Michael Avenatti doesn’t want to go down without a fight, or at least he doesn’t want to go down alone. Either way, the celebrity attorney made clear on Tuesday that he intends to play an ongoing and potentially transformative role in the college basketball corruption controversy.
After he was arrested on Monday for allegedly attempting to extort more than $20 million dollars from Nike, Avenatti took to Twitter to bash Nike and target several people allegedly connected with the company, including Phoenix Suns center Deandre Ayton and University of Oregon center Bol Bol, who is expected to be selected in the 2019 NBA draft.
According to federal prosecutors from the Southern District of New York, Avenatti demanded as much as $26.5 million from Nike for two purposes: 1) compensation to an unnamed client, who is described as a California-based AAU coach whose annual $72,000 contract was not renewed by Nike; and 2) a retainer fee to Avenatti and an unnamed co-conspirator to conduct an internal investigation into Nike that Nike doesn’t seek. Most of the financial demand was earmarked for Avenatti and his co-conspirator, who the Wall Street Journal and Associated Press have identified as attorney Mark Geragos (who represented Colin Kaepernick in his collusion grievance against the NFL). The criminal complaint notes that Avenatti’s in-person and phone conversations with Nike attorneys were, unbeknownst to the 48-year-old attorney, recorded and transcribed.
If convicted on all charges, Avenatti would face a maximum of 47 years in prison. In an unrelated federal prosecution that began last Friday, Avenatti has also been charged with bank and wire fraud charges in California.
Avenatti claims innocence and will soon develop a defense
Among Avenatti’s most recent tweets is a statement saying he “never intended to extort” Nike. As explained more fully in a separate SI story, Avenatti might defend himself by arguing that his discussions with Nike attorneys reflected hardnosed bargaining between attorneys, not an extortion attempt.
The challenge with a “lawyering defense” is that it appears most of the demanded $26.5 million was intended not for Avenatti’s client but rather for Avenatti and his co-conspirator. Also, even if Avenatti should be accorded some leeway in confidential attorney-to-attorney negotiations over a client matter, Avenatti arguably exceeded those boundaries when he tweeted to his 858,000 followers his plan to hold a press conference on Tuesday at 11 a.m. ET. During the press conference (which never took place), Avenatti would have accused Nike officials and “some of the biggest names in college basketball” of masterminding an alleged conspiracy involving Nike employees and other persons connected to the sneaker company paying elite basketball recruits.
If those illicit payments had occurred, they would have been in contravention of NCAA rules and, much more importantly, criminal law. Indeed, Nike officials might be accused of similar conduct that led to the recent conviction and prison sentencing of Adidas director of global marketing James Gatto, Adidas consultant and basketball organizer Merl Code and client recruiter (aka runner) Christian Dawkins.
Nike’s stock price fell on Monday after Avenatti’s tweet. However, the price rebounded by the close of trading. As of 2:25 pm on Tuesday, Nike’s price was $83.37, up from Monday’s closing price of $82.33. While there are numerous potential influences on any publicly-traded company’s stock price, it does not appear that Avenatti’s claims have meaningfully damaged Nike’s price. Avenatti could use that point to argue that his tweets have not caused Nike economic harm and thus he has not inflicted the kind of damage alleged in the complaint.
Tuesday’s tweets: a virtual press conference
While the Tuesday press conference never happened, Avenatti used Twitter on Tuesday as something of a virtual substitute. Through several tweets, he aims a new set of allegations against Nike and persons connected to the company.
In one tweet, Avenatti writes that Nike officials have been “lying in response to subpoenas” and “withholding documents” in an effort to “divert attention from their own crimes.” In another tweet, Avenatti claims that Nike officials were responsible for “cash payments” to Ayton and his mother, Andrea Ayton. In still another tweet, Avenatti contends that Bol “and his handlers” have received “large sums from Nike” and that there are receipts to support this accusation. Avenatti also names one employee at Nike—Carlton DeBose, who has been identified as Nike’s director of elite youth basketball—as among company employees to have engaged in “criminal conduct.”
In subsequent tweets, Avenatti predicted that the Securities and Exchange Commission will investigate Nike and “start asking why Nike hid” from it investors disclosures about the company possibly working with the government. Avenatti also characterized the level of corruption at Nike as “rampant” when Code worked for the company and that it only worsened when DeBose took over for Code after he left for Adidas. Avenatti also asserts that “Nike conspired to route many of the payments through a convicted felon” and lied to the government.
Six potential legal consequences from Avenatti’s tweets
There’s a lot to unpack from Avenatti’s tweets, and each tweet could have its own legal fallout.
1. Avenatti is apparently trying to refute the extortion charges by positioning himself as a whistleblower. He claims to have knowledge and evidence of Nike employees committing criminal acts in the context of college basketball recruiting. To that end, Avenatti insists the public will “learn the truth about Nike’s crime and cover-up.” Avenatti also refrains from mentioning the names of any players who are currently playing in college basketball or who will play in college next season (Bol suffered a stress fracture in his left foot that ended his season in January and is preparing for the draft). Avenatti could stress that he doesn’t wish to cause any player compliance issues with the NCAA and that his specific references to Ayton and Bol but not other players support that point.
The challenge for Avenatti in portraying himself as a whistleblower is that, according to the complaint, he is only revealing damning information about Nike because the company refused to pay him for his silence. It is difficult for Avenatti to claim a moral high ground if he was willing to keep quiet for the right price.
2. Even if everything Avenatti claims about Nike, Ayton, Bol, DeBose, Code and potentially others proves true, he was allegedly recorded making explicit and arguably illegal threats to Nike. He repeatedly warned Nike attorneys that he would disclose incriminating information unless the company paid him. That type of aggressive and manipulative behavior arguably meets the elements of extortion. Along those lines, Avenatti being guilty of wrongdoing, Nike being guilty of wrongdoing and various individuals being guilty of wrongdoing are not mutually exclusive outcomes. It’s possible for everyone to have committed wrongs that, in turn, trigger legal consequences. Stated differently, Avenatti proving that Nike employees broke the law doesn’t disprove that he too broke the law.
3. Avenatti tweeting specific details could make him less valuable to prosecutors for purposes of a plea deal. To the extent Avenatti plans to negotiate a plea deal to resolve the charges in a way that makes it unlikely he would be sentenced to prison, prosecutors will demand that he relay information that is not inhibited by the attorney-client relationship and that would prove useful for the Department of Justice’s ongoing college basketball corruption probe. If Avenatti is disclosing crucial details on Twitter without getting anything in return (other than retweets and media mentions), he might be unwittingly “giving up the goods” for free. However, that concern may prove irrelevant for Avenatti should he fight the charges to the end. His initial response to the extortion charges are to vigorously contest them.
4. Avenatti presumably secured the permission of his client (the AAU coach, who ESPN and Yahoo! Sports report is Gary Franklin of the California Supreme program in Los Angeles) to publicly disclose claims about Ayton, Bol, DeBose and Code derived from the client’s knowledge and materials. Although politically controversial, Avenatti is a seasoned and sophisticated attorney, so he likely obtained the requisite client clearance. If, however, Avenatti made such allegations without the consent of his client, the client could consider action against Avenatti, such as reporting him to the bar or suing him for malpractice.
5. The targets of Avenatti’s tweets could explore the possibility of suing him for defamation. Avenatti directs specific and factual accusations against several individuals. Take Ayton and his mother. Avenatti asserts that the two took bribes from persons connected to Nike. This sort of accusation is nothing new to Ayton. Last year Ayton was accused of taking $100,000 from Dawkins as a bribe for Ayton to play at the University of Arizona during the 2017-18 season. That report, particularly as it connected to knowledge by Arizona coach Sean Miller, was refuted by SI and others. The accusation did not match up with the known timeline for the wiretaps, and Arizona is sponsored by Nike, not Adidas.
Avenatti’s tweet appears to contain a different kind of allegation against Ayton: that persons connected to Nike paid Ayton. Avenatti doesn’t say that the alleged payment went to Ayton as an inducement to play for Arizona or to sign an endorsement deal with Nike (Ayton signed with Puma). But it claims that Ayton received a payment.
If this allegation about Ayton is untrue, both Aytons could sue Avenatti for defamation. They would argue the tweet implies they partook in criminal conduct. Such a tweet could damage Deandre Ayton’s reputation and harm his potential endorsement income. As a public figure, Deandre Ayton would face the legal hurdle of having to show that Avenatti acted with “actual malice” (Andrea Ayton would face the same hurdle if she were deemed a limited public figure). To establish actual malice, Ayton would need to prove that Avenatti either knowingly published false and defaming information about him or had reckless disregard for the information’s truth or falsity. If Avenatti’s claim against the Aytons is shown to be erroneous, Avenatti might argue he relied on credible claims made by his client and his other research, and thus he did not intend to lie or have reckless disregard for the information’s truth or falsity.
It’s not clear that Ayton, Bol or the other persons named in Avenatti’s tweets would actually pursue litigation. They would be advised that if they sue Avenatti, Avenatti would attempt to depose them under oath through the pretrial discovery process. Any sort of involvement in what could be broadly termed “college basketball corruption” could be “discovered” through that process and be made public. Sometimes it’s best to simply deny another person’s accusation and let it be, rather than filing a lawsuit and opening oneself up to the accompanying risks.
6. Nike has reason to worry about the damage Avenatti could inflict. Even if Avenatti hasn’t impacted Nike’s stock price, Avenatti seems intent on portraying the company as engaged in the same type of corruption that led to Adidas employees being convicted. It remains to be seen if Avenatti’s allegations about Nike produce that same outcome. It will be up to the same set of prosecutors from the Southern District of New York who successfully prosecuted Gatto, Code and Dawkins to decide. Whether those prosecutors believe Avenatti, whose credibility has been called into question at multiple points over the last two years, remains to be seen.
With Gatto, Code and Dawkins, prosecutors convinced jurors that payments to recruits were more than mere violations of NCAA rules. These payments also constituted criminal fraud. This was because two Adidas-sponsored schools, Louisville and Kansas, had enrolled basketball players who falsely claimed to be NCAA eligible.
Under this theory of fraud, the schools were “victims” because they had awarded scholarships and other items of value to persons who were ineligible to receive such benefits. Jurors believed that Gatto, Code and Dawkins intended to injure Louisville and Kansas by directing elite recruits to those schools. Jurors reached this determination even though enrolling top recruits is usually associated with increased revenue for schools through increased ticket sales, higher TV ratings and more frequent purchases of merchandise and apparel, not to mention indirect boosts to the admissions office (which can use the success of the basketball team to recruit high school students) and fundraising offices (which can use the success of the basketball team to convince alumni to donate).
Michael McCann is SI’s legal analyst. He is also Associate Dean of the University of New Hampshire School of Law and editor and co-author of The Oxford Handbook of American Sports Law and Court Justice: The Inside Story of My Battle Against the NCAA.