left to right: Assistant U.S. Attorney Ranee Katzenstein, IRS Agent James Kim, AUSA Brett Sagel and U.S. Treasury Agent Ramoun Karlous after Michael Avenatti pleaded guilty to five crimes on Thursday, June 16, 2022. (Photo: Meghann M. Cuniff/ALM)

Michael Avenatti pleaded guilty Thursday to five federal felonies, admitting a criminal scheme to defraud clients of their settlement money as well as to trying to obstruct an Internal Revenue Service investigation into his failed coffee shop venture.

Avenatti entered the pleas without an agreement with the U.S. Attorney's Office after failed attempts to strike a deal, leaving 31 remaining charges that prosecutors haven't decided if they'll keep pursuing. 

He said plans to seek the dismissal of his remaining tax and bankruptcy charges for violation of the Speedy Trial Act, but six wire fraud counts remain, and Senior U.S. District James Selna said he's "not inclined to engage in two sentencings." The judge scheduled a "placeholder" sentencing date of Sept. 19, with the understanding that it will be vacated if prosecutors pursue the remaining charges.

Michael Avenatti appears via video from federal prison on April 13, 2022, in an Orange County Superior Court civil case. (Photo: Meghann M. Cuniff/ALM)

Avenatti told Selna he disagrees with prosecutors' assertion that the total amount of money associated with his fraud scheme is $9 million, with another $5 million linked to his tax crime.

"That will be a fight for another day," Avenatti said. "But again, my position is that it will be drastically less than that."

Dressed in a baggy gray jail sweatshirt and tan pants, Avenatti replied, "I'm obviously nervous, your honor. But health wise. I'm fine," when Selna asked how he was feeling. He then answered a series of questions from the judge to establish he was clearheaded, acting of his free will and understood his rights. That includes what he was giving up – his right to remain silent – and what he getting into – an unknown sentence that could be up to the consecutive, statutory maximum of 83 years in prison.

Avenatti also read a statement about his wire fraud crimes to establish the court-required factual basis for his guilty pleas, telling Selna he was licensed in California from June 2000 through 2020 and represented "thousands of clients during that time" including the four clients who are the victims in the four wire fraud counts. "I misappropriated and misused certain of their settlement funds to effectuate a plan and I effectuated wire transfers in pursuit of that plan," Avenatti said before describing each of the wire transfers, which ranged from $1,900 to $200,000.

 "Did you understand that in making those transfers you were carrying out a scheme to defraud each of your clients?" Selna asked.

"Yes," Avenatti answered.

"And did you understand that you were not authorized to make those transfers by your clients?" Selna asked.

"Yes," Avenatti answered.

"Did you make those transfers voluntarily?" Selna asked.

"Yes," Avenatti answered.

Avenatti also described his tax crime, saying he'd previously served as CEO of Global Baristas LLC – it owned the Tully Coffee's chain – and obstructed the IRS's tax collection efforts by instructing employees "to undertake various efforts."

Assistant U.S. Attorney Ranee Katzenstein said she wasn't "entirely" satisfied with Avenatti's stated factual basis because he needed to admit he "acted corruptly," so Avenatti on the spot admitted he'd done so. Selna asked him a couple more questions, and Avenatti admitted he should have told the clients about the wire transfers. Katzenstein then said there "are sufficient facts" to support the pleas but "obviously we will be supplementing the record extensively prior to sentencing."

That sets the stage for what Assistant U.S. Attorney Brett Sagel said "might be a somewhat substantial sentencing hearing," with he and Katzenstein apparently planning to detail Avenatti's crimes in much greater detail. 

After court, Sagel told reporters Avenatti admitted what prosecutors and the IRS "have been saying for several years now: That he committed unlawful and audacious acts to steal money from his clients to line his own pockets."

"In addition to defrauding his legal clients, he also didn't pay his taxes," Sagel said. "Today is step 1 before the government decides what to do on the remaining counts. But he will now be sentenced on his conducts of violating his duties to his clients and his duties as a taxpayer to the IRS."

Michael Avenatti's standby counsel H. Dean Steward and Courtney Cummings Cefali leave the federal courthouse in Santa Ana, California, after Avenatti pleaded guilty to five felonies on June 16, 2022. (Photo: Meghann M..Cuniff/ALM)

Avenatti, 51, was joined in court by his advisory counsel, sole practitioner H. Dean Steward and Courtney Cummings Cefali of Cefali & Cefali in San Juan Capistrano. They declined to speak with reporters afterward, though Steward replied "yes" when asked if he wonders what would have happened if instead of Selna declaring a mistrial last summer over newly discovered financial data on Aveantti's seized law firm servers, Avenatti had taken the case to the jury.

After Selna's mistrial last August, Avenatti appealed to the U.S. Court of Appeals for the Ninth Circuit, arguing he couldn't be retried again under double jeopardy. But the court quickly rejected his appeal, and prosecutors were planning on a July 27 re-trial. 

Avenatti currently is serving a total of five years in prison for two criminal cases out of the Southern District of New York, the first involving extortion charges against Nike and the other a wire fraud and aggravated identity theft involving the client that propelled him to fame in 2018, adult film star Stormy Daniels.

A jury convicted Avenatti of defrauding Daniels of payments for her autobiography, "Full Disclosure." The trial in Manhattan established that Avenatti sent some of Daniels' money to a victim in the California case, with both fraud schemes taking place in 2018, though the California scheme was much broader and began years earlier.

Along with Johnson, a paraplegic for whom Avenatti secured a $4 million settlement, the victims are Alexis Gardner, who was due $2.7 million from her former boyfriend, NBA basketball player Hassan Whiteside, as well as Greg Barela, a Southern California business whom Avenatti secured a $1.6 million settlement.

As established through testimony and bank records, all three never received a lump sum from Avenatti with an accounting of his attorney fees. Instead, he spent their entire settlement money, then paid them small amounts while telling them he hadn't yet received their money.

The fourth victim was Michelle Phan, a self-made international cosmetics entrepreneur who hired Avenatti amid his fame in 2018 to negotiate a departure package with Ipsy but never received a final $4 million payment. Phan's friend Long Tran was central to her efforts to try to recover the money, and he testified at trial, so the overall case against Avenatti is considered to involve five clients and four settlements.

If prosecutors' $9 million total loss calculation stands, Avenatti could face at least several more years in prison under U.S. Sentencing Guidelines. They also plan seek that amount as restitution.

Selna is allowing briefs to be up to 50 pages because "there will be many substantive issues to consider."

Avenatti is being housed at the Terminal Island federal prison near Long Beach, where he said he's preparing appearances in the Daniels and Nike cases.

Meanwhile, closing arguments are scheduled Monday in an Orange County Superior Court civil trial that pits Avenatti's former co-counsel against his former clients in an 11-year fight over attorney fees.