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Judge orders law firm of Stormy Daniels' lawyer to pay $10M

MICHAEL BALSAMO

LOS ANGELES (AP) — A federal judge in California ordered a law firm linked to Stormy Daniels' attorney to pay $10 million on Tuesday to a lawyer who claimed that the firm had misstated its profits and that he was owed millions.

The judgment came after Jason Frank, who used to work at Eagan Avenatti, alleged that that the law firm failed to pay a $4.85 million settlement he had reached in December. He said in court papers that the settlement was personally guaranteed by Michael Avenatti, who has garnered national attention as the attorney for Daniels, the porn actress who is suing President Donald Trump following an alleged 2006 affair.

Frank had worked at Avenatti's firm under an independent contractor agreement and was supposed to collect 25 percent of the firm's annual profits, along with 20 percent of fees his clients paid, according to court documents. He resigned in May 2016 after alleging that the firm didn't pay him millions of dollars that he was owed, misstated the firm's profits and wouldn't provide copies of tax returns and other financial documents.

After he resigned, Frank brought the case to a panel of arbitrators, who found that the firm "acted with malice, fraud, and oppression by hiding its revenue numbers," according to a copy of the arbitration report included in court documents.

In December, Frank settled with Avenatti's firm for a total of $4.85 million, which was supposed to include an initial $2 million payment and then a second payment for $2.85 million. The $2 million payment was supposed to be made by May 14, but Avenatti and his firm never paid, Frank said in court papers.

The settlement agreement included a clause that the firm couldn't oppose a request for a $10 million judgment if the settlement payments weren't made within three days of the due date. Frank did not immediately return a telephone message seeking comment on Tuesday.

The judgment is final and cannot be appealed, U.S. Bankruptcy Judge Catherine Bauer said in her ruling.

Court records in the bankruptcy proceeding also show Avenatti had personally agreed to pay about $2.4 million in back taxes and penalties. During Tuesday's hearing, an assistant U.S. attorney said Avenatti had not made a payment that was due last week for unpaid taxes as part of the agreement that was reached in January.

Thom Mrozek, a spokesman for the U.S. attorney's office in Los Angeles, said lawyers from that office represent the government in bankruptcy court when there's a debt to a government agency, like back taxes or unpaid student loans.

Avenatti told The Associated Press that he would not discuss "irrelevant nonsense" and wouldn't answer specific questions about the case.

Court documents say Avenatti is the "managing member and majority equity holder" of Eagan Avenatti and "solely owns and controls" another firm, Avenatti & Associates, which represents Daniels.

Daniels, whose real name is Stephanie Clifford, has said she had an affair with Trump in 2006 and has sued to invalidate the confidentiality agreement she signed days before the 2016 presidential election that prevents her discussing it. She's also suing Trump and his personal attorney, Michael Cohen, alleging defamation.

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Associated Press journalist Catherine Lucey in Washington contributed to this report.