US judge halts Avenatti art sale

SANTA ANA -- Amid allegations of a new financial scheme, a U.S. judge on Tuesday prohibited the sale of high-end artwork once belonging to indicted attorney Michael J. Avenatti as his receiver-controlled law firm returned to bankruptcy.

The injunction from U.S. Bankruptcy Judge Catherine E. Bauer was issued just as a 30-day stay authorized by a family law judge in Avenatti's divorce case was to expire. Without the injunction, Avenatti or his ex-wife, Lisa Storie, could sell the four pieces of art, something that already happened with several other pieces, according to attorney Jack A. Reitman, who is representing Eagan Avenatti LLP.

Reitman noted Avenatti himself bought his own artwork back at an auction last month.

"They're trying to buy this stuff for cheap and sell it for a higher price to make a quick profit," Reitman said.

Reitman said the art "is worth $100,000, and it's going to be sold storage-unit style for probably 2 cents on the dollar." Instead, Reitman wants the art sold at a reputable high-end auction and the money used to pay Eagan Avenatti's creditors, who are owed more than $20 million.

Reitman said it was bought with Eagan Avenatti money, which could have been money belonging to clients from whom Avenatti is accused of stealing.

"For a bankruptcy estate that has no money, $100,000 is kind of a big deal," Reitman said.

Reitman and his uncle, John P. Reitman, both of Landau Gottfried & Berger LLP, represented the now-former receiver, Brian Weiss, and will represent the new bankruptcy trustee, Richard A. Marshack of Marshack Hays LLP, as Eagan Avenatti proceeds with Chapter 7 bankruptcy. In re Eagan Avenatti LLP, 19BK-13560 (C.D. Cal., filed Sept. 13, 2019).

The Sept. 13 filing thwarts Eagan Avenatti's involvement in lawsuits over Avenatti's alleged fraud. According to Weiss' most recent report, he and his firm, Force 10 Partners LLC, are owed $152,046.68, while Landau Gottfried & Berger is owed $367,424.98.

No one objected to Reitman's emergency motion Tuesday, and Avenatti did not attend the hearing. But the original family court writ, issued by Orange County Superior Court Judge Nathan T. Vu, followed a day-long argument in which Storie's lawyer, Ronn Bisbee, and Avenatti "were absolutely apocalyptic" at Reitman's interference, Reitman told Bauer. Avenatti v. Storie-Avenatti, 17D009930 (O.C. Super. Ct., filed Dec. 7, 2017).

Reitman said he interfered to stop a sheriff's auction in which the art was to be unlawfully sold. He said he learned of the looming auction "by accident" despite informing Bisbee in March that Weiss claimed ownership of the art as Eagan Avenatti's receiver.

Bisbee has since withdrawn as Storie's attorney, citing ethical reasons.

When Reitman told Bauer about Bisbee's withdrawal on Tuesday, the judge said, "Maybe Mr. Bisbee knows what he did was wrong." She told Reitman after court adjourned, "I would like to haul Mr. Bisbee in here."

Reached by phone Tuesday, Bisbee said he was shocked by the judge's allegations. He said Reitman and Weiss didn't produce any evidence showing Eagan Avenatti owned the artwork, "so we moved forward with the writ" in the divorce case.

"I did nothing wrong. This was the court's writ and not mine," said Bisbee, a sole practitioner in Dana Point. "It's not that complicated. It really isn't."

Asked why he withdrew as Storie's attorney, Bisbee said, "I'm really limited in what I can say about my client, especially when it's nothing good."

While Bauer's order protects the art that hasn't yet been sold, the several pieces Avenatti bought at an auction in August are now subject to a turnover order issued Aug. 29 by Los Angeles County Superior Court Judge Edward B. Moreton. Attorney Eric M. George of Browne George Ross LLP obtained it on behalf of Avenatti's ex-law partner turned creditor, Jason M. Frank, after learning Avenatti paid $18,000 for the art at auction, despite owing Frank more than $15 million. Jason Frank Law v. Avenatti, BC706555 (L.A. Super. Ct., filed May 16, 2018).