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Charges against Michael Avenatti engulf the now-defunct Tully's

The attorney rescued the coffee chain in 2013. But the company went out of business last year, and now he faces federal charges, says RB’s The Bottom Line.
Photograph: Shutterstock

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Michael Avenatti, the lawyer for President Trump accuser Stormy Daniels, found himself in hot water this week when U.S. attorneys in New York and California filed numerous charges against him for fraud and extortion.

Some of those charges have involved the coffee chain he owned, Tully’s. Those charges, which claim Avenatti used funds for one of his client’s settlements to fund the coffee chain, are only the latest pieces of evidence pointing to the chain’s ignominious end.

It might be difficult to believe, but at one time Tully’s was considered a rival to its fellow Seattle chain Starbucks. The company was founded in 1992 and over time expanded into Asia. It had more than 100 locations at one point and briefly considered an IPO.

But the company struggled to get financing and, by 2009, sold its wholesale business and its brand name to Keurig Green Mountain. Tully’s coffee shops licensed the use of the name back from Keurig.

In 2012, the coffee chain filed for bankruptcy protection. The next year, the auction for the chain’s assets drew a surprising number of bidders.

Bidders included Starbucks, which wanted some of Tully’s more valuable locations, and an investment group known as Global Baristas.

What was particularly interesting about that investor group was the name of one of its business partners: The actor Patrick Dempsey. He would lend his fame to the brand and for a while, the move generated considerable buzz.

Global Baristas won the bidding that year. But within a few weeks, Dempsey was out after a dispute with his business partner—Avenatti.

The next year, 2014, Tully’s nearly lost its name in a dispute with Keurig that was later resolved.

Keurig sued Global Baristas again last year, claiming that the company didn’t pay its annual $250,000 licensing fee to use the Tully’s name in 2016 and 2017. And Keurig also said that Tully’s used the wrong signage.

Global Baristas last year agreed to never use the Tully’s name again. It closed its shops, effectively ending the Tully’s coffee shop chain. Some of the chain’s lenders later put the company into involuntary Chapter 7 bankruptcy.

According to Business Insider and the Seattle Times, Avenatti denied that he still owned the chain, saying he had divested his interest and that he was its general counsel.

Others questioned that assertion. Avenatti was listed as the registered agent for Global Baristas, according to Washington State business filings, though some filings list him as the general counsel.

Whatever his role, federal charges this week suggest that Avenatti was illegally funneling money intended for his clients into Tully’s.

The U.S. Attorney’s Office in Santa Ana, Calif., said in a complaint that Avenatti negotiated a $1.6 million settlement payment for one of his clients that was to be paid in January 2018.

Avenatti, the charges say, gave the client a bogus agreement dated for March 18—and still didn’t pay his client after that date passed.  

The complaint says that Avenatti then used the funds to pay expenses for Global Baristas.

The complaint also charges Avenatti with defrauding a bank in Mississippi by obtaining $4.1 million in loans for his law firm and Global Baristas using fabricated individual income tax returns.

According to U.S. attorneys, Avenatti never filed personal income tax returns in 2011, 2012 or 2013—the years he used for the fabricated returns.

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