Avenatti’s Firm To Pay $10M After Failure To Submit Tax Returns

Avenatti has reportedly had tax problems for almost a decade, when due to an unpaid income tax payment the IRS put a $904,000 lien on all of his property years later.


Ever since the news of adult actress Stormy Daniels’ affair with President Donald Trump made headlines, Daniels’ attorney Michael Avenatti has continued to share the spotlight.

This time, though, with some damning news.

The Los Angeles Times reported one of Avenatti’s law firms, Eagan Avenatti, withheld payroll taxes from employees but failed to turn them over to the government.

The information emerged during a bankruptcy hearing for Eagan Avenatti, where Daniels’ attorney is a “managing member and majority equity owner,” during which it was ordered to pay $10 million to a lawyer who had previously worked for the firm.

Jason Frank alleged the firm misstated its profits and owed him millions. Frank said he had come to $4.85 million settlement in December 2017 but the firm failed to pay him and also refused to provide him with tax returns and other financial documents.

According to court documents, Frank said the payment was personally promised by Avenatti.

“At this point, that's what's appropriate,” Judge Catherine Bauer said of the ruling, according to the Los Angeles Times.

During the hearing, assistant U.S. Attorney Najah Shariff also stated Avenatti and his firm have not made payment on unpaid taxes according to agreement reached with the IRS in January.

Avenatti had promised to pay back a total of $2.4 million in back taxes, interest and penalties. More than half of the agreed payment is the money Eagan Avenatti withheld from employees but never paid to the IRS.

Avenatti blamed an unnamed payroll company for the issue.

Shariff said Avenatti has paid $1.5 million of the money promised but the authorities would soon file a motion for the rest of the payment as per the agreement with IRS.

Court records also show that Eagan Avenatti is not the firm that represents Daniels, which, in turn, is represented by a firm “solely owned” by Avenatti, Avenatti & Associates.

Avenatti alleged the Los Angeles Times was “purposely” confusing him with a “separate legal entity that has no role in the Daniels case.”

"Irrelevant," he wrote in an email responding to questions about the judgment and tax returns. “Over blown. Sensational reporting at its finest. No judgment against me was issued nor do I owe any taxes.”

However, both the Daily Mail and the Los Angeles Times, claimed they received emails about Daniels’ case from the Eagan Avenatti email address.

Frank had previously tried to collect his money through arbitration but mere days before the deposition Eagan Avenatti was forced into involuntary bankruptcy after Gerald Tobin, listing a Florida UPS mailbox as his address, filed a petition due to an unpaid invoice of $28,700, according to a suit that Frank filed.

According to Avenatti’s attorney, Mark S. Horoupian, he was not disputing the $10 million judgment to Frank.

According to the Los Angeles Times, Avenatti has had tax problems for almost a decade, when due to an unpaid income tax payment the IRS put a $904,000 lien on all of his property years later.

Avenatti said the “lien was placed in error” and he had no due taxes.

The lawyer also owned a coffee business, Tully Coffee, all of whose outlets have been reportedly closed.

Tully’s Coffee was also accused of similarly withholding payment from employees in the name of tax return and then never filing for taxes.

Avenatti again blamed a payroll company for this error. He also said he has no direct interest in the coffee business anymore and only works as an outside counsel.

However, court records showed he claimed ownership in the coffee chain as late as April 2017.

Thumbnail/ Banner Credits: REUTERS/Lucas Jackson

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