AP Photo/Richard Drew
Michael Avenatti.
- Michael Avenatti is facing charges of bank fraud and wire fraud.
- Federal agents allege that the attorney provided false information to get a loan from a Mississippi bank, and defrauded a legal client out of a portion of a $1.6 million settlement.
- Prosecutors link the alleged crimes to Avenatti's law firms and the coffee chain Tully's, which he acquired in 2013.
- In 2018, six former Tully's employees revealed to Business Insider what it was like to work at Tully's under Avenatti, including financial concerns and running out of coffee.
- Avenatti told Business Insider in October the he sold the coffee company for "nearly $28 million a long time ago"; federal prosecutors said in the complaint that this statement appears to be false.
Celebrity attorney Michael Avenatti is under fire, with two new criminal investigations coming to light on Monday.
New York prosecutors accused Avenatti of allegedly trying to extort Nike for over $20 million.
Separately, in Southern California, federal prosecutors announced that Avenatti was facing federal charges of bank fraud and wire fraud. According to the criminal complaint, Avenatti defrauded The Peoples Bank, located in Biloxi, Mississippi, and defrauded a legal client out of a portion of a $1.6 million settlement.
According to the filing, these schemes were interconnected with Avenatti's business dealings, including his attempts to keep Tully's, a coffee chain based in Seattle, Washington, afloat.
More than 45 suits have been filed against Global Baristas, the parent company of Tully's, since it was purchased by Avenatti in 2013. In 2017, the company owed roughly $5 million in unpaid taxes to the Internal Revenue Service, according to a federal tax lien.
The rise and fall of Tully's
Avenatti, along with "Grey's Anatomy" star Patrick Dempsey, beat out Starbucks and five other bidders with a $9.15 million offer to buy more than 40 Tully's locations in Washington state.
Dempsey soon sued to be let out of the partnership, alleging that Avenatti failed to disclose that he took out a $2 million loan to buy Tully's. The case was settled out of court, with Dempsey dissolving his relationship with Avenatti and cutting ties with Tully's and Global Baristas.
In March 2018, Tully's abruptly shut down all remaining locations.
"Dozens of people showed up for work on that March morning to find they were without a job," an employee who worked Tully's for eight years told Business Insider in June.
"Many are college students that needed to work to help lighten the financial burden on their parents, to reduce as much as possible any future student loans, and to cover their day to day cash needs," he continued. "Many are single moms that seriously depended on their income to support their families."
In the months that followed, six former Tully's employees spoke with Business Insider, alleging that they witnessed signs of financial woes, such as inadequate upkeep and issues with suppliers.
An IRS special agent who interviewed Tully's employees as part of a federal investigation highlighted similar problems in the complaint unsealed on Monday.
According to one former employee identified by the initials "B.H." who was featured in the complaint: "Avenatti did not reinvest into the company and the stores were failing. B.H. said that there was a 'steady bleeding' of [Global Baristas] and Avenatti placed 'band aids' on it."
Money from Global Baristas' accounts was transferred to bank accounts associated with Avenatti's law firms, with more than $1.7 million in payments being transferred from Global Baristas accounts from 2015 to 2017, according to the complaint.
The complaint states that Avenatti attempted to prevent the government from collecting payroll taxes from Global Baristas by "lying to an IRS Revenue Officer, changing contracts, merchant accounts, and bank account information to avoid liens and levies imposed by the IRS, and instructing employees to deposit over $800,000 in cash from Tully's stores ... into a bank account associated with a separate entity."
Employees featured in the complaint said they believed Avenatti to be the owner and CEO of Global Baristas, contrary to his claims that he merely served as general counsel. According to an employee who handled the company's accounting transactions until September 2018, Avenatti earned $250,000 a year as the CEO and chairman.
In a number of interviews with Business Insider throughout 2018, Avenatti said that he was no longer the owner or CEO of Global Baristas. Most recently, in October, he said he "sold the company for nearly $28 million a long time ago."
"To date, the government has been unable to locate any information confirming that Avenatti has sold Global Baristas LLC or Global Baristas US," states the recently unsealed complaint. "To the contrary, based on the information available to the government, it appears these statements are false."
Avenatti did not respond to Business Insider's request for comment on Monday.
After months of legal back-and-forth, Keurig Green Mountain and Global Baristas entered a permanent injunction in late September that prevents Global Baristas from using any Tully's trademarks or related names. In late October, a Chapter 7 involuntary bankruptcy petition was filed against Global Baristas.
Fraud allegations
Michael Owen Baker/AP
Michael Avenatti.
Avenatti sought loans from The Peoples Bank on behalf of Global Baristas and his law firms. As Avenatti pursued the loans, the complaint states, he provided false financial documents, including fake IRS filings and incorrect corporate financial material.
In or around December 2014, for example, Avenatti allegedly provided a 2012 IRS Form 1040 claiming that he made $4 million in 2013 and paid $1.3 million in taxes; according to IRS records, Avenatti did not file an IRS Form 1040 for 2013, nor did he pay any taxes to the IRS that year. Avenatti failed to file personal federal income taxes from 2011 to 2017, though he "generated substantial income and lived lavishly," according to the complaint.
Upon receiving the apparently fake IRS form, The Peoples Bank wired $494,500 to a bank account associated with Avenatti's law firm.
The complaint also alleges Avenatti defrauded a client of his law firm, using the client's portion of a $1.6 million settlement toward his own purposes. According to the complaint, Avenatti used $1.6 million transferred into one of his accounts related to the settlement for payment such as to Tully's vendors, a lawyer who represented Global Baristas, and a bank account under the name of "Michael Avenatti, Esq."
Avenatti told the client that the company never wired the settlement money.
