A "Stormy" Cross-Examination by Michael Avenatti

a jury that Daniels is a liar. The lawyer is on trial for allegedly stealing three hundred thousand dollars from Daniels by intercepting advanced payments for a book deal she struck while suing Trump. The prosecution's star witness is Daniels herself, and Avnati, who's representing himself, got the chance to grill his former client. Joining me is Bloomberg Legal reporter Eric Larson.

Tell us a little about the case, Eric, or the criminal case accusing Michael Avanati of stealing about three hundred thousand dollars from the book advance from his former clients, the porn star Stormy Daniels. So he is charged with wire fraud and identity theft for basically intercepting these electronic payments when I'm the publisher St. Martin's Press. So now for someone who might have been living in a hut during the Trump years, remind us of how they both

came to fame. It's a pretty bizarre a criminal trial if you think about it, because Michael Avenati was representing Stormy Daniels in a pretty explosive lawsuit against Donald Trump when he was president. She had sued to try to get out of a non disclosure deal that she had struck with Trump to stay quiet about and alleged sexual affair that she had with Trump, and to stay quiet about the hundred and thirty thousand dollar payment that she received to keep quiet about it just before the two

thousand sixteen election. So you might remember we saw Abanati and Stormy Daniels pretty frequently TV standing outside court. Aubanati was doing lots and lots of television appearances to talk about Stormy Daniels. She was on sixty Minutes. So they were a pretty interesting pair trying to take down Trump. They had a big falling out over this book deal when Stormy Daniels found out that Aubanati had been intercepting these payments, and she had been asking him where is

this money from the publisher? You know, all along recording to this criminal case. He knew that where the money was. He had taken it and spent it for his own personal expenses on things like payments on a ferrari and everything for you know, even going to Starbucks. Things like this is prosecutors together where the money went, and it didn't go to her. So she got an eight hundred

thousand dollar advance on the book. Well, it was an eight hundred book deal, and she was getting some of the money in installments as the deal was progressing, like when it actually was published and she was doing enough publicity and things for this, they were supposed to be giving her installments about a little over a hundred thousand dollars at a time. But two of those payments Abanati is accused of intercepting. Um. Of course, he has a defense saying that he was entitled to that money and

that he didn't do anything wrong. But when she found out about this, she went to the publisher herself and demanded where is this money? And they said, well, we've been sending it here's the proof of that. And so that's when it all fell apart. For those two. I always ask about the size of the book deals because I cannot believe the amount of money that that goes into advances on a book you don't even know how

well it will do. So he had a federal public defender, he did, and that the public defender gave the opening statement to the jury from a week ago. But shortly after that, Amanati decided to represent himself. So that was sort of a new twist on this case that was

already kind of strange to begin with. So that put him in a position to personally cross examine Dormy Daniels, who's the government star witness, And that's what happens on Friday, So tell us about her testimony on direct examination with the questioning by the prosecutor. Right, So that's where they spelled, you know, laid out this whole story about how Aubenatti had been communicating with Stormy Daniels every day, you know,

by phone and text. So naturally, when these payments from the publisher were supposed to start coming in, Stormy Daniels was looking at her bank account and wondering where that money was because, according to her, she had lots of expenses at the time, she travels a lot, she has

a lot of security detail things like that. So the prosecution had her read out these text messages that were shown to the jury, and it just showed her getting increasingly upset, you know, wondering where the money was and venting her frustration to Aubenati. And then the prosecutor showed the evidence that Abanati had actually already received the money and kept asking, you know, Storm McDaniels, well, at what

point did he say I have the money? And she would say, he never said that, So they're just and they spent that time trying to illustrate all of the different opportunities that Abanati would have had to tell her where the money was and then failed to do so. And she said he lied to me every day for almost five months, that's correct. There were two payments that had disappeared, so you could tell that she was every day asking him about it, which is why I think

she was so felt so betrayed. According to her, when when she found out where the money had gone. So you have Alvanati cross examining his former client. It must have been high drama in the courtroom just to see that. Yeah, it was pretty bizarre when you think about the falling

out that these two had. I mean, Albanati spent a lot of time, you know, several years ago telling Americans they needed to believe this woman, that she had a pretty salicious tale to tell about Donald Trump, and they really were trying to take the president down based on her word. And now he's here telling this jury that

she's a liar and can't be trusted. So he used his cross examination to try to pull out various times that he thinks showed that she had been untruthful about various things, and also questioned her about various times that she had accused other people of stealing from her. I think he was trying to sort of suggest that she was paranoid and accuse people of sess frequently that sort of thing. But it really wasn't bizarre questioning because Dormy

Daniels is a pretty interesting character. She is working on a TV show about the paranormal paranormal activities, so she's on record telling her viewers and fans and things like this that she can see ghosts, that she can see into people's houses, basically through their walls, that she's even in communication with a hunted doll. So he was trying to obviously make her look a little bit bonkers and wanted a jury to see that she can essentially make things up a lot, I think is what he was

trying to suggest. Has she made contradictory public statements about her relationship with Trump, because I got very confused about what her position was, right, It was a little confusing,

and that was actually brought up by Amanati. He asked her about a statement that she had made about a month before she hired him back when they were non just Her nondisclosure deal with Trump was in force in January two eighteen, and when reports were coming out about her affair with Trump and the hush money payment, she put out a statement saying that there was no fair

between her and Trump. Of course, then she changed her tune on that and basically said the opposite, and Abanati asked her about that and basically was saying, you lie. You put out this statement, it was a lie, trying to show that she was capable of lying because she now says that she did have interactions with Trump. But then it got even stranger because she still says, no, I didn't have an affair. It was just a sexual encounter. So she was trying to mince words there and say,

no, no no, it wasn't affair. Um, but at any rate, you're right it was a sort of a strange contradictory statement. So he said, Ms. Daniels, do have a single text message, email, voicemail or recording that says I would not take any money from your book deal. What was that about, right? So that was kind of the heart of the matter. All this other stuff was a little bit of a maybe a distraction or just trying to make Stormy Daniels

look a little nuts. But what it really got down to is when she hired him, they signed an agreement that said that he would be entitled to his share of any future book or media deals. But this agreement then says the amount will be determined by the parties later. So he's saying, look, you knew all along that I was entitled to some of this book money, and that I had lots and lots of expenses from representing you

in this huge lawsuit. And she claims that he verbally told her that he would not take any of the money after even though they signed that agreement, So they're interpreting the agreement differently. You know, Yes, I think Anadi acknowledges they never did specifically agree to an amount from the book deal that would he'd be entitled to. But he's arguing that she knew all alone that he was going to be entitled to that money. So what happened

with her defamation lawsuit against Trump? Yeah, so that was a separate lawsuit, um, separate from the non disclosure agreement lawsuits that was in California. She lost it, and she was also ordered to pay Trump's legal fees of almost

three hundred thousand dollars. So she was pretty upset about that. UM. I think she blames Anti for some of that, and he, you know, had suggested that it was her um that she ended up falsely accusing him of stealing her you know, this book money, um sort of his paybacks for that or you know, so that she'd have money to pay the three dollars. Is he as dramatic in the courtroom as he used to be when he was doing TV appearances? I would say, yes, know he is, or he was

a very successful, you know lawyer. He said on his website that he had secured hundreds of millions of dollars and settlements for clients and lots of cases before he ever represented Stormy Daniel. So of course all that has come crashing down his law firm, you know, it's gone, and he's been convicted in another criminal case separate from this, of course, he was convicted of trying to extort Nike out of five million dollars on behalf of another client

during settlements talks. He was sentenced to two and a half years for that, and he hasn't even started serving that prison term. Then there was a third criminal case in California where he was accused of ripping off other law firm clients of his, and that ended in a mistrial,

although they're going to retry that case. He's out on bail from the California cases while he's here in New York right right, He's been basically under homes infinement in Califor, Mornia for quite some time, staying with a friend in Venice, California. But because of this trial, he's now been allowed to travel. And it's it is here for that, you know, with a lawyer owes a client money, it seems like it might this might have been a civil case. Did his

celebrity play into this becoming a criminal case? Well, I mean it's hard to know exactly what, you know, the Justice Department is thinking or the U. S. Attorney's Office

here when they decided to bring a case. But you know, of course, Avanatti has claimed, you know, all along the all three of these criminal cases, you know, they were brought during the Trump administration, and he claims that that he was targeted by from Justice Department specifically because of his lawsuit on behalf of the Stormy Daniels So you're right, I guess it could have been a civil matter, but just between Stormy Daniels and Aminatti. But he argues that

because of who he is. You know, I don't know if Stormy Daniels went to the sider was the other way around. But they put together, you know, three completely separate cases against him and really sort of turned his world upside down. So he's actually filed a claim with the Justice Department accusing the Dustice Department of improperly having him thrown into solitary confinement when he was first arrested. He says that he spent weeks and weeks and weeks

in solitary confinement and horrible conditions. Again, he says that Trump and former Attorney General William Barr did that intentionally to punish him. And so he's seeking about ninety million dollars from the government for that, and that's the appending claim before the Justice Department just filed a few weeks ago. Eric I also want to talk to you about the January sixth prosecutions, and we've seen that the defendants are a very bunch. Tell us about the former influencer Brandon Straca. So,

Brandon Straca is described as a pro Trump social media influencer. Basically, he's a former liberal, self described gay, former role from New York City. He reportedly was a hair stylist um and at some point he decided to switch to becoming a Republican and supporting Trump and started a social media campaign all about trying to convince other Democrats to switch parties.

So he became a bit of a social media star on the right, very popular with conservatives, and he ended up, you know, participating in some rallies after the election, claiming that it was stolen, that sort of thing. He spoke at a big rally of conspiracy theorists in Washington, d C. On January five one, just the day before. And then he also participated in the assault on the Capitol of a live stream that to his to his followers, about

six hundred and sixty thousand followers um. And at one point, you know, he's caught on camera encouraging people to violently steal take his shield of protective shields from a riot officer. So very bizarre case. He's forty five years old. He pleaded guilty to disorderly conduct in October um and was just spent in last week to three years of probation.

He had been cooperating with the BED. He had about three meetings with them, I think according to the court papers, the prosecutors had wanted a period of home confinement as part of that sentence, but as they didn't end up getting that for just three years of probation for this guy. And yeah, as you said, there's a lot of sort of interesting characters who participated in that, and he certainly seems to be one of them. What's the civil suit

against him? Yeah, there's a civil lawsities filed against him by a group of Capital police officers who were injured during the insurrection, and the defendants in the suit include Trump as well as Roger Stone at the Political Operative and several members of different right wing militia groups like the Proud Boys and Oathkeepers. So he stands that is

kind of an unusual defendant in that case. But they alleged that he was part of a conspiracy to deprive these Capital police that they're still rights and to you know, basically alleged that because of all of their conduct together, that they're liable for these officers injuries. And he of course denied that in speaking dismissal of the suit, as are the other defendants. The people who marched on the Capitol were a diverse group of people, more than one

would have expected. Perhaps there was also a Yale Law school graduate. He's actually the head of the Oathkeepers, right wing militia, and he's fighting, uh, he's fighting those charges. He's pleaded not guilty. All of those Oathkeepers members that pleaded not guilty. I think it was just last week. So they're definitely going to be putting up a big

fight here. They all have separate lawyers and they're putting together what I think they're you know, suggesting is going to be a pretty big defense here that could lead to a very interesting trial. Um I think is in July. Thanks so much, Eric. That's Bloomberg Legal reporter Eric Larson. Google and Facebook make billions of dollars a year from their digital ad businesses, but they face data privacy legal risks on multiple fronts from Congress, from the Federal Trade Commission,

and from lawsuits. Joining me is Matthew Chettenhelm, litigation and government analysts for Bloomberg Intelligence tell us broadly about the data privacy legal risks that Google and Facebook are facing. Google and Facebook make billions of dollars a year from their digital ad business and they now face you know, really, I think a myriad of different legal risks on many different fronts. It's really a story about one legislation. Congress

is looking at making laws here as they never have before. Regulation, the Federal Trade Commission is looking at creating rules to potentially govern these businesses, and litigation. And you see your attorneys general in states across the US bringing more lawsuits. You see class action attorneys pursuing litigation against these companies as they never have before. And so it's really on those three fronts where you're seeing major legal risks for

this very lucrative business for these companies. Let's start with the possibility of a law from Congress. I know that people from both sides of the aisle are on board for tightening the rules for Internet platforms, but is there any consensus in Congress about a data privacy law? So that's really the stumbling block. And as you said, I mean this is really a change. For the past twenty years or so, there's sort of been this bipartisan consensus that the Internet works best when we stay out of

the way as lawmakers. That's changed very quickly in the in the last five years, where I think now there's a bipartisan consensus that well, maybe we went too far there and maybe if we have no rules of the road, that leads to problems. Now, where lawmakers are having an issue is identifying exactly what is the problem and then agreeing on fixes on it. And I think we're still

pretty far away here. When you look at directly regulating the digital ad business, which is the core business of these companies, there isn't really consensus across Democrats and Republicans or even within the parties themselves about exactly how to do that. And the big hurdle is in the Senate, you need sixty votes to make legislation into law, and that requires you know, often fifty Democrats and ten Republicans. And when you have the parties disagreeing about what is

the problem, it's hard to agree on a solution. So we're not there yet, at least on any sort of comprehensive data privacy legislation. You're gonna keep seeing headlines hearings about it. I'm not sure that in the near term you're going to face comprehensive legislation. You might see sort of targeted legislation, maybe for children's data, but I think we're still pretty far away on that consensus on direct

regulation of the core business. So then you have the Federal Trade Commission, which hasn't historically made rules for internet companies. What's the danger there? Yeah, So that's like I think what might be one of the big stories to watch this year. If Congress can't agree on how to go after these businesses and can't make a new law, it doesn't necessarily mean that the companies are going to continue to get to make the rules of the road for themselves.

The Federal Trade Commission usually historically, as you said, hasn't been in the business of making rules on the front end. It goes after companies after the fact and says what you did there was unfair, and it brings an enforcement action again. Sit Now there's sort of a change in thinking at the Federal Trade Commission under new Chairwoman Lena Khan.

And so in the middle of one the Federal Trade Commission went through and streamlined its process for making rules generally, which has been very difficult, and so they've kind of simplified that a little bit, sort of clearing the deck and getting things ready to go. Once the Federal Trade Commission has five commissioners in place, we're still waiting for

the Senate to confirm a fifth member. But when it does, I think you could see Lena Kahn lead an effort to create rules on the front end for these Internet businesses. Now there's lots of questions about the Federal Trade Commission's authority. The Federal Trade Commission isn't Congress. It can't do whatever it wants. It's limited in its jurisdiction and to what it can reach. But I think there's gonna be significant pressure on the Democrats at the Federal Trade Commission to

be aggressive in making new rules like that. And we don't know what exactly they have in mind yet and what we'll get to see them as the process plays out, but there's a chance that they start to go in that direction of trying to go after core elements of the digital ad business, and that would surely face lawsuits, wouldn't it. Any rules the FTC makes, Absolutely, there's major procedural hurdles just as a matter of making those rules. They have to jump through a number of hoops in

the law to make that happen. But then substantively, you're exactly right, whatever rules they make, if they're disruptive to the industry, you're surely going to see an immediate legal challenge to those rules. And the question then is did the Federal Trade Commission have the authority to make fools

like that that interfere with the business. The Federal Trade Commission's power is limited to policing unfair and deceptive practices, and that's what they've historically done through after the fact adjudication. If they go on the front end and say X y Z practices are unfair or deceptive. There's a real risk that the courts will step in and say, yes, you have that power to police unfair and deceptive practices, but you don't have the power to make major rules

about a core element of American business. Congress didn't give you that power clearly. And there's a real risk that the FTC goes beyond its narrow grant of authority and then ends up stumbling in the courts. We don't know exactly how aggressive the Federal Trade Commission will be. There's a risk that it's pretty aggressive, but as you said there on the back end, the courts will serve as somewhat of a protection for the company. Now let's turn

to the risks from litigation. And there's already a lot of litigation against the companies. So how big a risk is litigation in general? Yeah, in general, this is a problem. I think it's growing in scale because so many class action attorneys and so many attorneys generals have have realized that these are good targets. And and one reason that they are good targets for litigation is because the companies

have so many users. And and for example, um last week we saw DC and three other states bring lawsuits against Google for its use of location data, that it was trying to collect people's data about their location even though they tried to turn it off, Google was taking that data anyway. I don't think that's a huge deal for the company when you're talking about three to four states. Um. When it becomes a problem is when you look at nationwide class actions and potentially, as we said earlier, the

Federal Trade Commission enforcement authority. The Federal Trade Commission can in some cases collect civil penalties of forty six thousand dollars or more per violation. And when you do forty six thousand dollars per violation times millions of users, the math gets astounding. And so you saw Facebook in It's settled an FTC investigate and like that for for five billion dollars, and a lot of Democrats said that was a slap on the risk. You let Facebook off too easy.

So every time there's there's some sort of issue about their data practices, you run the risk of the Federal Trade Commission and class action attorneys and potentially states attorneys general banding together to bring these sorts of enforcement actions. And even if you're just talking a hundred dollars per user. The math adds up when you when you have UM that many users. And that's just a piece of it.

The other pieces shareholder lawsuits. Every time you see a big scandal and you saw this Facebook whistleblower last year led to a big drop in Facebook's UH share prices, you see litigation over that, and that threatens billions of dollars. So it's really multiple fronts um on the litigation side. These are big companies. They can handle the cost, but it's a it's a rising and persistent threat. I think the Super I d C in the States is that

likely to be settled. I do think it will. So we have one case that was brought by Arizona a couple of years ago, which is a very similar suit, and it's still playing out where we're two years into it and they're still litigating it. So I suspect that Google will bite each of these these three lawsuits, just as it's fought the Arizona lawsuits, and so far Google

hasn't been able to knock that out. But as I said, I do think if it can't knock any of them out, and and one good thing for the company here is each one is going to be fought in its own state court, so it's not like they all rise or fall together. And so that kind of helps contain the risk. And so it can try to knock off each individual

one based on state laws in that state. But then even if it can't knock them off, I think Google can settle suits by you know, by three or four states like this, um, you know, for in the mid hundred million dollar range. I think I said foreignern fifty million dollars when I did some estimates of it, and for for Google, that's that's something that is not real disruptive.

What when it becomes a risk, as I said, is when it when it goes nationwide and the FTC or class action lawyers go go bigger, or more attorneys general baned together to do this. That's when it becomes you know, billions of dollars of potential risk, and it's that's a harder thing UM to control. Is there a class action lawsuit or a proposed class action lawsuit already against Google for the tracking? So yes, so I think there are a number of them. So there there is already an

existing class action lawsuit out there about private browsing. That's been been pending in a federal court in California for some time now, and and there are are a handful of other suits that that are out there as well. Facebook as well, UM has you know, you can go back to the Cambridge Analytica matter. Um it's settled, book settled that five billion dollar investigation at the Federal Trade Commission.

But there's still a class action lawsuits from from users that Facebook tried to get a dismissal of a couple of years ago and the court refused. Now that takes forever. We're we've been in discovery for I think two years now with with no movement on the case. But again, every time there's a big, big, you know, data scandal like this, you're inviting class action lawsuits and potentially you know, significant settlements. We still don't have a resolution on that

Facebook one. And as I said, Google as well has cases out there that are still pending. Is there any doubt that Google does the tracking that they're accused of, you know, I think that's going to play out in the cases. What Google I think pushed back when when the when the litigation was immediately filed and said this sort of misstates um our practices, and it deals with outdated practices. I think this is really uh, you know

about a question of how clear were their policies. And there's an allegation that, um, Google let people opt out of tracking in one way but actually kept some other setting on the back end that that consumers wouldn't know that they need to turn off as well. And so there's I think they're Google will push back and say, look, no, this is not nearly as confusing as as users make it sound like. So I think there is a fight to be fought there, but um, in some cases the

companies haven't done very well with that. Lately, there there's been a push um from the courts to say, look, you have to be pretty clear. Um, you can't. You know, the users aren't going to read there, you know, their terms of service every time they click this stuff. You've gotta you can't make this stuff confusing. And I think I think it's it would be a tough hurdle to

get through. So that's where you kind of think that there is a real risk that the company would need to settle this because um, you know, in some cases, their their settings aren't very clear. And as I said, there aren't overall legal standards about how they need to be. The companies kind of get to do it on their own, and so this is the only check that you get to make your own terms of service. You just have

to be clear about it. And I think there is room to to litigate over that and risk for the company. I'm not particularly tech savvy, but I have been getting notices when I open different apps, do you want to allow this app to track your location? And I always say no. So I think if people are offered the opportunity one way or the other, they're going to say no, Right, why would you say yes? Yeah? I think that's that's

exactly it. And and and that's sort of like the one of the biggest questions is they'll offer you that opportunity on location data. And I think one of the biggest risks as you think about what could you know legislation look like here, It would be more questions like that, more empowering of users to say, um, do you want

this or do you not? And making it easy for them to say no, or Congress could say here's the default rule Google, Facebook, you can't take any data unless users go through jump through all these hoops to turn it on. And so that's the real risk I think for the companies is moving down that road. Right now, we have some steps there and allegations that even when when they give those options, they're not really giving those options,

and so there's litigation over that. But but the bigger story, I think is the potential legislation making that the standard and really cutting off the flow of data that fuels these businesses. Not how important is the location data for Google? I mean, how important is it that they know where you are? Yeah, I think the great source of data

for the companies. And that's that's the point that the DC Attorney General and others made when they filed these lawsuits that when when you're trying to appeal to advertisers, it's it's a great thing to be able to tell them. Look, we can pitch a product to these users based on our knowledge of where they are, where they're driving, where they're taking their phone every day, and then taylor the

advertising based on that location. That's a key piece of knowledge that users are often giving away, maybe without fully realizing it. And um, so I think it's an important, you know, part of the story. If that gets targeted and the rules about how the companies can collect that data get tighter. Then, uh, digital ads become a little bit less effective because it can't be as tailored to exactly where users are. So to sum up, what is the greatest risk to Google and Facebook? Is it from Congress,

from the FTC, or from lawsuits? So it's a great question. I think it's all of the above. In theory, the biggest risk is a law, you know, because Congress has power to impact these businesses in a way that that regulators or litigators can't. Uh. The problem there, as we said, is it's very difficult to do. We're not there yet, doesn't mean we won't get there, But that's the biggest

risk going forward. In the meantime, you're seeing you're going to see, you know, rising costs and risks from regulation and from litigation, but those are unlikely to be business model disruptive in the way that a new law from Congress would be. Thanks so much for being on the Bloomberg Laws Show. Matt that's Matthew Chettenhelm, Litigation and government analysts for Bloomberg Intelligence. And that's it for this edition of the Bloomberg Law Show. Remember you can always get

the latest legal news on our Bloomberg Law Podcast. You can find them on Apple pod Casts, Spotify, and at www dot bloomberg dot com, slash podcast slash Law, and remember to tune into The Bloomberg Law Show every week night at ten pm Wall Street Time. I'm June Grosso and you're listening to Bloomberg