A federal bankruptcy court judge in California on Tuesday slapped the law firm of adult-film star Stormy Daniels, Michael Avenatti, with a $10 million judgment for failing to pay $2 million to a former colleague.
U.S. Bankruptcy Court Judge Catherine Bauer in Santa Ana ordered the Eagan Avenatti law firm, based in Newport Beach, to pay the funds Jason Frank, who once worked at the firm, the Los Angeles Times reports.
“At this point, that’s what’s appropriate,” Bauer said at a hearing reported by the Times.
To settle his firm’s bankruptcy, Avenatti had personally guaranteed that Frank would receive the $2 million last week, but he and his firm failed to make the payment.
In addition, officials from the U.S. Justice Department disclosed at the hearing that Avenatti had also defaulted on more than $440,000 in back taxes, penalties and interest that he had personally promised to pay the Internal Revenue Service under another bankruptcy settlement for the firm.
Assistant U.S. Attorney Najah Shariff told the judge that the federal government would soon file a motion demanding payment, according to the Times.
Under a Jan. 30 bankruptcy settlement, Avenatti personally agreed to pay the IRS $2.4 million in back taxes, penalties and interest, according to court records.
As much as $1.3 million of that was for payroll taxes that his firm withheld from workers, but did not pay to the government.
According to the Times, Avenatti has paid $1.5 million of the amount due, but missed last week’s deadline for the next installment of $440,291, based on U.S. attorney’s office in Los Angeles.
Avenatti has blamed the unpaid taxes on a payroll company he has not named — and the lawyer has slammed the Times for “purposely confusing me with a separate legal entity that has no role in the Daniels case.”