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Wed Jan 23, 2019, 11:13 AM

Former Client Accuses Michael Avenatti of Operating Law Firm Like a 'Ponzi Scheme'

https://www.thedailybeast.com/former-client-accuses-michael-avenatti-of-operating-law-firm-like-a-ponzi-scheme

Former Client Accuses Michael Avenatti of Operating Law Firm Like a ‘Ponzi Scheme’


According to the statement of claims, Avenatti handled litigation with an unnamed third party for Barela, securing him a confidential settlement. In January 2018, according to Barela’s claim, the third party started paying funds into a client trust account managed by Avenatti for him to pass to Barela. But instead of doing so, Avenatti allegedly told Barela the third party never paid the settlement money. As the months passed, Barela’s suit says, he grew increasingly anxious about the money, frequently asking Avenatti when it would come through.

Barela needed the money to cover other business expenses, the statement says, and faced financial hardship because he couldn’t get it. Avenatti eventually offered to lend him money to help him get by, the claim says. Instead, Barela retained new counsel. Those lawyers contacted the third party with which Barela had entered into a settlement, and allegedly learned it had already started making payments to Avenatti, which were intended for Barela, back in January 2018—payments Barela’s claim says he has yet to receive.

“Mr. Barela hired our firm to investigate what happened to the settlement payment that he was supposed to have received early last year,” Steven Bledsoe, a lawyer with Larson O’Brien LLP representing Barela, told The Daily Beast. “As part of our investigation, we contacted the lawyer for the settling party and he gave us a copy of the unaltered settlement agreement and the wire-transfer confirmation showing that his client made the settlement payment to the bank account specified by Mr. Avenatti five days before it was due.”

...

“This is apparently how a firm with virtually no money in its operating accounts is able to fund hundreds of thousands of dollars in expenses each month,” Frank stated in the filing. “And by keeping the money stashed away in the IOLTA account, rather than transferring it to EA, Avenatti is able to prevent [Frank] from levying on these amounts as a judgment creditor.”

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Reply Former Client Accuses Michael Avenatti of Operating Law Firm Like a 'Ponzi Scheme' (Original post)
jberryhill Jan 2019 OP
The Velveteen Ocelot Jan 2019 #1
jberryhill Jan 2019 #9
The Velveteen Ocelot Jan 2019 #11
LuvLoogie Jan 2019 #2
Sanity Claws Jan 2019 #3
TreasonousBastard Jan 2019 #4
jberryhill Jan 2019 #10
The Velveteen Ocelot Jan 2019 #15
jberryhill Jan 2019 #16
The Truth Is Here Jan 2019 #18
The Velveteen Ocelot Jan 2019 #20
LuvLoogie Jan 2019 #5
still_one Jan 2019 #6
malaise Jan 2019 #7
UniteFightBack Jan 2019 #25
The Velveteen Ocelot Jan 2019 #8
Saboburns Jan 2019 #12
The Velveteen Ocelot Jan 2019 #13
Saboburns Jan 2019 #17
Saboburns Jan 2019 #19
The Velveteen Ocelot Jan 2019 #21
Saboburns Jan 2019 #22
The Velveteen Ocelot Jan 2019 #23
Saboburns Jan 2019 #24
Kingofalldems Jan 2019 #14

Response to jberryhill (Original post)

Wed Jan 23, 2019, 11:18 AM

1. Yikes. This is the sort of shit that gets lawyers disbarred.

State bar organizations tend to have no mercy when it comes to misuse of client funds.

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Response to The Velveteen Ocelot (Reply #1)

Wed Jan 23, 2019, 11:41 AM

9. Barela is pursuing arbitration


...which is likely in the dispute provision of his engagement agreement, or they have otherwise agreed to arbitrate. In that circumstance, I don't know whether the arbitrator would make a referral to Calbar or not.

Certainly, if he was lying to his client about having received the settlement, and was using money from the IOLTA account to fund general operations and expenses, then he's done.

It seems odd that the other party would have said that they paid Avenatti, and produced wire transfer receipts to Avenatti's IOLTA account, if its some kind of elaborate hoax.

My theory:

Whatever went on between Barela and the other party must be potentially embarrassing enough to Barela that he would be disinclined to pursue an action to enforce the settlement, and was able to be mollified long enough by the "slow pay" story. Most of Avenatti's problems, IMHO, stem from that large judgment he got in district court against Kimberly Clark for something like $450 million, which was later cut to $20 million and even that was still on appeal. That's from memory, but the basic idea is that he probably did a lot of chicken-counting before those eggs were hatched, and then developed some creative strategies for the fallout.

It also explains how he's avoided attachment of all kinds of things from the former partner, who is still looking to collect on the judgments in his favor, and the various aggrieved parties arising from the Tully's Coffee shitshow.

But playing games with client funds is, as you know, the chart-topping reason for attorney disbarment and other discipline, by far. If you are fond of reading attorney discipline cases, it never starts out as "I'm going to steal from my clients" but is precipitated by other problems arising from character flaws.

You don't "borrow" from the IOLTA account. You track every payment in and out. You inform the client immediately upon receipt or disbursement of funds, and you send an invoice recording every transaction involving the IOLTA account.

The dispute here is going to be pretty simple to figure out.

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Response to jberryhill (Reply #9)

Wed Jan 23, 2019, 11:50 AM

11. Barela sounds like a dodgy character himself,

but that doesn't excuse fiddling with client funds (and your theory makes sense - Avenatti might have been kiting funds owed from settlements that haven't yet arrived). Many years ago in another life I worked for a state appellate court that handled lawyer discipline appeals. In the vast majority of cases the lawyer got in trouble for "borrowing" from his trust accounts ("I'll just take a little of this money to pay some bills and I'll pay it back when I get paid on another case and nobody will ever know" ), and the motivating factor for the borrowing was usually a drinking or gambling problem, though in a few cases the lawyer was just a crook.

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Response to jberryhill (Original post)

Wed Jan 23, 2019, 11:20 AM

2. But he's a fighter!

And he should run for president because there aren't any good enough Dems!

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Response to jberryhill (Original post)

Wed Jan 23, 2019, 11:20 AM

3. If true, this is cause for disbarment.

You don't mishandle client's funds held in trust.

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Response to jberryhill (Original post)

Wed Jan 23, 2019, 11:20 AM

4. Isn't this the sort of thing that gets you disbarred? Indicted, even?

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Response to TreasonousBastard (Reply #4)

Wed Jan 23, 2019, 11:42 AM

10. #1 reason for disbarment

...is improper handling of client funds.

I mean, think of it.

This creature:



is an attorney in good standing in the State of California.

You can be a total loon, liar, crackpot, whatever.

But you mishandle $1 of a client's money and you are going down.

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Response to jberryhill (Reply #10)

Wed Jan 23, 2019, 12:07 PM

15. Is that Orly Taitz?

Quite true; you can be as mad as a box of frogs and still keep your license as long as you don't steal your clients' money.

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Response to The Velveteen Ocelot (Reply #15)

Wed Jan 23, 2019, 12:12 PM

16. The one and only...

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Response to jberryhill (Reply #16)

Wed Jan 23, 2019, 12:18 PM

18. Did she go back to being a dentist

 

after no-one wanted her legal acumen?

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Response to The Truth Is Here (Reply #18)

Wed Jan 23, 2019, 12:24 PM

20. It appears that she is now working as a full-time lunatic and conspiracy theorist.

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Response to jberryhill (Original post)

Wed Jan 23, 2019, 11:21 AM

5. I remain skeptical of Mr. Avenatti.

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Response to jberryhill (Original post)

Wed Jan 23, 2019, 11:23 AM

6. I am not surprised.

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Response to jberryhill (Original post)

Wed Jan 23, 2019, 11:24 AM

7. Avenatti has already done all I needed

exposed Cohen and the Con.

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Response to malaise (Reply #7)

Wed Jan 23, 2019, 06:39 PM

25. Yeah he really helped blow that up....and Stormy. nt

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Response to jberryhill (Original post)

Wed Jan 23, 2019, 11:26 AM

8. Blows my mind that anybody thought this con man ought to run for president.

We already have one of those, and look at how well that's working out. Sometimes the latest shiny object isn't very shiny.

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Response to jberryhill (Original post)

Wed Jan 23, 2019, 11:55 AM

12. I like Michael Avenatti.

I mean I still like Michael Avenatti. It seems that I'm not supposed to like him anymore, even though he and I are both Democrats and both hate Republicans.

It seems that these days it's more the Democrats telling me not to like Michael Avenatti. The Republicans led the charge against him til 6 months or so ago. And now it's my own party leading the charge.

But I still like Michael Avenatti.

I sort of feel like apologizing, when I say that. Like I'm supposed to say "I'm sorry, but I still like Michael Avenatti".

But I'm not sorry. I still like Michael Avenatti.

I watched quite a bit of him a few months ago, he was on Chris Cuomo a bunch. Boy he impressed me. Very intelligent. Great orator. But what I liked most was his total honesty and refusal to stretch the truth or embellish. What he he said, what he argued was true. He never stretches the truth, he doesn't sensationalize.

Of course he used client and her case to become famous. And I think he is extremely ambitious. Extremely. And, full disclosure, I'm pretty ambivalent regarding his domestic charges. Not that those charges don't warrant attention, nor be excused, ever, but from what know about them are dubious.

He could be my lawyer. I'd be very happy to have him represent me.

And I still like Michael Avenatti.

(Even though I'm not supposed to.)

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Response to Saboburns (Reply #12)

Wed Jan 23, 2019, 12:04 PM

13. You really shouldn't. A lawyer who takes money from his client's trust account

is definitely someone you would not want to represent you, because he's not someone who possesses "total honesty and refusal to stretch the truth or embellish"; he's a guy who steals his client's money. Maybe he'll steal yours, too. All lawyers know damn well that taking and using the money in the client trust account is theft as well as a serious breach of the lawyer's duty to their client. If you want to like a guy like that because he stirred up some shit with Michael Cohen and Trump, feel free. But remember, some people's willingness to overlook horrendous character flaws because they "liked" someone is what got us the Trump presidency.

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Response to The Velveteen Ocelot (Reply #13)

Wed Jan 23, 2019, 12:17 PM

17. I agree completely with you here.

I agree unreservedly. And what say you is exactly right, and correct.

And if it happened like his partner is claiming it happened I won't like Michael Avenatti. And I will gladly say so.

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Response to The Velveteen Ocelot (Reply #13)

Wed Jan 23, 2019, 12:23 PM

19. BTW I don't like Avenatti because he stirred up shit.

On Trump or anybody else.

And why actually stated the reasons I like him was his truthfulness and refusal to make any unsubstantiated claims. Which he was offered numerous times to do, by many different people, in many different environments.

I am struck by his adherence to things he knew to be proven in a courtroom.

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Response to Saboburns (Reply #19)

Wed Jan 23, 2019, 01:23 PM

21. One of the most important characteristics of a con man is

their ability to lie and bullshit convincingly. I think if you go back over the way Avenatti handled the Stormy Daniels case you'll find plenty of instances where he was less than truthful or ethical. This became more obvious as time went on and as he got in more hot water with various courts. I pretty much washed my hands of him after he made a big deal about wanting to intervene in Cohen's case in the SNDY, in order, he claimed, to prevent the public release of some of Daniels' documents that were among those seized by the Feds. But after he made the request to be admitted pro hac vice so he could represent Daniels in that case, the judge reminded him that under the lawyers' professional responsibility rules of New York State, he would not be able to comment publicly about the case if he was representing a party to it. He immediately dropped the request because he didn't want to give up being able to go on TV. In other words, his TV appearances were more important to him than protecting his clients' records. That's not the sort of lawyer I'd want representing me.

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Response to The Velveteen Ocelot (Reply #21)

Wed Jan 23, 2019, 04:50 PM

22. As I see it.

So you take great umbrage in the fact that Mr. Avenatti did not take on a case that he had no role in, nor that, AFAIK, his client never directed him to?

And by which doing so might jeopardize his strategy in a case he was currently very involved in, involving the current President of the United States paying hush money to his client, an adult film star, and possibly with campaign money, a felony.

I tend to think the more he talked on TV, making the most noise possible, he would ensure justice against the POTUS, tell this sordid tale to the world, and ensure both he and his client massive revenue streams lasting a lifetime. Tens of millions of dollars.

I would imagine his client did not ask him to join the Cohen case, did not want him joining the Cohen case if it caused him to be off television talking about her and her case.

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Response to Saboburns (Reply #22)

Wed Jan 23, 2019, 05:24 PM

23. If he did anything his client did not know about, direct or approve, he violated his duty to her.

He would have had to advise her and have received her permission to join the SDNY case. Lawyers are obligated to keep their clients advised as to all aspects of a case. If she told him she didn't want him to intervene in the case he wouldn't have (or shouldn't have) done it. Maybe he was able to convince her that it was more important for him to be on TV than to protect her interest in preserving her right to keep her documents confidential. But he couldn't have done either thing without advising her and seeking her consent.

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Response to The Velveteen Ocelot (Reply #23)

Wed Jan 23, 2019, 06:21 PM

24. er,um Yes

Which is why I stated above that he was following his client's wishes.

And is why I did not state he was NOT following his client's wishes.

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Response to Saboburns (Reply #12)

Wed Jan 23, 2019, 12:05 PM

14. Excellent.

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