Michael Avenatti in New York on April 13. (Andres Kudacki / AP) via Los Angeles Times
Judge Catherine Bauer of U.S. Bankruptcy Court in Santa Ana ordered the Eagan Avenatti law firm to pay the $10 million to Jason Frank, a lawyer who used to work at the Newport Beach firm.
"At this point, that's what's appropriate," Bauer said at a brief hearing.
To settle his law firm's bankruptcy, Avenatti had personally guaranteed that the $2 million would be paid to Frank last week, but both he and his firm failed to turn over the money.
At the hearing, the U.S. Justice Department revealed that Avenatti's firm has also defaulted on back taxes that it promised to pay the Internal Revenue Service under another bankruptcy settlement.
Assistant U.S. Atty. Najah Shariff told the judge that the federal government would soon file a motion demanding payment of the back taxes.
Under the Jan. 30 bankruptcy settlement, Avenatti personally agreed to pay the IRS $2.4 million in back taxes, penalties and interest, court records show.
Nearly $1.3 million of that was for payroll taxes that his law firm withheld from employees but did not turn over to the government.
Avenatti has paid at least $1.5 million of what was due, according to the U.S. attorney's office in Los Angeles. But he and his firm missed an installment that was due last week, Shariff told the court.
Avenatti, who has blamed the unpaid taxes on an unnamed payroll company, accused The Times of "purposely confusing me with a separate legal entity that has no role in the Daniels case."
"Irrelevant," he wrote in an email responding to questions about the $10-million judgment against Eagan Avenatti and the missed tax payment. "Over blown. Sensational reporting at its finest. No judgment against me was issued nor do I owe any taxes."
Avenatti is the lead equity partner in Eagan Avenatti, court records show. He has repeatedly sent emails to The Times about the Daniels case from an Eagan Avenatti email address, with Eagan Avenatti below the signature line.
Frank attended the hearing, but declined to comment.
Mark S. Horoupian, an attorney for Avenatti's firm, told the judge that the firm was not disputing Frank's right to a $10-million judgment under the terms of the bankruptcy settlement. After the hearing, Horoupian declined to comment.