Michael Avenatti’s firm Eagan Avenatti settled his case with the IRS over $880,000 in unpaid payroll taxes in a court proceeding Wednesday.
“We are very pleased that all issues with the IRS are fully resolved,” Avenatti, the attorney for former porn star Stormy Daniels in a lawsuit against President Donald Trump, told CNN.
The case stems from a settlement he made to remove Eagan Avenatti from bankruptcy. As part of that settlement, Avenatti’s firm agreed to pay millions to his former partner Jason Frank. When the firm failed to pay, Frank sued and received a judgment of $10 million.
James Selth, an attorney for Frank, argued Wednesday for a judgment debtor examination because Avenatti had not brought documents showing proof of his assets. Such an examination allows creditors to ask debtors questions under oath about their finances and their ability to pay the judgment.
Avenatti’s attorney, Hamid Rafatjoo, argued the case was turning into a “three-ringed circus” and that the examination should not be a public proceeding. He also asked to seal the transcript of Wednesday’s examination, effectively keeping the details out of the press.
Avenatti himself spoke to federal district Judge Catherine E. Bauer, saying about his former partner, “They want to embarrass my law firm. They want to embarrass me.”
Frank’s lawyer objected to closing the proceeding, citing a case in California Supreme Court that says judgment debtor exams are a public proceeding.
The Los Angeles Times, ABC and CNN also objected to the proceeding being held in private, but the judge said it could go forward without the media being allowed in and that there would be a time for the media to make an argument at a later date.
“I would not like to see this transcript in the newspaper tomorrow morning,” Bauer said.
After more than an hour of answering questions behind closed doors, Avenatti told CNN, “I’m all for freedom of the press and open access. But everything has its limits. My personal financial dealings and that of an old law firm are of no relevance and, you know, were not going to be leveraged by other people who are trying to get famous and take advantage of the situation.”
A second judge who presided over the emergency motion by the media to gain access to the proceedings denied the motion without prejudice.
Federal Judge Scott C. Clarkson said it seemed everyone was “blindsided” by the request, including the media, and he told the attorney for the media to file a motion with Bauer noting that there are going to be transcripts of Avenatti’s examination. His decision kept the media from being in the room as Avenatti answered questions under oath about his finances.
“A little breathing room never hurt anybody when talking about the law, and especially when we’re talking about the First Amendment and open access to court,” Clarkson said.
The proceeding Wednesday was due to the government’s motion to enforce the order for Avenatti’s firm to pay his debts, to find him in contempt or force his firm into Chapter 11 bankruptcy.
Bauer bristled at Avenatti’s attorney asking to delay the case in order to wait for a ruling on a different motion.
“A lot of people have spent a lot of time and money to do this today and we’re going to go forward,” Bauer said.
Earlier this month, Bauer issued a restraining order to prevent Eagan Avenatti from spending any legal fees it obtains while it owes Frank or the IRS, effectively freezing the firm’s new earnings. The order applies to fees in more than three dozen cases, including the case against Trump on behalf of Daniels.