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Michael Avenatti Is Accused in Nike Extortion Attempt

Michael Avenatti, a lawyer, was arrested and charged with trying to extort millions of dollars from Nike through threats of negative publicity right before the company’s earnings call.Credit...Jefferson Siegel for The New York Times

Michael Avenatti, the lawyer best known for representing the pornographic film star Stormy Daniels in her lawsuits against President Trump, arrived in New York on Monday for a negotiating session with Nike executives that he believed could net him millions of dollars.

Armed with sensitive information, Mr. Avenatti approached the meeting as though he had the upper hand. He left in the custody of F.B.I. agents.

Federal prosecutors in Manhattan filed charges accusing him of trying to extort millions of dollars from the apparel giant in exchange for evidence he said he had of misconduct by company employees in the recruitment of college basketball players.

The arrest of Mr. Avenatti, who in a separate case was charged by federal prosecutors in California with bank and wire fraud, was the latest development in a spectacular fall by a lawyer who is known for orbiting and representing an array of celebrities and who has been central to some of the most salacious headlines about Mr. Trump.

In court documents filed Monday, prosecutors said that Mr. Avenatti and a client, a basketball coach for a traveling youth team, had threatened a flurry of negative publicity right before a Nike earnings call and the N.C.A.A. men’s basketball tournament. Prosecutors said Mr. Avenatti had told Nike that he and the basketball coach, said to be Gary Franklin Sr. of the club team California Supreme in Los Angeles, had evidence that Nike employees had funneled money to recruits in violation of N.C.A.A. rules.

Mr. Franklin could not be reached for comment.

The prosecutors said Mr. Avenatti and the coach had threatened to release the evidence in an attempt to damage Nike’s reputation and market capitalization unless the company paid them at least $22.5 million.

Geoffrey S. Berman, the United States attorney for the Southern District of New York, based in Manhattan, said at a news conference that Mr. Avenatti’s conduct amounted to a “shakedown.”

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Prosecutors Announce Charges Against Michael Avenatti

Federal prosecutors accused the lawyer Michael Avenatti of attempting to extort more than $20 million from Nike. Mr. Avenatti is best known for representing Stormy Daniels in her lawsuits against President Trump.

Today, we announce criminal extortion charges against Michael Avenatti. The charges are based on Avenatti’s scheme to extract more than $20 million in payments from a public company by threatening to use his ability to garner publicity to inflict financial and reputational harm on the company. Avenatti’s conduct had nothing to do with zealous advocacy for a client or any other kind of legitimate legal work. Instead, Avenatti used illegal and extortionate threats for the purpose of obtaining millions of dollars in payments for himself.

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Federal prosecutors accused the lawyer Michael Avenatti of attempting to extort more than $20 million from Nike. Mr. Avenatti is best known for representing Stormy Daniels in her lawsuits against President Trump.CreditCredit...Spencer Platt/Getty Images

“Avenatti used illegal and extortionate threats for the purpose of obtaining millions of dollars in payments from a public company,” he said. “Calling this anticipated payout a retainer or a settlement doesn’t change what it was — a shakedown. When lawyers use their law licenses as weapons, as a guise to extort payments for themselves, they are no longer acting as attorneys.”

Mr. Avenatti was released Monday evening on $300,000 bond and under several conditions, including restrictions on travel. In a brief news conference after his release, Mr. Avenatti said he was “highly confident” that when all the evidence was presented, he would be “fully exonerated, and justice will be done.”

A veteran plaintiffs lawyer, Mr. Avenatti rose to fame in March 2018 when he filed a lawsuit against Mr. Trump on behalf of Ms. Daniels, who said that she had an affair with Mr. Trump and then received a hush-money payment leading up to the 2016 election.

Mr. Avenatti became a fixture on cable news, leveraging Ms. Daniels’s case to build his own profile as a foil to Mr. Trump. He was even taken half-seriously when he declared that he was interested in making a presidential run in 2020.

Ms. Daniels’s suit, which sought to invalidate a nondisclosure agreement, was dismissed by a federal judge in California this month, and a separate defamation suit Mr. Avenatti filed against Mr. Trump on Ms. Daniels’s behalf was dismissed late last year. The discussion about Ms. Daniels, however, has remained a leading sore point for the Trump administration, as checks made out to her with the president’s signature on them were given to Congress last month by his former personal lawyer, Michael D. Cohen, who has pleaded guilty to federal charges.

Last September, Mr. Avenatti inserted himself into the confirmation hearings of Justice Brett M. Kavanaugh. The week before Justice Kavanaugh was confirmed, Mr. Avenatti announced that he had a new client, Julie Swetnick. Ms. Swetnick said that she had witnessed sexual misconduct by Justice Kavanaugh and some of his friends at high school parties in the Washington area in the early 1980s, when she was a college student in Maryland.

As Mr. Avenatti’s national profile grew, so did his legal and financial troubles.

He was arrested in Los Angeles in November on suspicion of domestic violence, which he called an effort to intimidate him, though he was not charged with a crime. His firm, formerly known as Eagan Avenatti, has repeatedly filed for bankruptcy, most recently on March 7, in Santa Ana, Calif.

The charging documents in the Nike case refer to an unnamed co-conspirator, another lawyer who worked with Mr. Avenatti. That lawyer is Mark Geragos, according to people familiar with the matter who requested anonymity, citing the sensitivity of the continuing investigation.

Mr. Geragos, a top celebrity lawyer, is best known in the sports world for representing the former quarterback Colin Kaepernick in his collusion case against the N.F.L., which was recently settled. He also played a role in Mr. Kaepernick’s negotiations with Nike over 2017 and 2018, which resulted in Nike’s making Mr. Kaepernick one of its highest paid football endorsers and a face of a new advertising campaign.

Mr. Geragos did not respond to phone calls or an email seeking comment. Mr. Berman declined to say why Mr. Geragos had not been arrested. He said the investigation was continuing.

Federal officials announced the charges around the same time that Mr. Avenatti, in a post on his Twitter account, announced that he would hold a news conference on Tuesday to accuse Nike of “a major high school/college basketball scandal.” In the past week, he has also privately reached out to reporters, telling them that he had explosive information about a major company.

Last year, two former employees of Adidas were among those convicted of fraud for participating in a similar scheme, outlined by prosecutors in the Southern District of New York, in which families of recruits were paid in exchange for their sons’ commitments to college teams sponsored by Adidas.

In a statement, Nike said it “will not be extorted or hide information that is relevant to a government investigation. Nike has been cooperating with the government’s investigation into N.C.A.A. basketball for over a year.”

Nike said that it had immediately called federal prosecutors when it became aware of the matter and that it had worked with the law firm Boies Schiller Flexner to assist in the investigation.

According to people with knowledge of the cases, once Nike heard Mr. Avenatti’s claims, it acted to inform federal officials of the allegation that the company’s employees were paying players. The nature of the discussion with Mr. Avenatti raised the possibility that extortion was taking place.

In the case filed in California on Monday, Mr. Avenatti was charged with embezzling from a client and with defrauding a bank by using false tax returns to obtain loans.

Nicola T. Hanna, the United States Attorney in Los Angeles, said the two cases were unrelated, but the authorities in California and New York coordinated to arrest Mr. Avenatti and execute search warrants at the same time.

In the Nike case, the federal prosecutors said Mr. Avenatti had represented a coach, later identified as Mr. Franklin, whose team recently did not have a contract with Nike renewed, according to the court documents. Mr. Avenatti told Nike that he had evidence that at least three former high school players had been paid by Nike in ways that were intended to be concealed, the documents said.

California Supreme had three alumni taken in the 2018 N.B.A. draft, including Deandre Ayton of the Phoenix Suns.

Mr. Avenatti, according to prosecutors, threatened that he would hold a news conference when it could maximally disrupt Nike: before its quarterly earnings call last week, which coincided with the start of the N.C.A.A. men’s basketball tournament. The tournament is among the biggest annual events on the sports calendar, featuring many prominent teams that are sponsored by Nike, like Duke, North Carolina and Kentucky.

Mr. Avenatti said he would refrain from publicizing his evidence if Nike paid $1.5 million to his client, the court documents said, though prosecutors did not name Mr. Franklin. Mr. Avenatti also demanded that Nike hire him and another lawyer to conduct an internal investigation, for billings worth between $15 million and $25 million, court documents said.

As an alternative, prosecutors said, Mr. Avenatti said he would accept $22.5 million from Nike for himself and his client in exchange for not releasing the evidence.

According to the complaint, Mr. Avenatti told Nike that his client’s information, if publicized, would ultimately lower the value of Nike stock by billions of dollars. He believed that once he went public, parents, coaches and players all across the country would reach out to him with information about payments that violated N.C.A.A. rules.

“The company will die — not die, but they are going to incur cut after cut after cut after cut, and that’s what’s going to happen as soon as this thing becomes public,” Mr. Avenatti said in a meeting with Nike lawyers that was recorded for video and audio.

Nike, Adidas and Under Armour sponsor dozens of basketball teams for high school players that compete mainly in the summer. The equipment companies shower those teams with tens of thousands of dollars in financing and apparel, and also organize huge tournaments attended by the country’s most prominent college coaches. More than high school basketball, these leagues represent the hub of recruiting for college basketball programs.

The 2017 charges of corruption against former Adidas employees and several other figures in college basketball, including assistant coaches at major programs, rocked the sport and prompted the firing of Rick Pitino, the Hall of Fame coach at Louisville. There have been three convictions in the case so far and several guilty pleas.

William K. Rashbaum and Katie Benner contributed reporting.

A version of this article appears in print on  , Section A, Page 1 of the New York edition with the headline: Trump Nemesis Arrested in Nike Extortion Case. Order Reprints | Today’s Paper | Subscribe

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