Michael AvenattiCelebrities at Craig's Restaurant, Los Angeles, USA - 22 Mar 2019

Michael Avenatti, the trial lawyer who gained a national profile representing Stormy Daniels in her defamation battle against President Trump, had allegedly threatened to expose Nike for a familiar-sounding scheme.

In conversations with Nike’s attorneys earlier this month, he claimed a client of his had proof that employees of Nike had provided payments to the families of certain in-demand high school basketball players, according to a complaint by Manhattan federal prosecutors unsealed on Monday.

The choice Avenatti gave Nike was to either hire him to conduct an internal investigation for fees between $15 million to $22 million and pay one of his clients $1.5 million, or pay a $22.5 million settlement to keep Avenatti from going public with his story.

The purported scheme is reminiscent of allegations that an Adidas executive was convicted on at a trial in the fall in Manhattan. James Gatto, a director of global basketball sports marketing, along with two others, had been convicted of facilitating payments to the families of high school and college-level basketball players in order to direct them toward schools with Adidas contracts.

That Avenatti homed in on claims of similar misconduct by Nike employees to allegedly extract payment and work from Nike shows how retailers of sports apparel may be vulnerable to a cloud of suspicion that persists following the Adidas executive’s trial. The topic is also in air given the recent scandal that saw actress Lori Loughlin and her fashion designer husband, Mossimo Giannulli, allegedly pay big bucks to get their kids into college.

“Certainly it’s on the radar not only of law enforcement but of enterprising and aggressive attorneys and also the public consciousness,” said Adam Michaels, a partner at Hand Baldachin & Associates LLP, who heads the firm’s litigation practice. “If any other companies have any suspicion that people acting on their behalf are engaging in similar behavior, they have an opportunity to suss out the misconduct before other people do it for them.”

Prosecutors accused Avenatti of working with an unidentified co-conspirator, whom the complaint doesn’t name as a defendant, to strong-arm Nike into some kind of deal to either retain his legal services or pay out a multimillion dollar settlement.

“Calling this anticipated payout a retainer or a settlement doesn’t change what it was — a shakedown,” Geoffrey S. Berman, the U.S. Attorney for the Southern District of New York, said in a statement Monday. “When lawyers use their law licenses as weapons, as a guise to extort payments for themselves, they are no longer acting as attorneys.”

Prosecutors had documented Avenatti’s conversations earlier this month with attorneys for Nike, in which he’d allegedly made threats to “take 10 billion dollars off your client’s market cap,” if it did not pay up or hire him, according to the complaint. They claimed that he had threatened to hold a press conference before Nike’s quarterly earnings call on March 21 to allege wrongdoing. On Monday morning, Avenatti had tweeted his plans to hold such a conference. “Tmrw at 11 am ET, we will be holding a press conference to disclose a major high school/college basketball scandal perpetrated by @Nike that we have uncovered,” his tweet read.

“Nike will not be extorted or hide information that is relevant to a government investigation,” Nike said in a statement Monday. “Nike has been cooperating with the government’s investigation into NCAA basketball for over a year. When Nike became aware of this matter, Nike immediately reported it to federal prosecutors.” Nike said also that it had hired the law firm Boies Schiller Flexner LLP as it cooperated with prosecutors.

Attorneys say the complaint is remarkable for its speed in thwarting Avenatti, and also for what may demonstrate about the nature of certain legal threats to retailers.

“It’s obviously always very interesting when you see a complaint like this against a lawyer,” said Charles Kreindler of Sheppard Mullin Richter & Hampton LLP. “There can be a fine line between being an aggressive advocate on behalf of a client and what some might consider extortion.”

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