Avenatti delivers full-throated defense in client fraud trial

"No crime was committed by me, and I never intended to steal or defraud any client of any money at all. Not last week, not last month, not last year. Never. I have pled not guilty for one reason, because I am not guilty."

Keenly aware that he was giving the most important -- and perhaps final -- performance of his legal career, Michael J. Avenatti urged a jury on Wednesday to acquit him of charges that he stole nearly $10 million in settlement funds that the government alleges were never paid to his former clients Geoffrey Johnson, Gregory Barela, Alexis Gardner and Youtube star and beauty vlogger Michelle Phan.

Avenatti, who is representing himself in his trial on 10 counts of wire fraud, seemed to hold his own against prosecutors, despite acknowledging on Tuesday that he had little experience in criminal law. He successfully raised several objections during the government's direct examination of its first witness, lawyer Patrick McNicholas of McNicholas & McNicholas in Los Angeles, who testified that he was recruited by Avenatti to handle Johnson's lawsuit against Los Angeles County seven years ago.

Avenatti announced near the end of jury selection Tuesday that he intended to represent himself. His lawyer, H. Dean Steward of Newport Beach, is now serving in an advisory role. USA v. Avenatti, 8:19-cr-00061 (C.D. Cal., filed April 10, 2019).

"Ladies and gentlemen, for over 20 years, I, too, have represented the United States of America, and I have done it one citizen at a time," Avenatti began his opening statement. In a loud, clear voice, speaking slowly and methodically, he denied ever stealing $4 million in settlement money from Johnson, who was left a paraplegic after an incident while in custody at the Los Angeles County Jail.

Avenatti denied taking money from other clients, including Alexis Gardner, who was suing her former boyfriend, basketball star Hassan Whiteside. Gardner was homeless, living in a car in West Hollywood when she hired Avenatti.

Assistant U.S. Attorney Brett A. Sagel opened the trial by telling the jury that Avenatti never provided his clients with accurate details of the settlements he secured on their behalf. After Avenatti received $2.75 million in a client trust account for Gardner, he moved it to another attorney trust account to purchase a private jet, Sagel said.

Sagel said that Avenatti lied to his clients, blaming it on the defendants' untimely payments. The prosecutor said text messages exchanged between Gardner and Avenatti showed Gardner constantly asking him where her money went, while Avenatti promised to figure out "'what the hell' is going on."

Each client trusted Avenatti but he deceived and defrauded them, Sagel said. Johnson hoped to use the money from the county to buy a handicap accessible home and a van. Avenatti spent that money while lying to Johnson for months, the prosecutor said.

Avenatti told the jury that he ensured his clients, like Gardner, "had a place to lay her head at night, and that's exactly what we did."

"The evidence will show that for Alexis Gardner, as for Mr. Johnson, and Mr. Barela and many, many others, we took money out of our own pockets to assist them with their lives and with their cases," Avenatti said. "The evidence will show that the government doesn't want to focus on any of those points."

Avenatti said Barela had a "significant criminal record, associated with defrauding people," and asked that his law firm, Eagan Avenatti LLP, do a large amount of work on a series of different matters, "and we were entitled to be paid for that work."

"You'll hear evidence of Mr. Barela fabricating calls and meetings that he claims happened that never happened," Avenatti said.

The lawyer has maintained outside of court that this prosecution and two others in New York are punishment for his opposition to President Donald Trump on Twitter and cable TV news. The jury likely won't hear that defense but Avenatti appeared to hint at it.

"Ladies and gentlemen, this case didn't start with a crime, it started with a target," Avenatti said dramatically before being sharply cut off by a gruff U.S. District Judge James V. Selna of the Central District of California.

"Tell the jury what you're going to prove," Selna warned Avenatti.

Avenatti then explained the history of his firm, the work it did, and said his firm never billed clients monthly, never got paid by the hour, did cases on contingency, and "gave people who had no chance a fighting chance."

"We represented thousands of the little guys. We represented the Davids versus the Goliaths. We did it across the country, and the evidence will show we were blessed to do it very well," Avenatti told the jurors. Thousands of hours were expended, and money was often spent out of the attorneys' own pockets to pay for expenses along the way, from paying for Johnson's costly medical care to Gardner's food and living arrangements, Avenatti said. He maintained he asked for nothing upfront but bore the risk of losing thousands or millions of dollars if he lost a case.

"In many cases, we were attempting to make chicken salad out of chicken scratch. We took cases that nobody else would touch because they were too risky," he said. "But if we prevailed and we were able to get a recovery, we were entitled to be paid. We were entitled to pay our percentage, entitled to be reimbursed our costs, our expenses out of pocket."

The case boiled down to a final, accurate calculation of what a client is owed after a settlement is received, Avenatti said. The government messed up its math and calculations, and expects jurors to focus entirely on the clients' settlements, "but that's not the end of the story," Avenatti said. Attorney fees and costs are deducted, along with out of pocket expenses and money advanced for clients, he said. The government's expert financial analyst, John Drum, failed to get those numbers right, he said.

"We will show in this case that Mr. Drum's work, much like the government's investigation and prosecution of me, has been plagued by sloppiness and lack of detail. We'll show that it is smoke and mirrors. And when we show that Mr. Drum's math doesn't check out, it doesn't pencil as they say, it will require an acquittal," Avenatti concluded.

The government's first witness was McNicholas, who testified he was brought in to help out with Johnson's case by Eagan Avenatti LLP. McNicholas said that while Avenatti did know much of the details of Johnson's case, nor did he appear to do any work on it until the very end when settlement neared, he was listed as lead counsel.

Under direct examination by Assistant U.S. Attorney Alexander C.K. Wyman, McNicholas explained his firm was entitled to 25%, with Eagan Avenatti receiving 75% in a contingency share. McNicholas confirmed he never personally communicated with Johnson.

Throughout cross examination, Avenatti proved once again to be a formidable trial lawyer. Under Avenatti's questioning, McNicholas acknowledged he did not steal the entire $4 million settlement, as alleged by prosecutors. Avenatti then grilled McNicholas about the check for $350,000 he received for costs incurred in working the Johnson case.

Avenatti got McNicholas to admit that he had no idea how much Eagan Avenatti LLP paid for advances to Johnson, and that the government never pressed him on those figures.

Avenatti then went down the list of costs McNicholas sought to recoup from Johnson, from photocopies worth 25 to 50 cents to Uber rides. Avenatti asked McNicholas if he felt embarrassed about billing for each item.

McNicholas said he was not, because it is customary to itemize each cost no matter how small or large, then put it into the firm's client accounting sheet.

Avenatti asked if he and McNicholas put that money into the trunk of a car and went to Las Vegas and gambled it, would it be criminal, to which McNicholas acknowledged that it would not.

Avenatti concluded cross examination by asking that, as he sat in the witness stand, McNicholas could not testify that Avenatti did anything unlawful in connection with Johnson's settlement money.

McNicholas affirmed that was correct.

The government's final witness for Wednesday was Thomas C. Hurrell, managing partner at Hurrell Cantrall, who represented Los Angeles County in the Johnson case. Hurrell testified about email exchanges between Avenatti and himself about the $4 million resolution. Hurrell testified he wasn't sure whether it was Johnson's actual signature on the settlement agreement, and also said the deal did not say quarterly payments would be made to Johnson.

Under cross examination, Avenatti got Hurrell to admit there was nothing unusual about having money sent to an attorney trust account, and agreed it was common for plaintiffs' lawyers to press defense counsel about settlement money being paid as soon as possible.

"Sir, as you sit there today, do you have any idea one way or the other whether I did anything unethical or illegal in connection with Mr. Johnson's settlement?" Avenatti asked Hurrell

Hurrell said he did not.

Johnson was scheduled to be the next witness for the government Thursday morning.