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Michael Avenatti indictment: Tully’s tax fraud



Michael Avenatti’s time as owner and CEO of the coffee chain Tully’s is coming back to haunt him.

A federal grand jury indicted Avenatti on 36 counts of perjury, fraud, failure to pay taxes, embezzlement, and other financial crimes, according to an indictment that was unsealed on Thursday. If convicted, Avenatti could face up to 335 years in prison.

Many of these charges were linked to Tully’s, a Seattle-based coffee chain.

Read more: Unpaid taxes, abruptly closed locations, and employee rebellions: Inside the 6-year downfall of Michael Avenatti’s coffee chain

Avenatti purchased Tully’s out of bankruptcy in 2013, in partnership with the actor Patrick Dempsey. Last March, as Avenatti’s star was rising as Stormy Daniels’ lawyer, the chain abruptly closed all remaining locations. In late October, a Chapter 7 involuntary-bankruptcy petition was filed against Tully’s parent company, Global Baristas.

According to the federal grand jury, Global Baristas failed to pay federal payroll taxes for years under Avenatti’s control. From September 2015 to October 2017, Global Baristas failed to pay the IRS at least $3.2 million in federal payroll taxes, according to the indictment.

Avenatti allegedly obstructed the collection of taxes by the IRS by changing bank account information, lying to an IRS agent, and instructing Tully’s employees to deposit cash receipts in the bank account linked to Avenatti’s auto racing business.

At the same time, the indictment alleges, Avenatti transferred millions of dollars of funds from Global Baristas’ bank accounts into his own accounts and accounts associated with his law firms.

Tully’s funds were allegedly used to pay Avenatti’s rent and Neiman Marcus bills

Tully’s Coffee.
Ted Warren/AP

From September 2015 to December 2017, Avenatti allegedly caused roughly $2.5 million to be transferred from Global Baristas accounts to accounts associated with his law firms.

In one case in 2017, Boeing purchased two Tully’s coffee kiosks. Avenatti allegedly deposited the roughly $155,010 from Boeing into the bank account of one of his law firms, according to the indictment. Avenatti then transferred $15,000 of the funds to his own account, used another $13,000 to pay the rent for his apartment, and paid Neiman Marcus $8,459 that he owed the retailer, according to the indictment.

The grand jury additionally is charging Avenatti with two counts of bank fraud, after he allegedly submitted bogus financial information to obtain $4.1 million in loans from The People’s Bank. As Avenatti pursued the loans, the indictment states, he provided false financial documents, including fake IRS filings and incorrect corporate financial material for Global Baristas and his law firms.

“The financial investigation conducted by the IRS details a man who allegedly failed to meet his obligations to the government, stole from his clients, and used his ill-gotten gains to support his racing team, the ownership of Tully’s coffee shops, and a private jet,” Acting Special Agent in Charge Ryan L. Korner with IRS Criminal Investigation in Los Angeles said in a statement.

Since at least 2017, Avenatti insisted to the IRS and the media that he was not personally involved in Global Baristas finances, something that the grand jury says is false, as he controlled the company’s finances.

In a number of interviews with Business Insider throughout 2018, Avenatti said that he was no longer the owner or CEO of Global Baristas. Most recently, in October, he said he “sold the company for nearly $28 million a long time ago.” Federal agents said in an earlier criminal complaint, which established many of the charges in Thursday’s indictment, that there is no indication that Avenatti ever sold the company.

In addition to the tax fraud and bank fraud charges linked to Tully’s and Global Baristas, Avenatti is also charged with bankruptcy fraud and wire fraud related to his law practices. The indictment claims that Avenatti stole millions of dollars from clients.

Avenatti did not respond to Business Insider’s request for comment. He said on Twitter that he looked forward to defending his innocence and quote Theodore Roosevelt’s “The Man in the Arena” speech.

“I intend to fully fight all charges and plead NOT GUILTY,” Avenatti tweeted. “I look forward to the entire truth being known as opposed to a one-sided version meant to sideline me.”

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