Michael Avenatti arrested on federal charges of wire fraud and extortion

Attorney Michael Avenatti, who came to national prominence as the lawyer for adult film star Stormy Daniels, was arrested on federal charges in two separate cases in California and New York, federal prosecutors announced Monday.

The U.S. attorney for the Southern District of New York charged Avenatti for allegedly trying to extort Nike for nearly $20 million. Prosecutors said he and another attorney threatened to release damaging information about the company if it did not meet his demands.

The U.S. attorney in Los Angeles separately announced Avenatti faces bank and wire fraud charges for allegedly embezzling money from a client and defrauding a bank through fake tax returns.

Avenatti was arrested in New York and appeared in federal court Monday afternoon in Manhattan. He was released on a $300,000 personal recognizance bond and ordered to surrender his passport. He is also required to report any transactions of $5,000 or more to the court, and his travel is restricted. He's scheduled to appear in court in California on April 1, with preliminary hearings in New York set for April 25.

When he emerged from court, Avenatti addressed reporters, saying in part, "As all of you know, for the entirety of my career I have fought against the powerful, powerful people and powerful corporations. I will never stop fighting that good fight. I am highly confident that when all of the evidence is laid bare in connection with these cases, when it is all known, when due process occurs, that I will be fully exonerated and justice will be done."

Hours later, he repeated that on Twitter regarding the Nike-related counts:

The criminal complaint in the New York case says Avenatti and an alleged co-conspirator, an attorney identified as "CC-1," requested a meeting with Nike's lawyers in New York last Tuesday, March 19. Two of the attorneys represent Nike as outside counsel at the law firm Boies Schiller Flexner, and one of the attorneys works for Nike in-house.

CBS News has learned CC-1 is Mark Geragos, the high-profile celebrity attorney whose recent clients include former NFL quarterback Colin Kaepernick and the actor Jussie Smollett. Geragos was not charged in the complaint released Monday. His office said he had no comment on the allegations.

During the meeting at Geragos' office, Avenatti said he represented the coach of an amateur athletic union (AAU) basketball team in California whose contract with Nike had not been renewed. He said the coach had evidence of Nike employees funneling illegal payments to top high school basketball prospects and their families. 

The coach Avenatti said he represented is Gary Franklin of Los Angeles, CBS News has learned. Franklin is the cofounder and executive director of the California Supreme, a basketball program in Southern California.

Avenatti allegedly threatened to hold a press conference detailing the allegations to coincide with the beginning of the NCAA basketball tournament and Nike's quarterly earnings call. The complaint says Avenatti offered to scrap the press conference if Nike paid his client $1.5 million and hired Avenatti to conduct an internal investigation of the company. 

After the meeting later that afternoon, Nike's attorneys contacted the U.S. Attorney's Office to report the alleged extortion attempt.

On March 20, the next day, two of the Nike attorneys held a phone call with Avenatti that was recorded by law enforcement. Avenatti allegedly reiterated his demands for payment for him and his client.

"I'm not f---ing around with this, and I'm not continuing to play games," Avenatti was recorded as saying. "You guys know enough now to know you've got a serious problem. And it's worth more in exposure to me to just blow the lid on this thing. A few million dollars doesn't move the needle for me. I'm just being really frank with you."

"I'll go and I'll go take $10 billion off your client's market cap. But I'm not f***ing around," he said.

On March 21 — the day of the Nike earnings call and the first day of the NCAA Tournament — the group met again in New York, with the Nike attorneys recording the meeting. They asked Avenatti and Geragos whether they could arrange to make a payment without an internal investigation.

"If [Nike] wants to have one confidential settlement and we're done, they can buy that for $22.5 million and we're done," Avenatti is quoted as saying. "Full confidentiality, we ride off into the sunset."

Avenatti set a deadline of Monday, March 25, to reach an agreement and arranged another meeting. Early Monday afternoon, Avenatti tweeted: "Tmrw at 11 am ET, we will be holding a press conference to disclose a major high school/college basketball scandal perpetrated by @Nike that we have uncovered."

He was arrested when he showed up for the meeting in New York, U.S. Attorney Geoffrey Berman said at a press conference.

In a statement Monday afternoon, 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 NCAA basketball for over a year. When Nike became aware of this matter, Nike immediately reported it to federal prosecutors," the company said. "Nike firmly believes in ethical and fair play, both in business and sports, and will continue to assist the prosecutors."

In the California case, prosecutors charged Avenatti with wire fraud, saying he negotiated a $1.6 million settlement for a client but used the money for personal use and to pay expenses for his coffee business.

Avenatti is also charged with bank fraud in California. According to the criminal complaint, Avenatti lied about his income to obtain more than $4 million in loans from a Mississippi bank in 2014. The complaint alleges Avenatti gave The Peoples Bank bogus tax returns showing more than $14 million in earnings for the three preceding years. In fact, the complaint alleges, Avenatti never filed returns for those years, and owed the IRS $850,000 from prior years.

Avenatti came to prominence for his representation of Daniels, the adult film star who alleged she had an affair with President Trump and was paid for her silence in the weeks before the 2016 election. On Monday, Daniels said she cut ties with Avenatti more than a month ago "after discovering that he had dealt with me extremely dishonestly."

Lex Haris contributed to this report.

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