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Michael Avenatti is accused of keeping a $4M personal injury settlement payout from a paraplegic man with mental health issues, according to his former legal partner

Daily Mail logo Daily Mail 3/25/2019 Ryan Parry West Coast Editor For Dailymail.com And Josh Boswell For Dailymail.com

a man wearing a suit and tie: Michael Avenatti has been accused of improperly keeping a $4 million personal injury settlement payout away from a paraplegic man, a Los Angeles court heard

Michael Avenatti has been accused of improperly keeping a $4 million personal injury settlement payout away from a paraplegic man, a Los Angeles court heard
© Provided by Associated Newspapers Limited
Michael Avenatti has been accused of improperly keeping a $4 million personal injury settlement payout away from a paraplegic man, a Los Angeles court heard.

The embattled attorney, 48, was also alleged to have hid almost $1 million from creditors, a hearing was told on Friday.

The news comes as Avenatti was charged with wire and bank fraud on Monday, with federal authorities saying he attempted to extract more than $20 million from Nike.

The hearing held at federal court came as part of Avenatti's former legal partner Jason Frank's case against his old colleague.

According to a court judgment, Avenatti owes Frank $10 million in unpaid profits from his former law firm Eagan Avenatti, sending his firm into bankruptcy proceedings.

A lawyer for Frank told the US District Court, Central District of California that Avenatti has been concealing cash in a bid to avoid paying his debt.

The court heard that in 2015 Avenatti's law firm won a settlement from the County of Los Angeles in a lawsuit it filed on behalf of Geoffrey Johnson, a paraplegic man with mental health issues.

Although details of the case were not discussed in court, DailyMail.com understands Avenatti sued the County of Los Angeles, the Los Angeles County Sheriff's Department and former Los Angeles County Sheriff Lee Baca on behalf of Johnson in a major personal injury claim.

Frank's lawyer revealed a $4 million settlement contract signed by Avenatti in January 2015, resulting in a check for $4 million from LA County to his firm Eagan Avenatti.

But according to bank records presented by Frank's attorney Andrew Stolper, Johnson was only paid around $2,900 per month after the settlement.

The records, presented by Stolper in court, show the $4 million was put in a trust account rather than being sent directly to Johnson.

Avenatti described the allegations as 'absolutely outrageous' and said the payments were an advance on a different settlement payment.

He said in court that the $4 million check cashed in his trust account was not the same $4 million sent to his firm by LA County five days earlier. 

Stolper claimed that in 2017 Avenatti funneled $952,000 to a private trust account rather than to his bankrupt firm, then denied under oath in a hearing a month later that he had any private trust accounts.

In court Stopler produced documents showing that the NFL paid Avenatti's firm around $1.5 million to settle a case with one of the firm's clients on May 17, 2017.

The same day, Avenatti set up a private trust account and funneled $952,000 of the settlement money to it, bank statements presented in court showed.

In a hearing a month later, Avenatti testified under oath that he did not have a separate trust account.

Frank's lawyer Stolper told federal judge Karen Scott that the documents showed Avenatti 'set up a secret trust account' and used it to hide money from creditors trying to recover unpaid debts from Eagan Avenatti.

Avenatti told Stolper in court that 'whatever happened to [the money] was perfectly legal' and there was 'nothing wrong' with diverting part of it to a separate trust account. 

Frank, who used to work as a partner in Avenatti's firm, has been pursuing Avenatti since 2017 for $10 million in unpaid profits from Eagan Avenatti. 

Frank settled for $4.85 million in a settlement on December 2017, but when Avenatti failed to make the first payment a judge awarded Frank $10 million.

Avenatti ducked and dived during the hours of grilling by Frank's attorney, frequently telling Stolper he 'can't recall' where clients' money was wired to and which of his law firms - Eagan Avenatti, Avenatti and Associates, and Avenatti LLP - were being paid.

Stolper also accused Avenatti of filibusters, making 'a hodgepodge or frankly contradictory testimony', and of failing to hand over documents to Frank weeks after the judge ordered it.

Avenatti said he had supplied a 'litany of documents' and said Stolper was trying to pull a 'grandiose stunt'.

The drama continued outside the courtroom as Avenatti clashed with internet troll Jacob Wohl, who came to sit in on the hearing.

Avenatti previously tweeted accusing Wohl of fabricating a story about domestic violence against the lawyer's ex-girlfriend, Mareli Miniutti and said he was 'coming for' Wohl.

In the Los Angeles courthouse, Avenatti called Wohl a 'p***k' and shouted at the 21-year-old, 'I'm going to take you down if it's the last thing I do.'

'I thought the whole unhinged thing was an act,' Wohl told DailyMail.com, 'but now I see it's real.' 

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