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In SDNY Michael Avenatti Indicted and Arrested for Extorting Nike With Adidas NCAA Echo

By Matthew Russell Lee

NEW YORK CITY, March 25 – In the U.S. Attorney for the SDNY's press briefing room on March 25, the arrest of Michael Avanatti was announced, see below. Arriving from covering another of the US Attorney's proceedings of interest across the street in 40 Foley Square, including wire and bank fraud and the NYC Human Resources Administration in The Bronx, after the sentencing of Patrick Ho for UN bribery, a chart was on display, and this summary: "In a scheme that unfolded in less than a week, AVENATTI and a co-conspirator not named as a defendant in the Complaint (“CC-1”) used threats of economic and reputational harm to extort NIKE, Inc. (“Nike”), a multinational corporation engaged in, among other things, the marketing and sale of athletic apparel, footwear, and equipment.  Specifically, AVENATTI threatened to hold a press conference on the eve of Nike’s quarterly earnings call and the start of the annual National Collegiate Athletic Association (“NCAA”) men’s basketball tournament at which he would announce allegations of misconduct by employees of Nike.  AVENATTI stated that he would refrain from holding the press conference and harming Nike only if Nike made a payment of $1.5 million to a client of AVENATTI’s in possession of information damaging to Nike (“Client-1), and further agreed to “retain” AVENATTI and CC-1 to conduct an “internal investigation” – an investigation that Nike did not request – for which AVENATTI and CC-1 demanded to be paid, at a minimum, between $15 and $25 million.  Alternatively, and in lieu of such a retainer agreement, AVENATTI and CC-1 demanded a total payment of $22.5 million from Nike to resolve any claims Client-1 might have and additionally to buy AVENATTI’s silence.     The March 19 Meeting With Avenatti     As alleged, AVENATTI first met with representatives of Nike last Tuesday, March 19, 2019, in New York, New York.  At that meeting, AVENATTI claimed to represent a coach of an amateur youth travel basketball team sponsored by Nike, i.e., Client-1.  AVENATTI claimed the team coached by Client-1 had recently lost its sponsorship with Nike, one worth approximately $72,000 a year, and that his client had information that Nike employees had been engaged in illicit payments to the families of high school student athletes.  AVENATTI further stated that he planned to hold a press conference the next day announcing allegations of misconduct at Nike, and made clear that he had approached Nike now because he knew that the annual NCAA tournament – an event of significance to Nike and its brand – was about to begin, and further because he was aware that Nike’s quarterly earnings call was scheduled for March 21, 2019, thus maximizing the potential financial and reputational damage his press conference could cause to Nike.     AVENATTI further stated that he would refrain from holding that press conference and damaging Nike if Nike agreed to two demands: (1) Nike must pay $1.5 million to Client-1 as a settlement for any claims Client-1 might have regarding Nike’s decision not to renew its contract with the team coached by Client-1; and (2) Nike must hire AVENATTI and CC-1 to conduct an internal investigation of Nike, with a provision that if Nike hired another firm to conduct such an internal investigation, Nike would still be required to pay AVENATTI and CC-1 at least twice the fees of any other firm hired.  AVENATTI made clear that Nike would have to agree to accept those demands on a very short time frame.  Nike immediately contacted the United States Attorney’s Office for the Southern District of New York, which launched an investigation in conjunction with the FBI.     The March 20 Call With Avenatti     In a follow-up call on March 20, 2019, recorded by law enforcement, AVENATTI reiterated both his threat, stating, in substance and in part, that unless Nike immediately agreed to his financial demands, he would hold his press conference and, as AVENATTI threatened: “I’ll go and I’ll go take ten billion dollars off your client’s market cap.  But I’m not fucking around.”  During the same call, AVENATTI made clear that his demands included not simply that he and CC-1 be paid for an “internal investigation,” but that he be paid more than $9 million.  As AVENATTI stated during the 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’s 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.”     The March 21 Meeting With Avenatti     On March 21, 2019, at the direction of law enforcement, representatives of Nike met again with AVENATTI and CC-1.  During the meeting, AVENATTI reiterated his demand for a  $1.5 million payment for his client and, with respect to his demand to be retained for an internal investigation, AVENATTI stated, in substance and in part, that he and CC-1 would require a $12 million retainer to be paid immediately and to be “deemed earned when paid,” with a minimum guarantee of $15 million in billings and a maximum fee of $25 million, “unless the scope changes.”  When informed by an outside attorney for Nike (“Attorney-1”) that Attorney-1 has never received a $12 million retainer from Nike and never done an investigation for Nike “that breaks $10 million,” AVENATTI responded, in substance and in part, by asking whether Attorney-1 has ever “held the balls of the client in your hand where you could take five to six billion dollars market cap off of them?”                 When Attorney-1 asked, in substance and in part, whether Nike could resolve the demands just by paying Client-1, rather than retaining AVENATTI and CC-1, AVENATTI and CC-1 conferred privately.  AVENATTI then stated:  “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. . . .  Full confidentiality, we ride off into the sunset. . . .”  AVENATTI then laid out again his threat of harm to Nike, adding that “as soon as this becomes public, I am going to receive calls from all over the country from parents and coaches and friends and all kinds of people – 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 that this is going to snowball . . . and every time we got more information, that’s going to 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.”                 Shortly after the March 21, 2019, meeting ended, and consistent with the threats AVENATTI communicated, AVENATTI posted a message to Twitter writing, in reference to an article about a prior prosecution involving employees of a rival company:  “Something tells me that we have not reached the end of this scandal.  It is likely far far broader than imagined…” Back on March 13 in DC, before sentencing Paul Manafort to 73 months imprisonment, 30 months of that concurrent with Manafort's Eastern District of Virginia sentence, Judge Amy Berman Jackson in the U.S. District Court for the DC Circuit on March 13 trashed Manafort's argument that he has only been pursued for violating the Foreign Agents Registration Act because of Special Counsel Robert Mueller. The government noted Manafort's papers omitted his representation of Saudi Arabia and Angola, in the past. The Department of Justice was already pursuing Manafort and his offshore accounts. Judge Jackson said the DOJ "investigation of Ukraine predates the Special Counsel." She said Manafort sent a false letter about Ukraine in November 2016, after his resignation as Trump campaign chair but before the Special Counsel was appointed. She paused for drama and said, "Court is one of those places where facts still matter." Mocking a word in Manaford's legal papers, she called him the "transmogrifier" whose apology was essentially, "I'm sorry I got caught." He said he was in solitary confinement but Judge Jackson called it a room of one's own, with newspapers and a view of the TV.  When she finally got to the sentence she imposed 60 months on Count 1 - with 30 of those months concurrent with the EDVA sentence - and 13 months on count two, witness tampering. That's 43 extra months, for a total of seven and a half years (so far).  In the courthouse outside the closely watched courtroom there was dark talk and predictions of pardons, of New York  cases - on which we'll have more.

Before writing her remarks in a 25 minute break, Judge Jackson heard 85 minutes of arguments from Manafort's three lawyers and one from Special Counsel Mueller's office. Manafort, from a wheelchair, told Judge Jackson "I stand here today... different than in October 2017." He said he is his wife's primary caregiver. The government cited the UN Oil for Food scandal as a precedent; Manafort's team countered with witness tampering cases from Hawai'i and the argument that Manafort spoke with the US State Department in Kiev and therefore his FARA violation is less. Judge Jackson said that ten years would be the maximum and she would rule at 11:10 or 11:15 pm. Watch this site.  The day before, she conducted a pre-trial conference in a disability discrimination case that was filed in 2013, about a failure to provide an accomodation in 2011. The case is Orma Buie v. Victoria Lipnic, 13-cv-1181. She told the litigants their proposed verdict form questions were too argumentative, but that they will be allowed to use body microphones for their openings and summation. I am not going to handcuff you to the lectern, she said - while many are hoping or expecting she will handcuff Manafort for a long, long time.

 In E. Barrett Prettyman Courthouse the day before the Manfort storm, it was relatively quiet. Inner City Press was the only media in Courtroom 3 for the disability pre-trial conference. Marshals were in the hallway discussing what to do if a member of the press violates the no broadcasting rule, prominently displayed on the courtroom door. The day before on March 11 a jury heard a series of audio tapes records from phone calls by defendand Anthony Fields while in D.C. Department of Corrections custody. Judge Amit P. Mehta told the jury to only consider the calls against those who were identified on them by the Special Agent on the witness stand, and to not speculate on or give weight to Mr. Fields having been in custody.  The case is US v Anthony Fields, et al, 18-cr-267 (APM).

 Courtroom 10 on the fourth floor of the courthouse was full of lawyers and defendant but, it appeared, no media other than Inner City Press which could not help compare proceedings in the U.S. District Court for the Southern District of New York. There, for example in the US v Cammarano racketeering trial in which summations began on the morning of March 11, the jury was handed transcripts of the audio recordings played. This was not matched in DC - but the DC District allows electronics in and use of media room and Internet. In Courtroom 25 before Judge James E. Boasberg, a seemingly routine status proceeding suddenly went sealed, with even the prosecutor stepping out; courtroom 11 of Judge Tanya S. Chutna also had something listed as "Sealed" on 11 am. We'll have more on all this.  In the rackeeting trial of Joe Cammarano and John Zancocchio in the U.S. District Court for the Southern District of New York the afternoon of March 4 ended with government witness Stephen Sabella being questioned about racist Facebook posts and a scar his step-brother left on his head. Stephen Sabella testified that the defendant John Zancocchio gave him a black eye and a broken tooth and stole his busienss from him, some $2 million in all.

"I can't stand him," Stephen Sabella said. But he went beyond that, and posted on Zancocchio's daughter's Facebook wall insults against her bi-racial daughter. He called Zancocchio himself a "stuttering MF-er;" Zancocchio's lawyer referred to "my client's disability." He cross examined: you know her from Bella Mama Rose, right? She's a good person, right? Judge Alvin Hellerstein sustained an objected by Stephen Sabella managed to work into his response, yes she is a nice person. He said he wasn't sure how Facebook worked, how many people saw his posts.

A liquor salesman posted a photo with Zancocchio calling him a classy guy; Stephen Sabella replied online that he was surprised, unless the salesman meant a thief and robber. When Stephen Sabella was beaten up a second time outside his home he decided to cooperate with the government. But, he admitted, he continued with a gambling book and some drug sales, "just marijuana," he said. Asked if his father was arrested in Florida for cocaine he followed Judge Hellerstein's sustaining the government's objection and did not answer.

Still one wondered how this might hurt his credibility with the jury, one of whose members told Judge Hellerstein that Stephen Sabella's name was mis-spelled in the transcripts that were passed out to the jurors. Stephen Sabella explaining his own calls was one thing - but another government witness was asked to authenticate a series of calls about "meet you in twenty minutes," "I can't hear you I'll call you right back" and the like. At one point classical hold music came one and Judge Hellerstein quipped, Is Mozart a part of this case? Cammarano's laughed followed suit, saying "I object." Perhaps the music was Vivaldi.

Judge Hellerstein's is a classy court room, where he has waxed poetic of defendants like Norman Seabrook and Murray Huberfelt, why do good people do bad things. The phrase has yet to be heard in this trial. Earlier on March 4, the government put on the stand an expert on La Cosa Nostra, to whom the defendants objected without avail. He described a system in which proposed new "made men" must be circulated to all of the five families to see if there is any objection, akin to the silence procedure in the UN Security Council with its five permanent members. Because of the high level of incarceration, a previous rule of new members only being allowed in to replace deceased one has been waived - each year, each family can bring in an additional two members. Similarly, the requirement that made men be 100% Italian has been changed such that only the father must be Italian. He said surveillance of wakes is "of incredible value to law enforcement.. The understanding is visual, a hierarchy, you put the dots together." And slowly, perhaps too slowly, in this SDNY courtroom, the dots are being put together. Back on February 28, beyond testimony by the Business Integrity Commission now looking in sham unions, the head of security for the Peninsula Hotel certified the one-night stay of Zancocchio for a mere $295, saying the normal rate was $795. Zancocchio's lawyer on cross established that the three other couples staying at 700 Fifth Avenue in the Peninsula that night each paid with their own credit card, including yesterday's carting witness William Cioffi. Then a retired NYPD detective Kevin Hui, now with FSA Capital, came on to describe his surveillance of a one story building next to a car wash on March 22, 2015. Thus are cases built - or not. On February 27 Cioffi  described in great detail how demolition debris was dumped on a construction site on Staten Island. There was a price war on such dumping, and a company called Silver Star stopped paying. And so the witness or rather his wife signed checks to the site's owner; the witness signed a non prosecution agreement and now testified again Cammarano today in a sweater and Zancocchio whose last name he said he never knew. TD Bank handled the funds; the Peninsula Hotel was a place to stay overnight in Manhattan. The trial is motoring along, the prosecution said. Even ending the week on Thursday at 4 pm, the government's evidence will conclude next Wednesday. But what might the defense have up its (sweater) sleeve? Earlier on February 27 Judge Alvin Hellerstein disallowed several of the questions of Zancocchio's lawyer John Meringolo. Judge Hellerstein has told the jury to be sure not to read anything written about the case or broadcast, presumably including Periscope live-streams. Two audio captures of initial government witness Lovaglio were disallowed, one with U.F. a/k/a Unidentified Female a/k/a "my ex-fiance" as the prosecution said Lovaglia called her. There will be ten to twenty more minutes of cross, ten minutes of re-direct. Judge Hellerstein has requested a glossary of names, or a chart with photographs like "before the age of automation." But the prosecution and defense couldn't agree to what should go in the chart. The chart or easel or something like it will be part of summations. For now the trial continues: watch this site.  When Lovaglio described his current eight year New York State jail sentence he recounted being insulted by the step son of the owner of a sushi restaurant owner on Staten Island. "I assaulted him with a glass," Lovaglio deadpanned. The man's eye no longer works, and he would not accept money to make the criminal complaint go away. Now Lovaglio is suing his NYPD handler for telling him not to take a lesser plea, for assuring him he wouldn't do a day in jail. He is in a "private detention facility." Judge Hellerstein wanted to know what they meant. It's a private prison.

  Later in the morning, after several audio tapes Lovaglio recorded while wearing a wire for the government were played, he was asked to confirm that the Bonanno crime family used hand signals to refers to some people: an ear tug, the chin, and for the named defendant Joe Cammarano, a hand sweeping over the top of the head. Why, Judge Hellerstein asked.

  "Because he has nice hair," Lovaglio shrugged. Cammarano and some sitting behind him laughed, seemingly with pride. Listening to Lovaglio try to get associates to talk for his audio recorder, one wondered if the jury will wonder if he isn't playing them, too. But if he lies he loses the prospect of the Fed's helping him on the racketeering he's pled to, with the 5K letter.  Watch this site.  On February 26 when Lovaglio described a loan of $200,000 at four percent a week and mentioned a "Johnny Sideburns" whose photograph was put on-screen for the jury, Judge Hellerstein had two questions. "Where are the sideburns?" he asked. There were none in the photo.   

"We just give nicknames," Lovaglio said. When Hellerstein said that a weekly interest rate of four points was 100% a year, Lovaglio deadpanned, I think it's more, Judge. And so it is: not unlike the payday loans that the US Consumer Financial Protection Bureau is settling on without restitution...

Earlier on February 25 a prison sentence of life plus five years was imposed for a Bronx murder by U.S. District Court for the Southern District of New York Chief Judge Colleen McMahon. She presided over the trial in which Stiven Siri-Reynoso was convicted of, among other things, murder in aid of racketeering for the death of Jessica White, a 28 year old mother of three, in the Bronx in 2016. Jessica White's mother was in the court room; she was greeted by Judge McMahon but declined to speak before sentencing. Siri-Reynoso was representing himself by this point, with a back-up counsel by his side. Judge McMahon told him, "You're a very smart man... a tough guy, a calculating person... You are a coward, sent a child to do it for you... Your emissary shot the wrong person, a lovely lady... It was a vicious, evil attack against the good people of that neighborhood." When she imposed the life plus five sentence, a woman on the Jessica White side of the courtroom cried out, yes Ma'am, put the animal away! Later, after Siri-Reynoso ended asking how he can get more documents about the case, a woman on his side of the courtroom said, "No te preocupes, muchacho, Dios sabe lo que hace" - don't worry, God knows what he is doing. But does He? Earlier on February 25 when the government tried to defend its 2018 change of policy or practice on Special Immigrant Juvenile status in the U.S. District Court for the Southern District of New York Judge John G. Koeltl had many questions about the change. He asked, are you saying that all the decisions before 2018 were just wrong, under a policy in place but not implemented at the time? In the overflow courtroom 15C the largely young audience laughed, as the government lawyer tried to say it wasn't a change of policy but rather an agency interpretation of the statute. Shouldn't there have been notice and comment rulemaking under the Administrative Procedure Act? The government said the argument proffered for this was about the Freedom of Information Act (on which, as Inner City Press has noted, the US Office of the Comptroller of the Currency has similarly reversed its policy 180 degrees without justification). SDNY Judge Koeltl demanded t know if the government is arguing that no juvenile court in New York, California (and maybe Texas for other reasons he said) is empowered to grant relief. The answer was far from clear - but where the ruling is going does seem so. Watch this site. The Bangladeshi Central Bank which was hacked for $81 million in February 2016, on January 31 sued in the US District Court for the Southern District of New York. Now the first pre-trial conference in the case has been set, for 2 April 2019 before SDNY Judge Lorna G. Schofield. Inner City Press will be there.

In Dhaka, the Criminal Investigation Department which failed to submit its probe report into the heist on time has now been ordered by Metropolitan Magistrate Sadbir Yasir Ahsan Chowdhury to do so by March 13 in Bangladesh Bank cyber heist case.

In the U.S. District Court for Central California, the unsealed criminal complaint against Park Jin Hyuk lists four email addresses involved in spear-phishing Bangladesh Bank and among others an unnamed "African Bank;" one of these addresses is said to also have communicated with an individual in Australia about importing commodities to North Korea in violations of UN sanctions.

To the Federal Reserve, Inner City Press has requested records relating to the Fed's role with response due in 20 working days - watch this site. In the SDNY, the case is Bangladesh Bank v Rizal Commercial Banking Corp et al, U.S. District Court, Southern District of New York, No. 19-00983. On February 3 in Dhaka Bangladesh Bank's lawyer Ajmalul Hossain said it could take three years to recover the money. The Bank's deputy governor Abu Hena Razee Hasan said those being accused -- in the civil not criminal suit -- include three Chinese nationals. Ajmalul Hossain said the Bank is seeking its hacked million plus interest and its expenses in the case. He said US Federal Reserve will extend its full support and that SWIFT, the international money transfer network, also assured of providing all the necessary cooperation in recovering the hacked money.  The Philippines returned $14.54 million in November 2016, so $66.46 million has yet to be retrieved. Now defendant RCBC Bank of the Philippines has hired the Quinn Emanuel law firm to defend it, and it already fighting back in words. RCBC’s lead counsel on the SDNY case, Tai-Heng Cheng, said:  “This is nothing more than a thinly veiled PR campaign disguised as a lawsuit. Based on what we have heard this suit is completely baseless. If the Bank of Bangladesh was serious about recovering the money, they would have pursued their claims three years ago and not wait until days before the statute of limitations. Not only are the allegations false, they don’t have the right to file here since none of the defendants are in the US." But it seems the funds were transferred to and through the Federal Reserve Bank of New York. And as Inner City Press reported in the US v. Patrick Ho case last year, the wiring of funds through New York can confer jurisdiction. Inner City Press will be covering this case. The first paragraph of the 103 page complaint reads, "This litigation involves a massive, multi-year conspiracy to carry out one of the largest banks heists in modern history right here in New York City. On February 4, 2016, thieves reached into a bank account at the Federal Reserve Bank of New York (“New York Fed”) and stole approximately $101 million (out of the nearly $1 billion they attempted to steal). The bank account was held for the benefit of Bangladesh Bank, which is Bangladesh’s Central Bank. Bangladesh Bank has had a 45-year banking relationship under which it has placed its international reserves with the New York Fed. The New York Fed is a critical component of the United States’ central banking system and its link to the international financial system." Bangladesh's lawyers on the case are "COZEN O’CONNOR John J. Sullivan, Esq.  Jesse Loffler, Esq. Yehudah Gordon, Esq." We'll have more on this.

Debaprasad Debnath, a general manager at the central bank’s Financial Intelligence Unit, Joint Director Mohammad Abdur Rab and Account and Budgeting Department General Manager Zakir Hossain all left Dhaka to head to New York, for the filing of the lawsuit, which Inner City Press will be following.

They say the Federal Reserve Bank of New York, which on January 29 was instructed by the US State Department to allow Juan Guaido to access Venezuelan accounts, will be helping its Bangladeshi counterpart to get to the bottom of the hack.  Those eyed include Philippines’ Rizal Commercial Banking Corporation or RCBC and some of its officials, and Philrem Service Corporation, casino owners and beneficiaries. Ajmalul Hossain QC, a lawyer for the central bank, is with them to file the case.

It is an interesting twist on the SDNY as venue for the money laundering and FCPA prosecution of Patrick Ho of CEFC for bribery in Chad and to Uganda - in this case, too, the money flowed through New York. Inner City Press intends to cover the case.


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