Lawyer Michael Avenatti was arrested and charged March 25 over an alleged attempt to extort more than $20 million from Nike Inc., according to the U.S. Department of Justice.
The Justice Department said in a statement that Avenatti threatened to use his ability to "garner publicity to inflict substantial financial and reputational harm on the company if his demands were not met."
According to a criminal complaint, Avenatti told Nike that he had evidence from a client that Nike employees had been engaged in illicit payments to the families of high school student-athletes.
Avenatti allegedly threatened Nike's lawyers to hold a press conference and reveal the information about the payments. He then allegedly offered to cancel the press conference if the company made a payment of $1.5 million to Avenatti's client and also agreed to retain Avenatti and an unidentified co-conspirator to conduct an "internal investigation."
The complaint states that Avenatti and the co-conspirator demanded to be paid, at a minimum, between $15 million and $25 million for the investigation.
According to the complaint, the co-conspirator is an attorney licensed to practice in the state of California and "known for representation of celebrity and public figure clients." The co-conspirator is not named as a defendant in the complaint.
The complaint also states that on March 20, Avenatti and the co-conspirator spoke by phone with lawyers who represent Nike, during which Avenatti reiterated his threats and said if his demands were not met he will "go take ten billion dollars off [Nike's] market cap."
Before news of his charges, Avenatti tweeted March 25 that he would hold a press conference on March 26 to disclose "a major high school/college basketball scandal perpetrated" by Nike.
"This criminal conduct reaches the highest levels of Nike and involves some of the biggest names in college basketball," he tweeted.
"When lawyers use their law licenses as weapons, as a guise to extort payments for themselves, they are no longer acting as attorneys," Manhattan U.S. Attorney Geoffrey Berman said in a statement.
Nike had immediately informed federal prosecutors after becoming aware of this matter, the company said in an emailed statement to S&P Global Market Intelligence.
"Nike will not be extorted or hide information that is relevant to a government investigation," Nike said. "Nike has been cooperating with the government's investigation into [National Collegiate Athletic Association] basketball for over a year."
"When Mr. Avenatti attempted to extort Nike over this matter, Nike with the assistance of outside counsel at Boies Schiller Flexner, aided the investigation," the company added.