Geragos Expected to Testify Against Avenatti – and Spared Indictment

A superseding indictment has been unsealed against celebrity lawyer Michael Avenatti in the Nike extortion case – which will postpone his trial – previously scheduled to start this month – until January.

Nike, a multinational, publicly held corporation headquartered in Beaverton, Oregon, produces and markets athletic apparel, footwear, and equipment – and sponsors athletic teams in many sports at the high school, amateur, collegiate, and professional levels.

The key change in the superseding indictment versus the original is that the conspiracy charge against Avenatti was dropped.

This tells us that his partner in the extortion case, celebrity lawyer Mark Geragos, is off the hook. In the original indictment, Geragos was referred to as an unnamed co-conspirator.

The dropping of the conspiracy charges almost certainly means Geragos will testify against Avenatti. It also means Geragos likely made a deal to avoid criminal charges in return for his testimony.

Geragos’ testimony against Avenatti, especially their private discussions leading up to and during the alleged extortion attempt, will help prove intent and make this a stronger case against Avenatti.

This may, however, severely damage Geragos’ reputation – for he certainly seems to have been part of the alleged extortion plan.

The superseding indictment has three counts.  It drops the conspiracy charges but adds a count of wire fraud to the extortion and fraud charges. The indictment is in the Southern District of New York.

In brief, here is what the case is about:

In March 2019, Avenatti was contacted by Gary Franklin, the director and head coach of an amateur youth basketball program based in California.

On March 5, Avenatti met with Franklin. Franklin told Avenatti that, for years, his basketball program had a sponsorship agreement with Nike which paid Franklin’s program $72,000 annually. Franklin wanted Nike to reinstate its annual sponsorship.

Franklin provided Avenatti with information regarding what Franklin believed to be misconduct by certain employees of Nike involving the alleged funneling of illicit payments from Nike to families of certain highly-ranked high school basketball prospects.

Avenatti told his client he believed he would be able to obtain a $1 million settlement from Nike.

On March 19, 2019, Nike’s lawyers met with Avenatti in New York City.

Avenatti told them that his client, Franklin, had evidence that Nike employees authorized and funded payments to families of top high school basketball players and attempted to conceal those payments, similar to illegal conduct involving a competitor of Nike that had recently been the subject of a criminal investigation by the United States Attorney’s Office for the Southern District of New York.

Avenatti said he intended to hold a press conference the following day to publicize the misconduct at Nike.  Avenatti said he knew the annual NCAA men’s college basketball tournament – an event of great significance to Nike and its brand – was about to begin, and because he was aware that Nike’s quarterly earnings call was scheduled for March 21, 2019 – his press conference would maximize potential financial and reputational damage to Nike.

Avenatti said he would refrain from holding that press conference if Nike agreed to pay $1.5 million to Franklin as settlement for any claims Franklin might have and if Nike hired Avenatti and Geragos to conduct an internal investigation of Nike.

After the meeting, representatives of Nike contacted the United States Attorney’s Office for the Southern District of New York.

On March 20, 2019, Nike’s lawyers spoke with Avenatti and Geragos on a conference call, which was recorded by law enforcement.

Avenatti said he expected to “get a million five for our guy” [Franklin] and be “hired to handle the internal investigation,” adding, “if you don’t wanna do that, we’re done.”

Avenatti said on the recorded call, “I’m not fucking around with this, and I’m not continuing to play games. You guys know enough now to know you’ve got a serious problem. And it’s worth more in exposure to me to just blow the lid on this thing. A few million dollars doesn’t move the needle for me. I’m just being really frank with you. So if that’s what, if that’s what is being contemplated, then let’s just say it was good to meet you, and we’re done. And I’ll proceed with my press conference tomorrow. I’m not fucking around with this thing anymore. So if you guys think that you know, we’re gonna negotiate a million five, and you’re gonna hire us to do an internal investigation, but it’s gonna be capped at 3 or 5 or 7 million dollars, like let’s just be done.  And I’ll go and I’ll go take ten billion dollars off your client’s market cap. But I’m not fucking around.”

Avenatti also said that an internal investigation of conduct at a company like Nike could be valued at “tens of millions of dollars, if not hundreds,” saying, “let’s not bullshit each other… We all know what the reality of this is,” adding that while he did not expect to be paid $100 million, he did expect to be paid more than $9 million.

Avenatti then agreed to meet with Nike’s Counsel in person the following day, Thursday, March 21, the date of Nike’s scheduled quarterly earnings call and the beginning of the NCAA tournament, to present the exact amount he wanted from Nike and under what terms it would have to be paid.

On March 21, Avenatti and Geragos met with Nike’s lawyers in New York. That meeting was secretly video and audio-recorded by law enforcement [with the consent of Nike’s lawyers].

At the beginning of the meeting, at the direction of law enforcement, one of Nike’s lawyers said he did not believe that a payment to Avenatti’s client Franklin would be the “sticking point,” but that the lawyer needed to know more about the proposed “internal investigation.”

Avenatti said he would need a $12 million retainer to be paid immediately and that would be “deemed earned when paid,” with a minimum guarantee of $15 million in billings and a maximum of $25 million, “unless the scope changes.”

Nike’s lawyer said he never received a $12 million retainer from Nike and had never done an investigation for Nike “that breaks $10 million.”

Avenatti asked if he ever “held the balls of the client in your hand where you could take five, six billion dollars in market cap off of ’em?”

During the meeting, Avenatti said an “internal investigation” could benefit Nike by allowing Nike to “self-report” to law enforcement any alleged misconduct, and that it would be Nike’s choice whether to disclose such alleged illegalities or not.

One of Nike’s lawyers said, again at the direction of law enforcement, that he did not think paying Avenatti’s client $1.5 million would be a “stumbling block,” but asked whether there would be any way to avoid Avenatti carrying out his threatened press conference without Nike retaining Avenatti.

Avenatti said that he did not think it made sense for Nike to pay Franklin an “exorbitant sum of money in light of his role in this.”

Avenatti added, “If [Nike] wants to have one confidential settlement and we’re done, they can buy that for twenty-two and half million dollars and we’re done. Confidentiality; we [Avenatti and Geragos] ride off into the sunset.”

Avenatti added, “I just wanna share with you what’s gonna happen if we don’t reach a resolution.”

Avenatti then laid out his plan for a press conference, adding that, “as soon as this becomes public, I’m gonna receive calls from all over the country from parents and coaches and friends and all kinds of people, because this is always what happens – and they are all going to say I’ve got an email or a text message or now, 90% of that is going to be bullshit because it’s always bullshit 90% of the time. Always. Whether it’s R. Kelly or Trump, the list goes on and on – but 10% of it is actually going to be true. And then what’s going to happen is, this will snowball… and every time we get more information, that’s gonna be the Washington Post, the New York Times, ESPN, a press
conference, and the company will die – not die, but they are going to incur cut after cut after cut after cut, and that’s what’s going to happen as soon as this thing becomes public.”

At the end of the meeting, Avenatti agreed to meet at NIke’s lawyers’ office on Monday, March 25, 2019, to hear whether Nike was willing to make the payments.  Avenatti said Nike would have to agree to his demands at that meeting or he would hold his press conference, saying “If this is not papered on Monday, we’re done. I don’t want to hear about somebody on a bike trip. I don’t want to hear that somebody has, that somebody’s grandmother passed away or the dog ate my homework, I don’t want to hear; none of it is going to go anywhere unless somebody was killed in a plane crash. It’s going to go zero, no place with me.”

After that meeting, where Nike’s lawyers essentially said they would pay Avenatti’s client the $1.5 million he wanted, but did not agree yet to pay Avenatti, he did not bother to tell Franklin.  Yet, he still planned to use the confidential information his client gave him.

Within approximately two hours after the meeting, Avenatti in what could be viewed as a warning to Nike tweeted – referring to a prior prosecution by the United States Attorney’s Office for the Southern District of New York involving employees of Adidas, a competitor of Nike:

“Something tells me that we have not reached the end of this scandal. It is likely far far broader than imagined … College basketball corruption trial: ExAdidas exec sentenced to nine months in … & cbssports.com.”

On March 25,  Avenatti learned that law enforcement had approached Franklin.  He evidently smelled a rat – in the form of Nike’s lawyers or Nike themselves.  Avenatti posted a message on Twitter announcing he was holding the press 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. This criminal conduct reaches the highest levels of Nike and involves some of the biggest names in college basketball.”

Perhaps still thinking he could get the money from Nike, Avenatti went to the office complex of Nike’s lawyers in Manhattan for their scheduled meeting.

Before he got there, he was arrested by the FBI.

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Avenatti came to fame after he represented adult film star Stormy Daniels in her lawsuit against President Donald Trump.

He also represented a woman who made accusations against Supreme Court Justice Brett Kavanaugh.

He briefly represented Nxivm leader and Seagram’s heiress Clare Bronfman, who retained him to go after this writer and in her Nxivm criminal case. Avenatti and Geragos attempted to negotiate a plea deal for Bronfman in exchange for providing evidence of criminal activities on another, unrelated matter [possibly Nike] to the feds.

In addition to the Nike extortion charges, Avenatti has also been indicted in California and New York on federal charges accusing him of stealing from his clients – including Stormy Daniels. He has pleaded not guilty to all charges.

Frank Parlato