petitioner and I enjoyed a very extravagant marital lifestyle. In October 2011, we bought a home in Laguna for $7.2 million and sold it in September 2015 for $12.6 million.”
“We traveled extensively throughout the world, and, when not flying privately, we always flew business class and stayed at five-star hotels,” Storie-Avenatti said in the court filing, adding that they regularly visited Cabo (where they held their destination wedding and paid expenses for 20 guests), the French Riviera, and Paris.
“I had unfettered use of credit cards that were in my name. My American Express bill was historically on average of $60,000 to $70,000 per month, and was paid in full each month,” Storie-Avenatti added in court papers.
“We traveled extensively throughout the world, and, when not flying privately, we always flew business class and stayed at five-star hotels.**”
She said that since 2010, Avenatti raced in about 33 professional sports car races in the United States and Europe, including the 24 Hours of Le Mans in France, where his team included Saudi Prince Abdulaziz bin Turki Al Saud. “We spend a large amount of money on Petitioner’s racing activities,” Storie-Avenatti continued, the emphasis hers.
Storie-Avenatti was asking for $215,643 a month in family support and provided a rundown of the couple’s alleged monthly expenses including, among other things, $12,000 for nannies, $19,779 for groceries and household supplies, $19,849 for clothing, and $27,257 for entertainment, gifts and vacations.
Avenatti employed a full-time pilot hired at $100,000 a year, and owned two private jets worth about $9 million, Storie-Avenatti claimed. He also retained a full-time driver paid through his firm, but she didn’t know his pay rate.
She claimed that since they separated in October 2017, after more than six years of marriage, Avenatti cut her off from his income and she was forced to use her savings to pay for expenses for herself and the couple’s 3-year-old son.
“The parties’ marital lifestyle was funded by [Avenatti’s] earnings and income—over which [he] continues to exercise exclusive control,” Avenatti-Storie’s attorney said in one court filing.
The couple “filed separate tax returns during marriage at [Avenatti’s] insistence” and he “shared only minimal specific information with Lisa,” the document continued.
Storie-Avenatti said in court papers that in November 2016, Avenatti told her he earned $3.7 million, but that she suspected his actual take-home was “substantially higher” based on his self-publicized verdicts, the couple’s 2016 expenses and his “secreting from me of his tax returns and bank records.”
Avenatti stopped paying rent on their Newport Beach home, where Storie-Avenatti and their son lived, but his “luxurious lifestyle continues unimpeded,” an attorney for the estranged spouse claimed in divorce pleadings.
After Avenatti moved out of their home in August 2017, he snagged a $14,000-a-month apartment at the posh Ten Thousand skyscraper in Los Angeles, Storie-Avenatti said in court documents.
“While I continue to pay all the bills I can afford and to support our son, Petitioner continues to vacation and race cars,” she said, adding that in November 2017, Avenatti flew himself, a friend and the friend’s dog, to a villa.
“Avenatti employed a full-time pilot hired at $100,000 a year, and owned two private jets worth about $9 million, Storie-Avenatti claimed.”
Storie-Avenatti also claimed that Avenatti stopped paying the $100,000-per-month lease on their Newport Beach home, resulting in eviction proceedings.
According to court filings, Avenatti and his wife agreed to purchase their former home, at 618 Via Lido Nord, for $15.75 million. As part of the agreement, they would move in and pay $100,000 monthly, for nine months, toward the purchase price.
Two days before the couple’s final payment of nearly $14 million was due, a mysterious lawsuit from a Swiss company stopped the transfer of the property to the Avenattis, and negated their obligation to cough up the millions. As a result, the property’s owner, casino magnate Gary Primm, filed court papers to evict the couple.
Storie-Avenatti listed the home as an asset in her divorce papers, saying the couple “spent hundreds of thousands of dollars to fully remodel” it.
“Because I am in the dark regarding Petitioner’s actual income, I am requesting an award of non-taxable family support based on our luxurious marital lifestyle in the amount of $215,643 per month per my review of our 2016 expenses,” she said in her declaration.
Avenatti did not appear to contest his ex-wife’s claims about their high-flying lifestyle, but he did say she was “placing unreasonable restrictions” on spending time with their son. His attorneys also fought her requests for his financial statements, according to a review of court records.
In July, a judge ordered child support of $31,981 per month, and $124,398 per month in spousal support, based on Lisa-Storie’s expenses.
The judge also ordered Avenatti to pay $185,000 in attorney’s fees and $30,000 in expert fees.
“The court notes this is a case with a considerable amount of money and amounts requested are reasonable and necessary and provide the function of support for the respondent who has limited access to funds,” a minute order stated.
Continued