Michael Avenatti. Photo from Shutterstock.com.
Lawyer Michael Avenatti, who’s probably best known for representing adult film actress Stormy Daniels, has agreed to place his onetime law firm in receivership after a former partner alleged in court papers that he had hidden millions of dollars from the bankruptcy court.
U.S. Magistrate Judge Karen E. Scott of Orange County appointed a receiver who will take possession of bank accounts and case files for the firm, Eagan Avenatti, the Los Angeles Times reports.
In a joint court stipulation, Avenatti agreed to the receivership and the former partner, Jason Frank, agreed to withdraw papers alleging “brazen acts of bankruptcy fraud.”
Frank had claimed that Avenatti had received undisclosed legal fees during the bankruptcy that he used for personal expenses, such as a payment on his Ferrari, payments to his ex-wife, and money to aid his coffee company, Global Baristas.
Avenatti also agreed to cooperate with efforts by Frank to collect on a $10 million judgment against the firm. Frank had alleged Eagan Avenatti failed to pay him money owed for legal work.
Avenatti denied any wrongdoing in an interview with the Los Angeles Times. “Every dollar has been properly accounted for and reported as required,” he said.
Avenatti said the bankruptcy court never had required him to receive all his legal fees through Eagan Avenatti. Money from one case constituted reimbursement for out-of-pocket expenses, he said.
Avenatti’s legal practice is now known as Avenatti & Associates. Eagan Avenatti lawyers and staff members are employed by the new firm.