Michael Avenatti pleaded guilty to five felony offenses and admitted that he engaged in a scheme to defraud four of his legal clients. Avenatti, who has been suspended by the State Bar of California, specifically pleaded guilty to four counts of wire fraud – each related to one of four matters in which he embezzled money that should have been paid to clients – and one count of endeavoring to obstruct the administration of the Internal Revenue Code. Avenatti faces 83 years in federal prison.
Avenatti admitted that he received clients' money on behalf of clients, misappropriated the money, and lied to the clients about receiving the money. He also admitted that he corruptly obstructed and impeded the IRS's efforts to collect unpaid payroll taxes, estimated at $5 million and included payroll taxes that he been withheld from the paychecks of employees of the Avenatti-owned company that operated Tully's Coffee.
Even after pleading guilty, Avenatti still faces 31 counts – six wire fraud charges, 18 tax-related charges, two counts of bank fraud related to alleged false statements he made in an attempt to obtain loans from a federally insured financial institution, one count of aggravated identity theft for misusing the name of a tax preparer in relation to the bank fraud scheme, and four counts of bankruptcy fraud related to alleged false statements he made after his law firm was forced into bankruptcy.