9th vacates Avenatti's sentence | Young Thug mistrial possible | A$AP Rocky update
Disgraced lawyer Michael Avenatti will return to Santa Ana for resentencing under a new appellate order that says a judge must determine the value of his legal work.
A federal appellate panel on Wednesday vacated disgraced lawyer Michael Avenatti’s 14-year prison sentence in his California client fraud case.
The 9th Circuit U.S. Court of Appeals said Avenatti’s sentence didn’t properly consider the money he paid victims as well as the value of his legal services because Senior U.S. District Judge James V. Selna punished him for the full amount of the settlements from which he embezzled.
The ruling says Avenatti’s clients “were never entitled to receive the full settlement values — they hired Avenatti on a contingency fee basis and agreed, by contract, to pay him a portion of any settlement as his fees and to reimburse him for his costs.”
“Thus, even if Avenatti acted lawfully, his clients would not have received the full settlement amounts,” according to the nine-page unpublished memorandum from 9th Circuit Judges Michelle T. Friedland and Roopali Desa as well as U.S. District Judge Karen E. Schreier, sitting by designation from the District of South Dakota.
The judges didn’t decide whether Avenatti should be credited for work by other attorneys at his firm, saying he forfeited the argument by raising it in his reply brief instead of his opening brief.
In an X / Twitter post apparently dictated from prison, Avenatti said he’s thankful the panel unanimously “threw out my draconian prison sentence today.”
“The sentence was always grossly unjust and violative of my most basic constitutional rights, but the government sought it anyway solely because of who I am. We ALL deserve due process,” Avenatti wrote.
Wednesday’s ruling could affect other lawyers prosecuted under federal wire fraud law for stealing from clients, including disbarred Real Housewives of Beverly Hills lawyer Tom Girardi, who’s to be sentenced in December in Los Angeles for four wire fraud convictions.
Like Avenatti, Girardi paid his victims partial amounts from their settlements while lying to them for several years about what was going on with their money. Prosecutors said they were “lulling payments” meant to continue the fraud.
In Avenatti’s case, Assistant U.S. Attorneys Brett Sagel and Ranee Katzenstein persuaded Senior U.S. District Judge James V. Selna to increase Avenatti’s prison sentence based on the total of the four client settlements he ransacked, which is $12.35 million.
The 9th Circuit said this contradicts “the purpose of the loss enhancement, which is to ensure that a defendant’s sentence is proportional to the harm he caused.”
“We therefore remand and direct the district court to account for the fair market value of Avenatti’s legal services and costs in its ‘actual loss’ calculation, without any reliance on forfeiture,” the judges wrote.
The judges also said Selna didn’t properly show how Avenatti’s perjury during judgment-debtor examinations in civil proceedings justified an increased sentence for obstruction of justice in the client fraud case, and they said his $7.6 million restitution order should have considered the legal services he provided cosmetics entrepreneur Michelle Phan when he acquired Em Cosmetics for her while negotiating her departure from Ipsy, the company she founded after becoming famous by posting makeup tutorials on YouTube.
Avenatti’s agreement with Phan entitled him to 7.5 percent of the value of Em Cosmetics, and “such services rendered to the victim must be deducted from the restitution owed,” according to the ruling.
Additionally, the 9th Circuit panel said Selna should have imposed Avenatti’s sentence to run at the same time as his four-year sentence in the Southern District of New York for stealing from the client who rocketed him to fame in 2018, adult film star Stephanie “Stormy Daniels” Clifford. But, in a win for the U.S. Attorney’s Office, the judges said Selna was justified when he imposed the sentence consecutively with Avenatti’s 30-month sentence for extorting Nike.
“The modus operandi in the Nike offense — attempting to extort money from a company — is distinct from the stealing of settlement money from clients at issue here,” the 9th Circuit judges wrote.
However, “Contrary to the district court’s finding, the Clifford offense was also contemporaneous with the offenses in the present case: the relevant conduct in the Clifford offense spanned July 2018 to February 2019, and the conduct here spanned January 2015 to March 2019.”
Selna also increased Avenatti’s sentence because he abused a position of trust, used sophisticated means, victimized vulnerable people, caused them substantial financial hardship and obstructed justice when he threatened on Twitter speak about his client-turned-victim Alexis Gardner and her ex-boyfriend, NBA player Hassan Whiteside.
The 9th Circuit’s ruling doesn’t touch those enhancements.
The finding regarding a concurrent sentence with the Stormy Daniels case could reduce Avenatti’s new sentence by at most four years, which is the length of the sentenced imposed by U.S. District Judge Jesse M. Furman. Furman imposed the 48-month sentence with 18 months to run concurrently with the 30-month Nike sentence.
Regarding the total loss amount, Avenatti argued during his trial in Santa Ana, California, in July and August 2021 that federal investigators didn’t properly consider the work he did for clients and the partial payments he gave clients from their settlements. His repeat questions about his law firm’s bill records in the Tabs3 software program — “WHAT IS TABS?” — led to the U.S. Department of Justice releasing 2,000 electronic files to him six weeks into trial.
The records weren’t reviewed by investigators or the financial expert hired by prosecutors, and they led Judge Selna to declare a mistrial on Aug. 24, 2021, because he said Avenatti could have used the Tabs info when preparing his defense. Selna said the failure to provide the info violated Brady v. Maryland case law regarding prosecutors’ duties to release favorable evidence to defendants. But he also said no misconduct occurred and that prosecutors didn’t try to goad the mistrial, and he rejected a double jeopardy claim from Avenatti that sought to prevent a retrial.
Prosecutors said the records couldn’t contain enough previously unknown client costs and expenditures to change the scope of the case, and they emphasized that they used bank records to track Avenatti’s expenditures and how he spent settlement money. They also accounted for Tabs3 data that was used in two client cases because it was reflected in banking transactions.
Avenatti never publicly revealed the details of the Tabs data. Instead of going to trial a second time, he pleaded guilty on June 16, 2022, to five of his 36 charges without a plea agreement with prosecutors. Prosecutors recommended Selna sentence him to 18 years in prison, while Avenatti asked for a six-year sentence to be served concurrently with his New York sentences. He and his lawyer, H. Dean Steward, argued the money Avenatti stole from his clients was far less than prosecutors alleged — $1.5 million to $3.5 million.
In Avenatti’s appellate opening brief, Deputy Federal Public Defender Margaret A. Farrand said Selna’s decision to consider the entire $12.35 million in settlements “invented a novel, extratextual, and state-dependent exception to the net loss rule for attorney defendants.”
Had Selna considered Avenatti’s payments and work for the client victims, the amount “would have been less than $9.5 million,” Farrand wrote, which would have decreased the sentencing enhancement under U.S. Sentencing Commission guidelines.
In her answering brief, Katzenstein said Judge Selna “did not apply a blanket legal rule prohibiting credit for fees” and instead “found, after considering all the circumstances, that the services defendant provided to obtain the settlements had no fair market value.”
Katzenstein said in oral argument on Sept. 12 that Avenatti was lying to his clients and causing them great harm, “and no lawyer could reasonably believe that he was nonetheless entitled to his fees.”
“No one would pay to have their money stolen from them,” Katzenstein said.
Judge Desa asked Katzenstein if “another way of looking at it” is “but for his services, they wouldn’t have bee entitled to the settlement amounts?”
Katzenstein replied that Avenatti’s “services” “were designed to get the settlements into his hands.”
“They didn’t get the settlements. His services got the settlements for him,” she said.
Wednesday’s ruling sided with Farrand and Avenatti and said, “Forfeiture is a sanction that does not approximate the pecuniary harm caused by an attorney’s misconduct.”
“It has no place in calculating ‘actual loss’ for the purposes of enhancing a criminal defendant’s sentence,” the judges wrote.
Selna has not yet scheduled a hearing. He could schedule briefing regarding the loss amount issue.
Avenatti, 53, currently is incarcerated at the Terminal Island federal prison in San Pedro, near Los Angeles.
Court documents:
Dec. 5, 2022: Judge Selna’s sentencing order
Nov. 3, 2023: Avenatti’s opening brief
Feb. 5, 2024: Prosecutors’ answering brief
March 27, 2024: Avenatti’s reply brief
Oct. 23, 2024: 9th Circuit ruling
Previous articles:
With Trump trial looming, 2nd Circuit upholds Avenatti's convictions for defrauding Stormy
Calling the evidence “overwhelming,” a federal appellate court on Wednesday affirmed imprisoned California lawyer Michael Avenatti’s two felony convictions for defrauding adult film star Stormy Daniels of book contract money while representing her in lawsuits against Donald Trump.
2nd Circuit rejects Avenatti's 'meritless' Nike extortion appeal as bankruptcy deposition looms
An appellate court on Wednesday affirmed imprisoned ex-California attorney Michael Avenatti’s felony convictions for extorting Nike, rejecting his “meritless” arguments that his $25 million demand reasonably relate…
Avenatti’s victims:
Alexis Gardner was living in her car when Avenatti started representing her in a dispute with professional basketball player Hassan Whiteside.
Avenatti negotiated a $2.75 million settlement with Whiteside for reasons not publicly disclosed, but as established in trial, he never sent Gardner her share of the money. Instead, he used $2.5 million to buy a jet with another client, which was seized by federal authorities after his arrest in March 2019, then spent much smaller amounts of money periodically on Gardner while telling her Whiteside and his team were wrongly withholding the money. Gardner
Michelle Phan’s friend Long Tran hired Avenatti amid the height of his fame in 2019 to negotiate Phan’s departure from Ipsy. Tran testified in trial that he asked Avenatti in 2018 if he’d like to borrow an armored Chevrolet Suburban B-6 with electric door handles, designed to thwart grenades, landmines and assault rifles, as he dealt with intense media attention amid his lawsuits against Trump on behalf of Clifford.
Geoffrey Johnson is Avenatti’s earliest victim, having hired him in 2012 to sue Los Angeles County after he became a paraplegic during a suicide attempt in jail following abuse by guards and inmates. Avenatti secured a $4 million settlement in 2015, then paid Johnson $900 to $1,900 every month for four years while lying to him about the status of the settlement. Johnson lost his Social Security benefits after Avenatti didn't respond to the office's questions about the settlement,
Greg Barela is a businessman whom Avenatti secured a $1.6 million settlement in a civil suit. But Avenatti never gave Barela his share of the money. Instead, he lied to Barela for months as Barela continued to spend time at his law firm and once hosted a watch party for Avenatti’s appearance on the news show 60 Minutes in 2018.
Young Thug judge suggests mistrial, but with retrial rights
The defense requested a mistrial in the Young Thug / YSL gang racketeering conspiracy trial in Atlanta, Georgia, on Wednesday during rapper Wunnie “SlimeLife Shawty” Lee’s testimony.
The request occurred after Lee read aloud a “Free Qua” caption in an Instagram post that was redacted on the copy displayed on the courtroom screen but not on the copy given to him.
The trial has had problems before with testimony indicating the defendants are in jail, which is considered prejudicial.
Nicole Westmoreland, lawyer for Quamarvious Nichols, requested the mistrial during Fulton County Deputy District Attorney Simone Hylton’s direct-examination.
“We’re not going to be able to unring this bell, Your Honor,” Westmoreland told Fulton County Superior Court Judge Paige Reese Whitaker.
She also said it’s “painfully obvious that the state is not prepping their witnesses” and pointed to Lee’s earlier testimony that he didn’t know he wasn’t supposed to say someone was in prison.
“We’re just not going to be able to unring 100 bells,” Westmoreland said.
Judge Whitaker already has appeared increasingly frustrated with prosecutors for their unpreparedness, inept trial management and much-too-large case.
Last week, she told Deputy District Attorney Seth Brown, “It is not about what the court wants or doesn’t want. Although the court does want attorneys who know how to try a case. But my rulings are based on the rules of evidence, OK?”
Whitaker told Westmoreland on Wednesday that she won’t declare a mistrial with prejudice because she doens’t believe prosecutors intentionally tried to elicit the testimony about prison to goad the defense into asking for a mistrial.
However, the judge then asked the defense if they want a mistrial without prejudice, which means prosecutors can retry them. Westmoreland asked for a moment to consider, then the attorneys spoke with Whitaker at the bench before the live stream ended for the day.
No mistrial was declared, and court is scheduled to reconvene Thursday afternoon in Atlanta. I’m not sure what time, but the cameras will be there in the morning and I’ll stream on my YouTube channel as soon as court is in session.
Here are a few videos from Lee’s testimony.
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The 25-year-old was charged in the racketeering conspiracy indictment alongside rapper Jeffery "Young Thug" Williams, but he entered an Alford plea in December 2022, which means he did not admit guilt but acknowledged enough evidence exists for him to be found guilty.
Hylton asked Lee if YSL is a gang, and he answer that “some people treat it like that.”
“What do you treat it as?” Hylton asked.
“I treated it like that before,” Lee answered.
“You treated it like a gang before?” Hylton asked.
“Yes,” Lee answered.
A$AP Rocky’s assault trial postponed to January
Rapper Rakim “A$AP Rocky” Mayer’s assault trial is now scheduled to begin on Jan. 21, 2024.
Los Angeles County Superior Court Judge Mark S. Arnold on Tuesday rescheduled the trial after speaking with Rocky’s lawyer Joe Tacopina.
Tacopina told reporters after court that Rocky has a concert in Thailand that conflicted with the Nov. 12 trial date.
Judge Arnold got the case in the last month or so, and he said Tuesday he will not reschedule the trial again.
The trial is expected to last seven to 10 days.
Judge M.L. Villar in November 2023 determined enough evidence exists to support two counts of first-degree assault against 35-year-old Rocky, who has two children with megastar Rihanna, for a Nov. 6, 2021, confrontation and alleged shooting involving his high school friend Terrell “Relli” Ephron.
Ephron testified in the preliminary hearing that a bullet fired by Rocky grazed his knuckles.
You can watch video from the hearing here.
Arnold asked Tacopina on Tuesday if Rihanna plans to attend the trial. He said he didn’t know, and the judge told him to find out.
“She’s welcome to be here whenever she wants,” Arnold said. “If she wants to come, she can come.”
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