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Stormy Daniels's lawyer Michael Avenatti could face uphill battle in Nike extortion case

Michael Avenatti — an attorney known for representing Stormy Daniels in her claim that President Donald Trump paid her $130,000 to keep quiet about an affair — is going on the offensive after federal prosecutors charged him with conspiring to extort Nike Inc. (NKE).

Prosecutors say that Avenatti threatened to publicize a claim that Nike made illegal payments to high school basketball players unless the company met his demands, including payments to Avenatti and a co-conspirator, and to one of Avenatti's clients. If Avenatti argues his communications with Nike amounted to negotiations on behalf of that client, he could face an uphill battle, according to criminal defense attorney Jeffrey Gold.

“Arguments can be made by reasonable legal minds that this is in that gray area where he was acting for a client, but I don't see it,” Gold said. “And because Avenatti is a lawyer, you have an elevated responsibility, and that counts against him — it makes it worse if you're in a position of trust.”

‘Nike will not be extorted’

Law enforcement officers arrested Avenatti Monday in Manhattan in coordination with prosecutors in California, where Avenatti is facing separate wire fraud and bank fraud charges. He was released from custody after posting bail.

According to the New York complaint, Avenatti demanded that Nike pay him a $12 million retainer, plus guarantee total payments of $15 million to $25 million for himself and a co-conspirator to conduct an unsolicited investigation of the so-called illegal payments. Avenatti also allegedly demanded $1.5 million for his client, who he said was the coach of a youth basketball team who knew about the claimed payments. The Wall Street Journal reports that celebrity attorney Mark Geragos, who has not been charged in the matter, is the co-conspirator named in the government’s complaint.

Geoffrey Berman, the U.S. Attorney for the Southern District of New York speaks during a news conference announcing charges against attorney Michael Avenatti, who represented adult film star Stormy Daniels in her legal battles against U.S. President Donald Trump, with extorting more than $20 million from Nike according to a criminal complaint filed by federal authorities in New York, U.S., March 25, 2019. REUTERS/Eduardo Munoz

“I’ll go and I’ll go take ten billion dollars off your client’s market cap,” Avenatti told Nike attorneys, in one of multiple recorded conversations, according to the District Court’s complaint.

Nike’s stock dropped nearly $2 Monday in the hours after Avenatti posted a tweet saying he planned to hold a Tuesday press conference to announce an alleged scandal perpetrated by Nike. The stock rebounded before market close.

In a statement to Yahoo Finance on Monday, Nike said, “Nike will not be extorted or hide information that is relevant to a government investigation. Nike has been cooperating with the government’s investigation into NCAA basketball for over a year.”

On Tuesday Avenatti continued to attack the company from his Twitter account.

“Contrary to Nike’s claims yesterday, they have NOT been cooperating with investigators for over a year. Unless you count lying in response to subpoenas and withholding documents as ‘cooperating.’ They are trying to divert attention from their own crimes,” Avenatti tweeted Tuesday in a series of posts.

Lawyers using their law licenses ‘as weapons’

Manhattan U.S. Attorney Geoffrey S. Berman said Avenatti’s alleged threats towards Nike do not qualify as settlement negotiations.

“Calling this anticipated payout a retainer or a settlement doesn’t change what it was — a shakedown,” Berman said. “When lawyers use their law licenses as weapons, as a guise to extort payments for themselves, they are no longer acting as attorneys. They are acting as criminals, and they will be held responsible for their conduct.”

If New York and California prosecutors prove their cases, the criminal defense lawyer, Gold said, Avenatti is likely to face a prison sentence. The New York charges, alone, carry a maximum penalty of 47 years in prison.

California prosecutors unsealed bank and wire fraud charges against Avenatti Monday, alleging he misappropriated $1.6 million in client settlement funds and filed false documents to obtain a $4.1 million loan. The charges carry a maximum penalty of 50 years.

“He’s certainly facing a lot of time,” Gold said.

Avenatti’s website boasts multimillion awards against high-profile defendants, including celebrities and multinational corporations such as the NFL, producers of The Apprentice, and public companies Kimberly-Clark, Halyard Health, and Service Corporation International.

As of afternoon trading on Tuesday, Nike’s stock remained mostly unfazed by the news, up around 1%.

Alexis Keenan is a New York-based reporter for Yahoo Finance. She previously produced live news for CNN and is a former litigation attorney. Follow on Twitter at @alexiskweed.

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