SANTA ANA, Calif. (AP) — Attorney Michael Avenatti has agreed to give up financial control of his former firm’s accounts after another lawyer accused him of hiding millions of dollars from a federal bankruptcy court.
Avenatti, the lawyer for porn actress Stormy Daniels, agreed to have a receiver appointed to take possession of the bank accounts, case files and other assets of his former firm, the Los Angeles Times reported Thursday.
The deal came after Avenatti’s former law partner Jason Frank made the request Tuesday to block the firm Eagan Avenatti from draining its assets.
Frank, who has been seeking to collect on a $10 million judgment against the firm, alleged that Avenatti moved money around when the firm was under federal bankruptcy protection to hide millions from its creditors.
“This includes brazen acts of bankruptcy fraud,” Scott H. Sims, Frank’s lawyer, wrote in court papers.
Avenatti, who is best known for representing Daniels in her lawsuit against President Donald Trump following an alleged 2006 affair, said every dollar has been properly accounted for and there have “never been any misdeeds or fraud.” Trump has denied the affair took place.
Frank on Wednesday agreed to withdraw court papers alleging bankruptcy fraud and Avenatti and his firm accepted the receivership.
In court filings, Frank alleged that Avenatti opened six bank accounts during the bankruptcy proceedings that were not included in required monthly reports on the firm’s income and spending.
According to the court papers, after a settlement involving ticket holders who sued the NFL, a lawyer told Avenatti in an email that he would transfer $1.4 million to the firm and Avenatti sent back wiring instructions splitting the money between an account that was known to the bankruptcy trustee and an account that was not disclosed.
Avenatti said he and the firm were entitled to reimbursement for more than $1 million in out-of-pocket expenses related to the case.
The dispute between Avenatti and Frank is scheduled to be discussed in federal court in Santa Ana on Thursday as the former firm is scheduled for a judgment debtor exam.
Avenatti now works under a firm named Avenatti & Associates.
