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Avenatti Googled ‘Insider Trading’ Before Nike Meeting

Erik Larson
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Avenatti Googled ‘Insider Trading’ Before Nike Meeting

(Bloomberg) -- Celebrity attorney Michael Avenatti did internet research on put options and insider trading before trying to extort millions of dollars from Nike Inc., federal prosecutors told a judge.

Lawyers for the government on Monday told U.S. District Judge Paul Gardephe in Manhattan that they intend to show Avenatti’s search history to jurors at a two-week trial getting underway this week, calling it evidence of the California attorney’s state of mind during the alleged crime. At the time, Avenatti was representing a youth basketball coach with claims against Nike.

Gardephe barred prosecutors from mentioning the search terms in their opening statement and said he’d rule later on whether and how the evidence can be used in the trial. Avenatti’s lawyers called the search terms irrelevant and said the evidence would improperly sway the jury in a case that doesn’t include insider trading allegations.

Avenatti gained a national profile while representing an adult-film actress in a lawsuit against President Donald Trump. The attorney was charged in March for allegedly demanding that Nike pay him and a colleague as much as $25 million in exchange for canceling a scheduled press conference that would damage the company’s finances and reputation. The press conference would have been used to go public with claims by his client, Gary Franklin, that the athletic apparel company made illegal payments to top high school basketball players.

Read More: Extortion or Negotiation? Avenatti’s Nike Jury Will Decide

Arrested again two weeks ago for allegedly violating his bail conditions, Avenatti appeared in court Monday wearing a suit instead of the jail-issued garb he wore to a recent pre-trial hearing. He stood with his legal team to face dozens of potential jurors who entered a large courtroom to fill out a questionnaire and be considered for the jury. Opening statements could start Tuesday or Wednesday.

Gardephe on Jan. 23 denied Nike’s request to block seven subpoenas issued to company employees by Avenatti, who wants them to testify about the alleged payments to youth players. The judge said Nike doesn’t have standing to block the subpoenas, and directed the employees to alert the court if they intended to plead their Fifth Amendment constitutional right against self-incrimination.

The judge said Monday the trial “will not involve an exploration” of whether Nike sought to corrupt youth basketball. Avenatti may, however, tell the jury about Nike’s alleged motive for going to prosecutors with its claim of extortion against him, the judge said. Avenatti argues Nike was trying to curry favor with prosecutors by offering up Avenatti “on a silver platter,” as the judge put it.

Nike argued in court filings that Avenatti was trying to “put the government’s and Nike’s conduct on trial” because he can’t dodge the video and audio evidence of his demands on the company.

“He intends to misdirect the jury -- pointing their attention anywhere but on his own conduct -- in the hope that at least one of them will be confused by evidence that is legally irrelevant and factually inaccurate,” Nike said.

Avenatti’s lawyers, for their part, described the government’s focus on their client’s internet research as a red herring.

“The obvious implication is that Mr. Avenatti illegally traded in Nike stock based upon information obtained from Coach Franklin,” the defense lawyers said in a Jan. 24 court filing. “That did not happen, the government has no evidence that it did, and Mr. Avenatti is not charged with insider trading.”

(Updates with judge allowing subpoenas of Nike employees in sixth paragraph. An earlier version of this story corrected the spelling of Avenatti.)

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Peter Blumberg, Steve Stroth

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