It was just after noon in New York when the controversial attorney Michael Avenatti announced on Twitter that he would reveal a major scandal involving Nike at a press conference tomorrow. “This criminal conduct reaches the highest levels of Nike and involves some of the biggest names in college basketball,” he tweeted.
But within an hour, the lawyer—a vocal critic of Donald Trump who had represented Stormy Daniels in her “hush money” lawsuit against the president, but has since parted ways with the actress—had himself been arrested. The Southern District of New York charged him with attempting to extort more than $20 million from the sportswear brand.
According to the criminal complaint, at a March 19 meeting with Nike’s lawyers, Avenatti and a California attorney threatened to reveal damaging information about Nike employees funding payments to the families of top high-school basketball players and then trying to cover them up. (The Wall Street Journal, citing two people familiar with the matter, identified the California attorney as celebrity lawyer Mark Geragos.)
Avenatti and the other lawyer were representing a coach in California, who for years ran an amateur basketball program that Nike sponsored, paying him about $72,000 a year. Nike, however, had decided not to renew the sponsorship deal. Avenatti said this coach had evidence that one or more Nike employees had been involved in the payment scheme, which was similar to the one that two former Adidas employees had recently been sentenced for.
Avenatti threatened to hold a press conference revealing all this information unless Nike agreed to his terms, the complaint alleges: The company had to pay the coach a $1.5 million settlement, and it had to retain Avenatti and and the other lawyer to do an internal investigation at the company. For this investigation, which the complaint states that Nike did not request, it would have to pay the two lawyers between $15 million and $25 million. Avenatti also told Nike, prosecutors allege, that it could pay $22.5 million instead of hiring the two lawyers to do the internal investigation, and promised “full confidentiality, we ride off into the sunset.”
If Nike didn’t comply, the complaint says, Avenatti would go public with the information in a press conference just before the company reported its latest quarterly earnings on March 21—also a time when college basketball was reaching its annual “March Madness” frenzy.
“I’ll go take $10 billion dollars off your client’s market cap,” he said on a March 20 call with Nike’s lawyers, according to the complaint. “I’m not fucking around.”
He also warned in a subsequent call that, once he went public, he was sure to receive calls from parents, coaches, and others all over the country wanting to come forward with evidence of misconduct on Nike’s part.
After the first meeting, however, Nike had alerted the US Attorney’s Office for the Southern District of New York about Avenatti’s threats, and the company told Avenatti it needed more time. The complaint quotes Avenatti telling Nike representatives that “If this is not papered by Monday [March 25], we are done. I don’t want to hear about somebody on a bike trip. I don’t want to hear that… somebody’s grandmother passed away.”
Later today, shortly after Avenatti tweeted that he would “disclose a major high school/college basketball scandal perpetrated by @Nike that we have uncovered” in a press conference, prosecutors arrested him.
“As alleged, Avenatti used illegal and extortionate threats for the purpose of obtaining millions of dollars in payments from a public company,” Geoffrey S. Berman, the US Attorney for the Southern District of New York, said in a statement. “Calling this anticipated payout a retainer or a settlement doesn’t change what it was—a shakedown. 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.”
Nike released its own statement, saying, “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. When Nike became aware of this matter, Nike immediately reported it to federal prosecutors… Nike firmly believes in ethical and fair play, both in business and sports, and will continue to assist the prosecutors.”
Just after news of his arrest broke, Stormy Daniels tweeted a statement on Avenatti, saying she was “saddened but not shocked.”