Celebrity lawyer Michael Avenatti was arrested Monday in New York City on charges of trying to extort up to $25 million from Nike by threatening to publicize claims that company employees authorized payments to the families of top high school basketball players.
Avenatti also was separately charged in a second federal case in Los Angeles with embezzling a client’s money “in order to pay his own expenses and debts” and those of his law firm and coffee company, and of “defrauding a bank in Mississippi,” prosecutors said.
He faces almost 100 years in prison if convicted in both cases as well as possible disbarment as a lawyer.
The famously aggressive litigator gained widespread notoriety in the past year for representing porn star Stormy Daniels in lawsuits against President Donald Trump and his former lawyer Michael Cohen. Those cases were related to a nondisclosure agreement she signed on the eve of the 2016 presidential election to keep quiet about her alleged affair with Trump in exchange for a $130,000 payment.
Avenatti was released from Manhattan federal court after a hearing and after signing a $300,000 personal recognizance bond. No actual money is posted for such bail. He would forfeit property or cash equivalent for the dollar amount of the bond if he fails to appear in court for future hearings.
“For the entirety of my career, I have fought against the powerful — powerful people and powerful corporations,” Avenatti told reporters when he was released. “I will never stop fighting that good fight.”
He said he was confident that when all the evidence is out, “I will be fully exonerated and justice will be done.”
Avenatti, who was dressed in a dark navy blue suit, dark shoes, a white shirt and a bright blue tie, was ordered by a judge to surrender his U.S. and Italian passports, and barred from traveling anywhere in the United States other than New York City, Long Island, several counties just north of Manhattan and the Central District of California, which includes the Los Angeles area.
At the hearing, where he was represented by a federal public defender, Avenatti was also ordered to have no contact with his alleged co-conspirator, fellow high-profile lawyer Mark Geragos, who is not criminally charged in the case. Avenatti must appear in Los Angeles to face charges there on April 1.
The judge also barred Avenatti from transferring more than $5,000 from any account he controls without first getting approval.
His hearing in New York occurred in the same courthouse where Cohen pleaded guilty to criminal charges that included ones relating to the hush-money deal with Daniels.
Last year, Avenatti announced that he was considering running for president, but later decided not to run.
Daniels replaced Avenatti as her lawyer earlier this month after a fallout with him.
Daniels, in a statement released by her new lawyer Clark Brewster, told CNBC that, “Knowing what I know now about Michael, I’m saddened but not shocked regarding his arrest.”
“I made the decision weeks ago to terminate Michael’s services after discovering that he had dealt with me extremely dishonestly, and I will have my own announcement coming soon,” Daniels said.
Avenatti, 48, was arrested in Midtown Manhattan at the law offices of Boies Schiller Flexner at 12:30 p.m. ET by FBI agents, about 15 minutes after he tweeted that he would be disclosing a big high school and college basketball scandal “perpetrated by” Nike that he supposedly had uncovered.
Boies Schiller lawyers were representing Nike, and were scheduled to meet Monday with at their office with Avenatti and his unidentified co-conspirator to discuss Avenatti’s demands, according to the company and prosecutors.
Nike stock initially nose dived after Avenatti’s tweet, but later recovered much of the losses.
The co-conspirator was identified by sources to NBC News as Geragos, a California criminal defense lawyer. Geragos is currently representing actor Jussie Smollet in a case where the “Empire” cast member is accused of lying to Chicago cops about a purported hate-crime attack.
A person who answered Geragos’s office phone told CNBC, “We are not at liberty to speak on the matter. We are not releasing any comments.”
Geragos is being represented by prominent New York criminal defense lawyer Benjamin Brafman. Brafman declined to comment when contacted by CNBC.
A CNN spokeswoman said that Geragos no longer is a contributor to that news network.
Prosecutors said Avenatti’s alleged effort to shakedown Nike for millions of dollars kicked off in earnest last Tuesday, and quickly escalated over the next two days as he threatened to hold a press conference accusing the company of being involved in bribing amateur basketball players.
Avenatti allegedly timed his threats to coincide with Nike’s quarterly earnings call and the kickoff the National Collegiate Athletic Association’s national championship basketball tournament.
According to a criminal complaint, Avenatti offered to refrain from that press conference “only if Nike made a payment of $1.5 million to a client of Avenatti’s in possession of information damaging to Nike … and agreed to ‘retain’ Avenatti and [the co-conspirator] to conduct an ‘internal investigation’ — an investigation that Nike did not request — for which Avenatti and [the co-conspirator] demanded to be paid, at a minimum, between $15 [million] and $25 million.”
The co-conspirator is “an attorney licensed to practice in the state of California, and similarly known for representation of celebrity and public figure clients,” the complaint said.
The client of Avenatti’s is “a coach of an amateur athletic union … men’s basketball program based in California,” who for a number of years had a sponsorship agreement with Nike, the complaint said.
The complaint says that on Wednesday, Avenatti and a cooperating witness spoke by phone with lawyers for Nike “during which Avenatti stated, with respect to his demands for payment of millions of dollars, that if those demands were not met ‘I’ll go take ten billion dollars off your client’s market cap … I’m not f—ing around.’”
On Thursday, Avenatti tweeted a link to a CBS News story from early March about the sentencing of three men, including a former Adidas executive and a former Adidas consultant, who were found guilty of conspiring to defraud the University of Louisville and the University of Kansas by funneling money to basketball recruits to those colleges with the goal of eventually signing the players to Adidas endorsement deals.
U.S. Attorney Geoffrey Berman, speaking at a press conference in Manhattan, said, “Avenatti’s conduct had nothing to do with valid advocacy on behalf of a client or any other kind of legitimate legal work. Instead, Avenatti used illegal and extortionate threats for the purpose of obtaining in payments for himself.”
“A suit and tie does not mask the fact that at its core, this was an old-fashioned shake down,” Berman said.
The prosecutor also said that the investigation is continuing.
In the Los Angeles case, Avenatti is charged two criminal counts: wire fraud and bank fraud. His presentment in that case will occur at a later date.
In a statement, Nike said, “Nike will not be extorted or hide information that is relevant to a government investigation.”
“Nike has been cooperating with the government’s investigation into NCAA basketball for over a year,” the company said. “When Nike became aware of this matter, Nike immediately reported it to federal prosecutors. When Mr. Avenatti attempted to extort Nike over this matter, Nike with the assistance of outside counsel at Boies Schiller Flexner, aided the investigation.”
“Nike firmly believes in ethical and fair play, both in business and sports, and will continue to assist the prosecutors,” the company said.
Avenatti’s law firm in Los Angeles had no immediate comment. The White House did not immediately comment.
But Trump’s re-election campaign manager Brad Parscale tweeted a reference to Avenatti’s arrest and to the release of a summary of the investigation by special counsel Robert Mueller that did not end in criminal allegations against the president.
In the Los Angeles federal case, Avenatti is accused in a 197-page complaint of negotiating a $1.6 million settlement for a client in a civil case, but then giving the client “a bogus settlement agreement with a false payment date of March 10, 2018.”
The U.S. Attorney’s Office in Los Angeles said “Avenatti misappropriated his client’s settlement money and used it to pay expenses for his coffee business, Global Baristas US LLC, which operated Tully’s Coffee stores in California and Washington state, as well as for his own expenses.”
“When the fake March 2018 deadline passed and the client asked where the money was, Avenatti continued to conceal that the payment had already been received,” according to prosecutors.
“Mr. Avenatti is facing serious criminal charges alleging he misappropriated client trust funds for his personal use and he defrauded a bank by submitting phony tax returns in order to obtain millions of dollars in loans,” U.S. Attorney Nick Hanna said.
Hanna’s office said Avenatti allegedly defrauded a bank in Mississippi by submitting to that bank fake tax returns to get three loans totaling $4.1 million for his law firm and coffee business in 2014.
The tax returns indicated that he had “substantial income even though he had never filed any such returns with the Internal Revenue Service,” the prosecutor’s office said. “The phony returns stated that he earned $4,562,881 in adjusted gross income in 2011, $5,423,099 in 2012, and $4,082,803 in 2013. … Avenatti allegedly also claimed he paid $1.6 million in estimated tax payments to the IRS in 2012 and paid $1.25 million in 2013.”
“In reality, Avenatti never filed personal income tax returns for 2011, 2012 and 2013 and did not make any estimated tax payments in 2012 and 2013,” Hanna’s office said.
“Instead of the millions of dollars he claimed to have paid in taxes, Avenatti still owed the IRS $850,438 in unpaid personal income tax plus interest and penalties for the tax years 2009 and 2010. Avenatti also submitted a fictitious partnership tax return for his law firm,” the investigators said.
U.S. Attorney for Los Angeles Nicola Hanna said, “On his Twitter account, Mr. Avenatti describes himself as ‘Attorney, Advocate, Fighter for Good.’ But the allegations in this case describe something different: A corrupt lawyer who instead fights for his own selfish interests by misappropriating close to $1 million that rightfully belong to one of his clients.”
On Tuesday, Avenatti took to Twitter to thank his supporters.
“I want to thank all of my supporters for your kind words and support today. It means a lot to me. I am anxious for people to see what really happened. We never attempted to extort Nike & when the evidence is disclosed, the public will learn the truth about Nike’s crime & coverup.”
GM quiet about Cruise driverless taxi fleet as deadline looms
As the self-imposed deadline for the self-driving taxi service from General Motors Co.’s autonomous vehicle development unit looms this year, the San Francisco-based GM Cruise LLC has gone quiet.
Hype for Cruise’s potential built up in late 2017 and into 2018 as the former start-up laid the groundwork for a commercial launch of its autonomous technology. Increasingly, however, company leaders have said a launch of Cruise’s driverless taxi service would be “gated by safety,” a hedge that has been repeated since October when GM’s self-driving unit partnered with Honda Motor Co.
Meantime, the industry at large has started pulling back on some of its autonomous-vehicle optimism. A fatal accident involving one of Uber’s self-driving test vehicles spurred an industry-wide reassessment of how to best validate the complex technology required to make a car navigate public roads without the help of a driver. As investors and industry observers wait to see Cruise’s robo-taxi service in action, experts say the 2019 deadline is hardly a deal-breaker for the driverless-vehicle unit’s future.
“The real question is not whether Cruise is on track for 2019 or not — it’s whether GM has the stomach to gut this thing out to completion and do everything it’s really going to take to get there,” said Mike Ramsey, an automotive analyst for research firm Gartner Inc. “Does GM have the stomach to spend money — that they don’t have a ton of — and sacrifice areas that make money now to stick this out?”
GM is trying to prove as much. The company is executing a sweeping restructuring that includes stopping production at five North American plants and cutting 15 percent of its salaried workforce. The goal is to cut costs and redirect precious capital toward expensive autonomy, electrification and mobility efforts.
The rollout of the technology has always been guided by safety, a Cruise spokesman said, reiterating what GM and Cruise executives have said in recent months. Leaders also say the quiet period for Cruise is a result of the Silicon Valley workforce’s focus on getting the technology right.
GM is planning to spend roughly $1 billion on Cruise in 2019 after spending about $700 million last year. That includes hiring another 1,000 people over the next nine months. Cruise has also garnered some $5 billion in outside investments from Japan’s SoftBank Investment Advisers and Honda.
And executives say a change in leadership ushers in a new phase for the self-driving car unit. Former GM President Dan Ammann took over as CEO of Cruise effective Jan. 1. He replaced co-founder Kyle Vogt who moved into the role of chief technology officer. Ammann and Vogt say the shuffle allows both executives to focus on their strengths as Cruise moves toward deployment.
But Cruise’s original vision of a driverless taxi fleet of cars without steering wheels or pedals is still stuck in neutral more than a year after the company asked NHTSA permission to put the cars on public roads. It took NHTSA about 14 months to respond to the petition, advancing it to the public review stage last month.
GM’s long wait for a response is evidence that gaining the necessary federal approval is no small step, nor is it guaranteed. Federal safety regulation language revolves around human drivers and vehicles engineered to be piloted by a human driver — as opposed to artificial intelligence.
GM CEO Mary Barra has said the San Francisco team could proceed without federal approval of the steering wheel-free models by launching the service with the safety driver-piloted test vehicles already on public roads. But even if GM Cruise doesn’t start ferrying customers in one of its lidar-equipped Chevrolet Bolt EVs by the stroke of midnight on Dec. 31, experts seem to think the company will be forgiven.
“If GM were to potentially recast its projected time horizon for the launch and rollout of its GM Cruise unit’s service at a later time (i.e. significantly beyond 2020),” Morgan Stanley analyst Adam Jonas wrote in a recent note, “we believe the stock market would be largely understanding.”
Sam Abuelsamid of Navigant Research, which recently ranked Cruise as one of the leaders in the autonomous vehicle race, said the company’s self-imposed 2019 deadline is largely arbitrary.
“If we don’t see a driverless taxi service from Cruise by the end of this year, it will not be the end of the world,” Abuelsamid said. “In the long term it’s better to delay and do this the right way — and Uber made the case last year for what happens when you rush this technology.”
Uber suspended all testing of self-driving cars last March after one of its autonomous test vehicles struck and killed a pedestrian in Arizona. The ride-hailing giant was rushing its autonomous vehicle development to keep up with leaders like GM’s Cruise and Alphabet’s Waymo LLC.
What followed was an industry-wide reckoning with autonomous-vehicle testing practices. Many companies took their driverless test vehicles off the roads while they revamped testing practices. Uber wouldn’t resume autonomous vehicle testing for another nine months. Waymo walked back promises to take human safety drivers out of its autonomous Chrysler Pacifica minivans. And GM appeared to quietly abandon plans to begin testing autonomous vehicles on the busy streets of New York City.
“This is normal,” Ramsey said. “None of what changed in the last year constitutes failure. This is just what happens when something that is really hard, but has a lot of promise, comes around. This is how new technologies get commercialized.”
Yemeni-Americans in New York City are boycotting the New York Post after a damning Ilhan Omar cover story
Yemeni-American shop owners across New York City are denouncing the New York Post in light of a controversial cover image put forth by the publication featuring the 9/11 terrorist attacks and a stand alone quote from Democratic Rep. Ilhan Omar.
“Here’s your something. 2,977 people dead by terrorism,” read last Thursday’s headline, appearing to suggest Omar, a Somali American congresswoman from Minnesota, was dismissive of the attack on the Twin Towers.
The cover was in reference to a speech Omar delivered last month at an event for the Council on American-Islamic Relations.
“For far too long we have lived with the discomfort of being a second-class citizen, and frankly I’m tired of it, and every single Muslim in this country should be tired of it,” Omar said. “CAIR was founded after 9/11 because they recognized that some people did something and that all of us were starting to lose access to our civil liberties.” (CAIR was founded in 1994, and an Omar spokesperson later told the Washington Post that the freshman lawmaker misspoke and meant to refer to the fact that the organization had doubled in size after 9/11).
Omar has faced backlash in recent weeks from the media, commentators, and politicians alike. Last Friday, President Donald Trump shared a video on Twitter blasting Omar for the speech. In the days since Trump’s tweet, Omar said she has experienced an increase in death threats. As of Monday, the video remains on his Twitter page.
New York City’s Yemeni-American community says they are worried that the New York Post’s front page will encourage anti-Muslim violence and rhetoric. As of Saturday morning, ten well-known Yemeni store owners had agreed to stop selling the tabloid, while Yemeni taxi drivers passed out fliers about the boycott to other Yemeni-owned establishments across the city, according to The New York Times.
In an open letter, the Yemeni American Merchants Association said the New York Post’s front page “provoked hatred against Rep. Omar,” and lambasted its decision to publish as “cheap and sensational tabloids that undermine national unity and entice violence and hate for the sole purpose of circulation and sales.”
“This rhetoric threatens the safety and wellbeing of Rep. Omar, Muslim leaders, and the larger Muslim American community at a time when Islamophobia is at an all-time high,” the letter added.
INSIDER reached out to the News Corporation, the New York Post’s parent company, for comment. On Sunday, the Yemeni American Merchants Association announced its formal boycott at a news conference outside of the News Corporation’s building in Manhattan. People in attendance displayed signs that read “boycott hate” and “New York Post take your paper back.”
The association has issued a set of demands, including a public apology to Omar by the Post, and a request that the publication’s editor-in-chief, Stephen Lynch, step down from his position.
Yemeni-American store owners have previously turned toward political activism: after the president issued a ban on travelers in 2017 from seven Muslim-majority countries, including Yemen, thousands of Yemeni-Americans closed shop and gathered together to rally against the policy.
“It’s not the first time that the New York Post basically spreads hate and fear in their newspapers,” Ayyad Algabyali, the association’s director of advocacy, told the Guardian, adding that there is “no end date” to the boycott and “this might be for good.”
Fire Mauls Beloved Notre-Dame Cathedral in Paris
Notre-Dame cathedral, the symbol of the beauty and history of Paris, was scarred by an extensive fire on Monday evening that caused its delicate spire to collapse, bruised the Parisian skies with smoke and further disheartened a city already back on its heels after weeks of violent protests.
The spectacle of flames leaping from the cathedral’s wooden roof — its spire glowing red then turning into a virtual cinder — stunned thousands of onlookers who gathered along the banks of the Seine and packed into the plaza of the nearby Hôtel de Ville, gasping and covering their mouths in horror and wiping away tears.
“It is like losing a member of one’s own family,” said Pierre Guillaume Bonnet, a 45-year-old marketing director. “For me there are so many memories tied up in it.”
Around 500 firefighters battled the blaze for nearly five hours. By 11 p.m. Paris time, the structure had been “saved and preserved as a whole,” the fire chief, Jean-Claude Gallet, said. The two magnificent towers soaring above the skyline had been spared, he said, but two-thirds of the roof was destroyed.
“The worst has been avoided even though the battle is not completely won,” President Emmanuel Macron said in a brief and solemn speech at Notre-Dame on Monday night, vowing that the cathedral would be rebuilt.
“This is the place where we have lived all of our great moments, the epicenter of our lives,” he said. “It is the cathedral of all the French.”
The cause of the fire was not immediately known, officials said. But it appeared to have begun in the interior network of wooden beams, many dating back to the Middle Ages and nicknamed “the forest,” said the cathedral’s rector, Msgr. Patrick Chauvet.
No one was killed, officials said, but a firefighter was seriously injured.
The fire broke out about 6:30 p.m., upending Mr. Macron’s plans to deliver an important policy speech about trying to heal the country from months of “Yellow Vest” demonstrations that had already defaced major landmarks in the capital and disfigured some of its wealthiest streets.
The tragedy seemed to underscore the challenges heaped before his administration, which has struggled to reconcile the formidable weight of France’s ideals and storied past with the necessity for change to meet the demands of the 21st century.
A jewel of medieval Gothic architecture built in the 12th and 13th centuries, Notre-Dame is a landmark not only for Paris, where it squats firmly yet gracefully at its very center, but for all the world. The cathedral is visited by about 30,000 people a day and around 13 million people a year.
For centuries France’s kings and queens were married there. Napoleon was crowned emperor in Notre-Dame in 1804, and the joyous thanksgiving ceremony after the Liberation of Paris in 1944 took place there, led by Charles de Gaulle.
World leaders congregated at the cathedral in a memorial service for Mr. de Gaulle in 1970, and then again for President François Mitterrand in 1996.
On Monday evening, as the last rush of tourists were trying to get in for the day, the doors of Notre-Dame were abruptly shut without explanation, witnesses said. Within moments, tiny bits of white smoke started rising from the spire — which, at 295 feet, was the highest part of the cathedral.
Billowing out, the smoke started turning gray, then black, making it clear that a fire was growing inside the cathedral, which is currently covered in scaffolding. Soon, orange flames began punching out of the spire, quickly increasing in intensity.
The French police rushed in and started blowing whistles, telling everyone to move back, witnesses said. By then, the flames were towering, spilling out of multiple parts of the cathedral.
Tourists and residents alike came to a standstill, pulling out their phones to call their loved ones. Older Parisians began to cry, lamenting how their national treasure was quickly being lost.
Thousands stood on the banks of the Seine river and watched in shock as the fire tore through the cathedral’s wooden roof and brought down the spire. Video filmed by onlookers and shared on social media showed smoke and flames billowing from the top of the cathedral.
Jean-Louis Martin, 56, a native of Dijon in eastern France who works at the university in Geneva, gasped as the flames leapt up. “It hurts me,” he said. “There are no words. It’s just horrible.”
The crowd gasped and cried in horror when the spire fell. “Paris is beheaded,” said Pierre-Eric Trimovillas, 32.
Vincent Dunn, a fire consultant and former New York City fire chief, said that fire hose streams could not reach the top of such a cathedral, and that reaching the top on foot was often an arduous climb over winding steps.
“These cathedrals and houses of worship are built to burn,” he said. “If they weren’t houses of worship, they’d be condemned.”
The city’s prosecutor’s office said it had opened an investigation.
Monsignor Chauvet said firefighters were able to save some of the cathedral’s artworks but did not say how much was damaged inside the building. A linen fabric associated with Saint Louis, the Holy Crown of thorns and the cathedral’s treasury were saved.
Mr. Gallet, the fire chief, said firefighters were still rescuing artworks in the building, hours after the fire had started. The main risk, he said, was the smoke within the cathedral, and the fall of materials, including melting lead.
The cathedral had been undergoing extensive renovation work. Last week, 16 copper statues representing the Twelve Apostles and four evangelists were lifted with a crane so that the spire could be renovated.
The cathedral had been in dire need of a thorough and expensive restoration, André Finot, the cathedral spokesman, told The New York Times in 2017.
Broken gargoyles and fallen balustrades had been replaced by plastic pipes and wooden planks. Flying buttresses had been darkened by pollution and eroded by rainwater. Pinnacles had been propped up by beams and held together with straps. In some places, limestone crumbled at a finger’s touch.
Glenn Corbett, an associate professor of fire science at John Jay College in New York, said construction work and renovations had long been a dangerous combination.
“There’s a history of churches and synagogues and other houses of worship falling victim to construction fires,” he said, adding that one of the reasons for the peril was the proximity of open flames on torches, sparks from welders and other hazards on scaffolding to other flammable materials.
In recent years, the Friends of Notre-Dame, a foundation based in the United States, estimated that the structure needed nearly $40 million for urgent repairs. The French state, which owns the cathedral, already devotes up to 2 million euros a year in upkeep, or about $2.4 million.
The fire came during Holy Week, six days before Easter Sunday. For Roman Catholics, the cathedral has been a spiritual pilgrimage site for generations. France has a deep Catholic history, and nearly two-thirds of its population is Catholic, even though fewer and fewer attend Mass.
“It’s apocalyptic,” said Eleanor Batreau, 45, who organizes pilgrimages to Lourdes and sometimes works at Notre-Dame. “It reminds me of Dresden burning. I’m a Catholic, and Notre-Dame is a symbol of Mary.”
The risk of the fire is not just to the cathedral itself, but also to the gargoyles that cover its walls and to the stained glass, particularly its “rose” windows.
The largest of its bells, which dates to 1681, managed to survive the French Revolution and has been rung at some of the most important events in French history, including both World Wars.
Bernard Fonquernie, the architect in charge of the cathedral’s restoration in the 1980s and 1990s, said that he believed much of the building, its furnishings and its stained glass could be saved. “The stone vaulting acted like a firewall and it kept the worst heat away,” he said.
Yet the fire is likely to be just the latest, if most dramatic, insult to a landmark that has endured decades of neglect and damage, some at the hands of French revolutionaries, through its more than 850-year history.
Victor Hugo’s 1831 novel, “Notre-Dame of Paris,” noted even then that “one cannot but regret, cannot but feel indignant at the innumerable degradations and mutilations inflicted on the venerable pile, both by the action of time and the hand of man.”
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