Unpaid taxes, abruptly closed locations, and employee rebellions: Inside the 6-year-downfall of Michael Avenatti's coffee chain

  • Michael Avenatti — together with the actor Patrick Dempsey, who left the partnership soon after —  acquired Seattle-based coffee chain Tully's for $9 million in 2013.
  • Over the next six years, Tully's parent company Global Baristas faced dozens of lawsuits over unpaid rent and taxes. 
  • On Monday, federal prosecutors revealed that Avenatti was facing federal charges of bank fraud and wire fraud connected to his business dealings — including Tully's. 
  • Avenatti said in October that he sold the coffee company for "nearly $28 million a long time ago"; federal prosecutors said in their complaint on Monday that this statement appears to be false.
  • "Myself and God knows how many other people have been waiting for this day for a long time," former Tully's manager Robert Sifuentez told Business Insider. 

Michael Avenatti's 2013 purchase of a struggling coffee chain is coming back to haunt the celebrity attorney. 

On Monday, federal prosecutors announced that Avenatti was facing charges of bank fraud and wire fraud. According to the criminal complaint, Avenatti is being accused of providing false information to get a loan from a Mississippi bank, and of defrauding a legal client out of a portion of a $1.6 million settlement.

According to the filing, these schemes were interconnected with Avenatti's business dealings, including his attempts to keep Tully's, a coffee chain based in Seattle, Washington, afloat.

Read more:The US government is accusing Michael Avenatti of bank and wire fraud related to the failed coffee chain he purchased with TV actor Patrick Dempsey

Avenatti purchased Tully's out of bankruptcy in 2013, in partnership with actor Patrick Dempsey. In March 2018, as Avenatti's star was rising as Stormy Daniels' lawyer, the chain abruptly closed all remaining locations; in late October, a Chapter 7 involuntary bankruptcy petition was filed against parent company Global Baristas. 

"Myself and God knows how many other people have been waiting for this day for a long time," former Tully's manager Robert Sifuentez told Business Insider on Monday evening.

Here's how Avenatti went from Tully's savior to having the federal government link him to the coffee chain's downfall. 

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Stormy Daniels' lawyer Michael Avenatti
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NEW YORK, NEW YORK - JULY 23: Celebrity attorney Michael Avenatti walks out of a New York court house after a hearing in a case where he is accused of stealing $300,000 from a former client, adult-film actress Stormy Daniels on July 23, 2019 in New York City. A grand jury has indicted Avenatti for the Daniels-related case and a second case in which prosecutors say he attempted to extort more than $20 million from sportswear giant Nike. (Photo by Spencer Platt/Getty Images)
Photo by: gotpap/STAR MAX/IPx 2019 8/26/19 Michael Avenatti is seen in Los Angeles, CA.
Photo by: gotpap/STAR MAX/IPx 2019 8/17/19 Michael Avenatti is seen in Los Angeles, CA.
California attorney Michael Avenatti makes a statement as he leaves a courthouse in New York Tuesday, July 23, 2019, as he faces charges accusing him of cheating porn star Stormy Daniels out of $300,000 in a book deal. (AP Photo/Craig Ruttle)
NEW YORK, NY - AUGUST 20: Michael Avenatti attends the 2018 MTV Video Music Awards at Radio City Music Hall on August 20, 2018 in New York City. (Photo by Nicholas Hunt/Getty Images for MTV)
MAY 28, 2019: Michael Avenatti pleads not guilty in federal court in New York City to all charges of theft, extortion, embezzlement and fraud in the Stormy Daniels and Nike, Inc. cases described below. - MARCH 26, 2019: Federal prosecutors in Manhattan, NYC and Los Angeles, CA charged celebrity attorney Michael Avenatti nearly simultaneously in two criminal cases on Monday, March 25, 2019. These complaints allege that Avenatti attempted to extort more than $20 million from Nike, Inc. and that he committed wire fraud and bank fraud. - File Photo by: zz/GOTPAP/STAR MAX/IPx 2019 3/22/19 Michael Avenatti is seen outside Craig's Restaurant in West Hollywood, Los Angeles, CA.
MAY 28, 2019: Michael Avenatti pleads not guilty in federal court in New York City to all charges of theft, extortion, embezzlement and fraud in the Stormy Daniels and Nike, Inc. cases described below. - MARCH 26, 2019: Federal prosecutors in Manhattan, NYC and Los Angeles, CA charged celebrity attorney Michael Avenatti nearly simultaneously in two criminal cases on Monday, March 25, 2019. These complaints allege that Avenatti attempted to extort more than $20 million from Nike, Inc. and that he committed wire fraud and bank fraud. - File Photo by: zz/Dennis Van Tine/STAR MAX/IPx 2018 4/16/18 Michael Avenatti holds a press conference at the Federal Courthouse in New York City following the hearing for President Donald Trump's lawyer, Michael Cohen, at the US District Court for the Southern District of New York State. (NYC)
NEW YORK, NY - AUGUST 20: Michael Avenatti attends the 2018 MTV Video Music Awards at Radio City Music Hall on August 20, 2018 in New York City. (Photo by Nicholas Hunt/Getty Images for MTV)
Michael Avenatti, lawyer of adult-film actress Stormy Daniels, speaks during a Bloomberg Television interview in New York, U.S., on Thursday, Aug. 2, 2018. Avenatti discussed the allegations against President Donald Trump. Photographer: Mark Kauzlarich/Bloomberg via Getty Images
LOS ANGELES, CA - JULY 28: Michael Avenatti is seen on July 28, 2018 in Los Angeles, California. (Photo by gotpap/Bauer-Griffin/GC Images)
Michael Avenatti, attorney for Stormy Daniels, is pictured outside the Manhattan Federal Court in New York City, New York, U.S., April 13, 2018. REUTERS/Jeenah Moon
Adult film actress Stephanie Clifford, also known as Stormy Daniels, speaks to media along with lawyer Michael Avenatti (R) outside federal court in the Manhattan borough of New York City, New York, U.S., April 16, 2018. REUTERS/Brendan Mcdermid
Michael Avenatti (C), lawyer for adult-film actress Stephanie Clifford, also known as Stormy Daniels, speaks to the media outside the U.S. District Court for the Central District of California after a hearing regarding Clifford's case against Donald J. Trump in Los Angeles, California, April 20, 2018. REUTERS/Lucy Nicholson
Michael Avenatti, lawyer for adult-film actress Stephanie Clifford, also known as Stormy Daniels, leaves with a film crew film as he departs the U.S. District Court for the Central District of California after a hearing regarding Clifford's case against Donald J. Trump in Los Angeles, California, April 20, 2018. REUTERS/Mike Blake
Michael Avenatti, lawyer for adult-film actress Stephanie Clifford, also known as Stormy Daniels, speaks to the media outside the U.S. District Court for the Central District of California after a hearing regarding Clifford's case against Donald J. Trump in Los Angeles, California, April 20, 2018. REUTERS/Mike Blake
Stormy Daniels' attorney Michael Avenatti leaves federal court surrounded by news media in the Manhattan borough of New York City, New York, U.S., April 16, 2018.
Michael Avenatti (R), attorney for Stormy Daniels, is pictured outside the Manhattan Federal Court in New York City, New York, U.S., April 13, 2018. REUTERS/Jeenah Moon
THE VIEW - On Tuesday, April 17, Stormy Daniels sits down with the co-hosts of The View (11:00 a.m.-12:00 p.m. EDT) for her first live television interview. Daniels will be joined in studio by her attorney Michael Avenatti. 'The View' airs Monday-Friday (11:00 am-12:00 pm, ET) on the ABC Television Network. (Photo by Heidi Gutman/ABC via Getty Images) JOY BEHAR, STORMY DANIELS, MICHAEL AVANETTI
NEW YORK, NY - APRIL 16: Stormy Daniels and Michael Avenatti are seen outside federal court in downtown Manhattan on April 16, 2018 in New York City. (Photo by Raymond Hall/GC Images)
NEW YORK, NY - APRIL 16: Adult film actress Stormy Daniels' lawyer Michael Avenatti arrives at Federal Court for the hearing at the United States District Court Southern District of New York related to Michael Cohen, President Trump's longtime personal attorney and confidante, April 16, 2018 in New York City. Cohen and lawyers representing President Trump are asking the court to block Justice Department officials from reading documents and materials related to his Cohen's relationship with President Trump that they believe should be protected by attorney-client privilege. Officials with the FBI, armed with a search warrant, raided Cohen's office and two private residences last week. (Photo by Yana Paskova/Getty Images)
Attorney for Stormy Daniels, Michael Avenatti (R), arrives for a court hearing at the US Courthouse in New York on April 16, 2018. President Donald Trump's personal lawyer Michael Cohen has been under criminal investigation for months over his business dealings, and FBI agents last week raided his home, hotel room, office, a safety deposit box and seized two cellphones. / AFP PHOTO / Hector RETAMAL (Photo credit should read HECTOR RETAMAL/AFP/Getty Images)
NEW YORK, NY - APRIL 12: Gayle King, Michael Avenatti, Don Lemon and Sean Hannity attend the 2018 The Hollywood Reporter's 35 Most Powerful People In Media at The Pool on April 12, 2018 in New York City. (Photo by Taylor Hill/WireImage)
NEW YORK, NY - APRIL 13: Michael Avenatti, attorney for Stormy Daniels, speaks to reporters following a court proceeding regarding the search warrants served on President Donald Trump's longtime personal attorney Michael Cohen, at the United States District Court Southern District of New York, April 13, 2018 in New York City. Cohen and his lawyers are asking the court to block Justice Department officials from reading documents and materials related to his relationship with President Donald Trump that they believe should be protected by attorney-client privilege. Officials with the FBI, armed with a search warrant, raided Cohen's office and two private residences earlier in the week. (Photo by Drew Angerer/Getty Images)
THE VIEW - Stormy Daniels' attorney Michael Avenatti is the guest today, Monday, 3/26/18 on ABC's 'The View.' 'The View' airs Monday-Friday (11:00 am-12:00 pm, ET) on the ABC Television Network. (Photo by Paula Lobo/ABC via Getty Images) MEGHAN MCCAIN, SARA HAINES, MICHAEL AVANATTI, JOY BEHAR, WHOOPI GOLDBERG, SUNNY HOSTIN
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Tully's search for a savior

Tully's was founded by Tom O'Keefe in Washington in 1992. The chain grew quickly — including through a 2006 franchisee deal in Japan — and attempted to brand itself as an independent, scrappy rival to Starbucks. But while Starbucks thrived, Tully's struggled to become profitable.

In 2012 Tully's filed for Chapter 11 bankruptcy with more than $3 million in debt.

The chain never managed to truly compete with Starbucks, another Seattle-based chain whose thousands of locations dwarfed the 131 Tully's operated globally at the time. Keurig's parent company, which was then called Green Mountain Coffee Roasters, had purchased the chain's wholesale business for $40 million in 2009. The purchase turned Green Mountain into Tully's supplier, and the chain struggled to find the necessary money to pay for its coffee.

Then Dempsey swooped in, in an apparent effort to valiantly save the Seattle coffee chain — the perfect role for an actor best known for his part as Derek "McDreamy" Shepherd in the Seattle-based "Grey's Anatomy." In January 2013, Dempsey served as the public face of Global Baristas LLC when the company beat out Starbucks and five other bidders with a $9.15 million offer to buy Tully's more than 40 locations in Washington state.

"We met the green monster, looked her in the eye, and ... SHE BLINKED! We got it! Thank you Seattle!" Dempsey tweeted, a reference to rival Starbucks.

Yet while the media focused on Dempsey, "McDreamy" was working with Avenatti — who had allegedly promised to fund the entire project, according to a complaint filed by Dempsey against Avenatti in August 2013.

'McDreamy' deal gone sour

By the time he entered the coffee business, Avenatti had already worked on several high-profile cases, including a $10 million defamation case involving Paris Hilton and an $80.5 million class-action lawsuit against the Jewish cemetery Eden Memorial Park.

At the same time, Avenatti was also racing as a professional driver. It was likely on the racetrack that his path first crossed with Dempsey, a fellow race-car driver.

It didn't take long for Avenatti and Dempsey's business partnership to fall apart. The Tully's deal closed in late June 2013; by August, Dempsey was suing Avenatti.

Avenatti was originally the sole owner and manager of Global Baristas before Dempsey joined as a partner, according to Dempsey's complaint. Dempsey said in the complaint that Avenatti had promised to provide all funding for the deal.

According to Dempsey, Avenatti didn't actually have the funds to buy Tully's. In the suit, Dempsey claims his business adviser found out through an internet search that Avenatti had borrowed $2 million with an "exorbitant" interest rate of 15% to fund the deal, sparking Dempsey's decision to sue his way out of the partnership.

"Avenatti concealed the Loan and the Security Agreement from Dempsey," the complaint says.

It continues: "He provided no advance notice that he was going to cause Global Baristas to borrow two million dollars, pay an exorbitant interest rate, and secure repayment in borrowed funds by pledging all or substantially all of the company's assets and future income."

The case was settled out of court, with Dempsey dissolving his relationship with Avenatti and cutting ties with Tully's. In a statement, Dempsey wished "the Company and Michael all the best," saying he was "happy to have been a part of the effort that brought awareness to Tully's brand."

Employees claim Avenatti went from savior to accomplice in killing the chain

Avenatti apparently had big plans for Tully's, with the company's representative Suzy Quinn telling Bloomberg in 2013 that the brand had planned to open more than 25 stores in the US and 200 in China.

However, according to six former workers who spoke with Business Insider in 2018, it soon became clear that Tully's was dealing with significant financial struggles. These ex-employees shared different stories from their individual coffee shops of experiences including the chain having trouble making payments — some to suppliers, some to landlords, and even some to employees.

"Corporate always postured that we were in good financial straits, but the feeling with myself and other managers was that we had been struggling for years," a manager who worked at the chain for three years said. "All of the locations I worked at were in disrepair, with inadequate maintenance on equipment, furniture, counters, signage, etc. I don't think we ever purchased new equipment, just recycled old units."

One former employee — who held various roles at Tully's over her three-and-a-half years at the chain — started working for the company soon after Avenatti acquired the chain. 

"It was really exciting," she said. "And then we started to realize that nothing was happening."

According to the employee, workers would wait weeks for items to be repaired, and she would typically have to fix things herself. Once, she said, a neglected shop in Mercer Island, Washington, was forced to shut down after its drive-thru roof collapsed when the corporate office failed to find the money to fix a leak.

The same employee said workers were forced to wait to get Avenatti's explicit approval to drop off the check for the week's supply of coffee beans from Dillanos Coffee Roasters every single Friday. The worker, who had firsthand knowledge of the situation, said Avenatti would often wait until the last minute to give his okay because otherwise, the check might bounce. Avenatti denied the claim when asked for comment by Business Insider in June. 

Three different employees told Business Insider that, at times, managers or the corporate home office would ask them to wait until a certain time of day to attempt to cash paychecks.

The federal criminal complaint against Avenatti, which was filed in February but unsealed on Monday, highlighted similar concerns, with employees telling a federal agent that payroll time was stressful because "cash was always tight." 

According to one former employee identified by the initials "B.H." who was featured in the complaint: "Avenatti did not reinvest into the company and the stores were failing. B.H. said that there was a 'steady bleeding' of [Global Baristas] and Avenatti placed 'band aids' on it."

Read more:Former employees reveal what it was like to work at the mysterious coffee chain once owned by Stormy Daniels' lawyer — including running out of coffee and questions about getting paid

Legal problems

As Tully's struggled, Global Baristas allegedly failed to pay taxes, landlords, and rent. According to the recently unsealed complaint, a Tully's employee reached out to an IRS investigator with information about the company in September 2017. 

Global Baristas failed to pay $4,998,198 in federal taxes in 2017, according to a tax lien filed by the IRS. That is in addition to thousands of dollars in state taxes the company failed to pay over the years, according to more than 20 state tax liens filed in California and Washington.

Related: How each state taxes small businesses: 

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How the 50 States Tax Small Businesses
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How the 50 States Tax Small Businesses

Alabama

Top Corporate Income Tax Rate: 6.5%

Alabama is among the top 15 states for its business property tax and unemployment insurance tax ranks, and its corporate tax rate is still among the top half of states for being relatively tax friendly. The state’s corporate taxes are a flat 6.5 percent rate across the board.

Alaska

Top Corporate Income Tax Rate: 9.4%

Alaska has one of the most progressive corporate tax brackets, with 10 different rates on business earnings that range all the way up to 9.4 percent on earnings over $222,000. So, although that top rate is among the highest in the study, Alaska ranked 25th for corporate taxes because of the lower rates on those with lower earnings.

Arizona

Top Corporate Income Tax Rate: 4.9%

Arizona is a relatively tax-friendly state on the whole, but it’s especially business friendly when it comes to business property taxes. The Tax Foundation ranked it fifth overall for this category.

Arkansas

Top Corporate Income Tax Rate: 6.5%

Arkansas is one state that doesn’t appear to be especially business-friendly if you’re focused solely on its tax code. Although the state ranks out of the top half of the United States for business property taxes and unemployment insurance taxes, it’s the state’s corporate tax rate that appears especially burdensome, landing just outside the bottom 10 states.

California

Top Corporate Income Tax Rate: 8.84%

California — home to Silicon Valley — appears to be doing a lot to take advantage of the business climate to pay for public services, with a top corporate tax rate just under 9 percent and corporate taxes that rank in the bottom half of states. However, it’s not all bad for California businesses with business property taxes and unemployment insurance taxes that rank among the top 20 states.

Colorado

Top Corporate Income Tax Rate: 4.63%

Colorado’s top corporate tax rate of just 4.63 percent is part of why it ranks among the top 20 states in the category, and it’s also among the top 20 states for business property taxes as well. But before you start looking for space in Boulder or Aspen, know that the state ranks just outside the bottom 10 for its unemployment insurance taxes.

Connecticut

Top Corporate Income Tax Rate: 8.25%

Connecticut’s top corporate tax rate of over 8 percent is relatively steep, but that’s not actually where the Tax Foundation sees the biggest source of griping for business owners: The state ranked dead last for its business property taxes.

Delaware

Top Corporate Income Tax Rate: 8.7%

More than half of the Fortune 500 is registered in Delaware to take advantage of a host of laws that make it advantageous to incorporate there, but it appears as though Delaware is also trying to take advantage of having so much of America’s corporate structure ostensibly doing business there. With a flat 8.7 percent rate across the board, Delaware ranks dead last for its corporate income tax structure.

District of Columbia

Top Corporate Income Tax Rate: 8.25%

Washington, D.C.’s 8.25 percent flat tax on business profits is among the higher rates, but other factors helped drag its ranking in that category up closer to the median state. However, it’s business property taxes rank among the bottom five states.

Florida

Top Corporate Income Tax Rate: 5.5%

Florida is one state that appears to be doing very well as far as using its tax code to create the most friendly business environment possible. Ranking second overall, Florida is especially strong in the corporate tax category and the unemployment insurance tax category, ranking sixth and second, respectively.

Georgia

Top Corporate Income Tax Rate: 5.75%

Georgia is neither especially good nor especially bad when it comes to business property taxes or unemployment insurance taxes, but it stands out for its corporate tax rate. With a flat 5.75 percent rate across the board, the state ranks eighth overall in the category.

Hawaii

Top Corporate Income Tax Rate: 6.4%

Hawaii is well-known as one of the most expensive states to live in, but that doesn’t necessarily extend to its business taxes. The state ranks among the top 20 states for both its corporate taxes and its business property taxes.

Idaho

Top Corporate Income Tax Rate: 7.4%

Idaho ranks third-worst for its unemployment insurance taxes and in the bottom half of states for its corporate taxes, but that’s tempered by business property taxes that ranked fourth overall.

Illinois

Top Corporate Income Tax Rate: 9.5%

Based on taxes alone, Illinois is not the friendliest place to open a small business. Ranking in the bottom 10 for business property taxes and unemployment insurance taxes, it’s also just outside the bottom 10 in corporate taxes. That top tax rate of 9.5 percent is the third-highest in the country, and it’s also a flat tax, so it hits all business profits across the board.

Indiana

Top Corporate Income Tax Rate: 6%

Indiana has a relatively low-impact tax environment, ranking relatively well for corporate and unemployment insurance taxes. But it’s the business property taxes that are especially supportive as the Hoosier State ranks second overall for that category.

Iowa

Top Corporate Income Tax Rate: 12%

Iowa’s 12 percent top corporate tax rate is the highest of any state in the country. And although that top rate only applies to profits over $250,000, the tax bracket still starts at 6 percent and jumps up to 8 percent after the first $25,000, all contributing to the state ranking third-worst for its corporate taxes.

Kansas

Top Corporate Income Tax Rate: 7%

Kansas is among the top 20 states for business property and unemployment insurance taxes, but its corporate taxes — 7 percent on profits over $50,000, 4 percent for the rest — rank in the bottom half of the country.

Kentucky

Top Corporate Income Tax Rate: 6%

Kentucky is right in the middle of the pack for its corporate taxes, which charge 4 percent on profits up to $50,000 a year, 5 percent on profits over $50,000 and under $100,000 and 6 percent for anything over that. However, it ranks fourth-worst for its unemployment insurance taxes and in the bottom half of states for its business property tax.

Louisiana

Top Corporate Income Tax Rate: 8%

Although Louisiana’s tax structures for corporate taxes and business property taxes don’t rate as being especially competitive, it has one of the top-ranked unemployment insurance tax systems, landing the No. 4 spot overall in that category.

Maine

Top Corporate Income Tax Rate: 8.93%

Maine has some unusually specific tax brackets for its corporate income taxes. The top rate of 8.93 percent kicks in at profits in excess of $250,000, but that only adds 0.6 percentage points to the 8.33 percent rate on income over $75,000. Regardless of why the top rate is 8.93 percent and not just 9 percent, the state ranks among the 10 worst for its corporate taxes and its business property taxes.

Maryland

Top Corporate Income Tax Rate: 8.25%

Maryland is right in the middle of the pack for its corporate tax and unemployment insurance tax rankings, though its top corporate rate of 8.25 percent is higher than most. That said, it’s among the 10 worst states for business property taxes.

Massachusetts

Top Corporate Income Tax Rate: 8%

For a state that’s often nicknamed “Taxachusetts,” Massachusetts might actually be doing OK in terms of its corporate taxes, which “only” rank as the 14th-worst in the country. That said, it’s earning the title elsewhere, with the worst-ranked unemployment insurance taxes and fifth-worst business property taxes.

Michigan

Top Corporate Income Tax Rate: 6%

The Great Lakes State has really run the gamut in terms of its rankings for the three types of business taxes considered here. Its corporate income taxes — a flat 6 percent rate across the board — rank 11th overall. Business property taxes rank 22nd overall, putting them right near the median. And finally, the state ranks second-worst for its unemployment insurance taxes, just one spot ahead of “Taxachusetts.”

Minnesota

Top Corporate Income Tax Rate: 9.8%

Minnesota’s top corporate tax rate of 9.8 percent is the third-highest in the study, and its impact isn’t lessened for less-profitable businesses as it’s a flat tax on all business earnings. As such, it shouldn’t come as a big surprise that the state ranks among the 10 worst states for that category.

Mississippi

Top Corporate Income Tax Rate: 5%

Mississippi has four different tax brackets for corporate income, but they’re all on under $10,000 in annual profit. That 5 percent top rate likely helped Mississippi land its top-15 spot in the rankings for corporate taxes, but the real gem for the state would be its top-five spot for unemployment insurance taxes.

Missouri

Top Corporate Income Tax Rate: 4%

There might be no better state in the country to open a small business if your primary goal is avoiding taxes. The Show Me State ranks in the top 10 for all three of the categories included in this study.

Montana

Top Corporate Income Tax Rate: 6.75%

Montana’s taxation climate includes a flat 6.75 percent tax rate on all corporate earnings, helping it rank among the top 15 states for that category. It also ranked among the top 10 states for its business property taxes.

Nebraska

Top Corporate Income Tax Rate: 7.81%

The Cornhusker State ranks just outside the bottom 10 for its business property taxes, just inside the top 10 for its unemployment insurance taxes and right in the middle for its corporate incomes taxes. And although the state doesn’t have a flat tax on corporate earnings, it’s very close: The 7.81 percent rate applies to earnings over $100,000 a year and everything under that is taxed at 5.58 percent.

Nevada

Top Corporate Income Tax Rate: 0%

Nevada’s rank for corporate taxes — 33rd overall — has to seem especially curious given that it doesn’t actually charge any tax on corporate income. But that’s because Nevada has opted to tax corporate revenues instead of profits — a move that’s supposed to reflect how widely profit margins can vary from one industry to another — with a commerce tax on gross receipts over $4 million. The rates vary from 0.05 percent to 3.3 percent depending on which of 26 different categories the business falls into.

New Hampshire

Top Corporate Income Tax Rate: 7.7%

The Granite State might claim “live free or die” as its motto, but plenty of local business owners might be chaffing at the relative lack of freedom in the tax code. The state ranked in the bottom 10 for its corporate taxes, business property taxes and unemployment insurance taxes.

New Jersey

Top Corporate Income Tax Rate: 9%

New Jersey is the country’s most-taxed state in terms of its personal taxes. And although it doesn’t quite land there for its business taxes, it doesn’t miss by much. New Jersey ranked among the bottom five for both corporate taxes and business property taxes.

New Mexico

Top Corporate Income Tax Rate: 5.9%

New Mexico holds the top spot for its business property taxes, beating out the other 49 states and Washington, D.C. What’s more, it landed in the top 10 for its rank on unemployment insurance taxes.

New York

Top Corporate Income Tax Rate: 6.5%

Although ranking among the five worst states for how it’s charging its business property taxes, New York’s corporate income taxes are among the best, according to the Tax Foundation. The state’s flat 6.5 percent on all business income ranked No. 7 overall in the category.

North Carolina

Top Corporate Income Tax Rate: 2.5%

North Carolina’s flat 2.5 percent rate on all business income ranked as especially well-structured, placing third overall. And that’s in addition to unemployment insurance taxes that ranked among the top 10.

North Dakota

Top Corporate Income Tax Rate: 4.31%

North Dakota did reasonably well across the board, but its strongest category was for its business property tax. There, the state ranked among the top 10 states.

Ohio

Top Corporate Income Tax Rate: 0%

Like Nevada, Ohio has no tax on corporate income because it’s opted to tax total revenue instead. The state taxes gross receipts over $1 million at a rate of 0.26 percent. And although this approach might have its own set of benefits, the Tax Foundation clearly sees more downsides as Ohio ranked as the fifth-worst corporate tax system in the country.

Oklahoma

Top Corporate Income Tax Rate: 6%

Although Oklahoma has a 6 percent flat tax on corporate incomes, it ranks among the top 10 states for the category. However, business owners in the Sooner State might be even more excited about the system for unemployment insurance taxes, where the state ranks first.

Oregon

Top Corporate Income Tax Rate: 7.6%

None of Oregon’s rankings stand out in a big way, but it does appear to fall on the tougher side of the spectrum for its business tax environment. Both the corporate taxes and unemployment insurance taxes are among the bottom 20 states.

Pennsylvania

Top Corporate Income Tax Rate: 9.99%

With the second-highest top corporate tax rate that comes in just a hair under 10 percent and the fact that it’s a flat tax on all profits, it shouldn’t be a huge surprise that the state ranked among the worst 10 states for that category. However, that’s not the worst ranking for the state: The Tax Foundation found its unemployment insurance taxes to be the fifth-worst in the country.

Rhode Island

Top Corporate Income Tax Rate: 7%

The smallest state in the country has business taxes that are anything but. Rhode Island charges a flat 7 percent on all corporate profits along with a business property tax system that ranks among the 10 worst in the country.

South Carolina

Top Corporate Income Tax Rate: 5%

South Carolina runs right in the middle of the pack for its business property taxes and unemployment insurance taxes, ranking 27th in both categories. However, its flat 5 percent tax on corporate profits does a little better, ranking 19th overall for the category.

South Dakota

Top Corporate Income Tax Rate: 0%

In South Dakota, you have the top-ranked state for corporate income taxes in the country, according to the Tax Foundation. With no taxes on corporate profits and no commerce tax on revenues like in Nevada or Ohio, doing business in South Dakota comes with some distinct tax advantages.

Tennessee

Top Corporate Income Tax Rate: 6.5%

Tennessee offers up nothing especially significant with its business tax environment, ranking in the middle 10 states for each of the three categories included here. Much like nearby Alabama, it charges a flat 6.5 percent tax on any corporate profits.

Texas

Top Corporate Income Tax Rate: 0%

It’s interesting to note that of the six states with no tax on corporate income, two are tied for the top ranking in the category while three others all fall within the bottom 10 states, including Texas that rated second-to-last ahead of just Delaware. That’s because Texas has deployed a complicated margin tax since 2008 that taxes some combination of gross receipts and profits, which is out of favor for the Tax Foundation.

Utah

Top Corporate Income Tax Rate: 5%

Utah’s flat 5 percent rate on corporate earnings lands it among the top five states for corporate taxes in the Tax Foundation’s rankings. What’s more, it clocked the third-best overall structure for its business property taxes in the index.

Virginia

Top Corporate Income Tax Rate: 6%

Virginia’s flat 6 percent rate on corporate profits helped land it the 10th overall spot for that category, but business owners there might have some other reasons to gripe. The unemployment insurance tax is among the 10 worst in the country.

Vermont

Top Corporate Income Tax Rate: 8.5%

The Green Mountain State takes a relatively big bite from corporate profits — 8.5 percent on everything over $25,000, 7 percent between $10,000 and $25,000 and 6 percent on everything under that — so it ranking just outside the bottom 10 states for corporate income taxes isn’t such a surprise.

Washington

Top Corporate Income Tax Rate: 0%

The third and final state to offer no tax on corporate profits but still rank in the bottom 10 for the category, Washington’s business and occupation tax results in the same stuff getting taxed multiple times throughout the supply change — what’s known as tax pyramiding. As such, its corporate tax system ranked the seventh-worst.

West Virginia

Top Corporate Income Tax Rate: 6.5%

West Virginia ranks in the top 20 states for both its corporate income tax and its business property tax. It loses ground, though, when you consider the unemployment insurance tax, which ranks just outside the bottom 20 states.

Wisconsin

Top Corporate Income Tax Rate: 7.9%

Wisconsin’s flat 7.9 percent tax on corporate earnings was ranked 35th overall by the Tax Foundation, but that’s not where the Badger State was rated the worst. Its unemployment insurance tax was ranked among the 10 worst in the country.

Wyoming

Top Corporate Income Tax Rate: 0%

Wyoming tied South Dakota for the top-ranked corporate income tax system in the country. In both cases, a lack of taxes on corporate profits without the additional tax on revenues that hits business operators in Washington, Ohio, Texas and Nevada helps make the tax environment especially appealing for business.

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The recently unsealed complaint states that Avenatti attempted to prevent the government from collecting payroll taxes from Global Baristas by "lying to an IRS Revenue Officer, changing contracts, merchant accounts, and bank account information to avoid liens and levies imposed by the IRS, and instructing employees to deposit over $800,000 in cash from Tully's stores ... into a bank account associated with a separate entity."

According to employees, the company also frequently failed to pay vendors. A former female barista who worked at the chain for roughly six months in 2017 said that suppliers quit delivering products twice to her store, citing a lack of payment.

"The first time it occurred it was handled really quickly," the ex-worker said. "The second time we were concerned about running out of coffee, and the stores ran out of espresso yet continued serving espresso-based drinks ... The upper-level management came by and suggested how to blend the coffee we had to fake espresso."

Global Baristas was also hit by lawsuits over rents from landlords, with at least 14 unlawful detainer cases filed since 2017. And, in January 2018, Keurig Dr. Pepper — which owns Tully's brand — demanded that Global Baristas stop using the brand, alleging that the company failed to pay $500,000 in licensing fees for 2016 and 2017.

Tully's demise

In March 2018, Tully's abruptly shut down all remaining locations.

"Dozens of people showed up for work on that March morning to find they were without a job," an employee who worked at Tully's for eight years told Business Insider in June.

"Many are college students that needed to work to help lighten the financial burden on their parents, to reduce as much as possible any future student loans, and to cover their day-to-day cash needs," he continued. "Many are single moms that seriously depended on their income to support their families."

Less than a week after the stores shut down, Suzy Quinn — Tully's head of communications, who transitioned to work as Stormy Daniels' head of media relations in 2018 — told the Associated Pressthat the company was "rebranding," an effort that could take months. 

In late September, Global Baristas agreed to never operate a coffee chain, or any other food or beverage business, under the Tully's name again, as part of a permanent injunction with Keurig Dr. Pepper. Keurig Dr. Pepper, which owns the Tully's brand and wholesale business, will continue to sell Tully's branded coffee.

Read more:The coffee chain once purchased by Michael Avenatti and Patrick Dempsey is finally, truly dead

In late October, a Chapter 7 involuntary bankruptcy petition was filed against Global Baristas.

Avenatti's role 

Since stores closed in March 2018, Avenatti has publicly maintained that he sold his stake in the company and serves only as an outside attorney. Avenatti did not respond to Business Insider's requests for comment on Monday and Tuesday.

However, employees who spoke with Business Insider and federal agents said that Avenatti both owned the company and had the final say on financial decisions.

"He was barking orders via phone calls and emails right up until he ghosted everyone last year," Sifuentez said on Monday. "And as I've said before, every single paycheck I ever got from 2013 to the end in March 2018 had his signature on it."

Employees who spoke with federal agents shared similar experiences — and skepticism of Avenatti's statements otherwise. 

"On March 8, 2018, M.G. [a Tully's employee] sent Avenatti a text message confronting him" over Avenatti's statements that he was not Global Baristas' owner, the complaint reads. "M.G. asked Avenatti if he was not the owner of Global Baristas, then who should she go to for Global Baristas business decisions. Avenatti responded everything still went through him." 

According to an employee who handled the company's accounting transactions until September 2018 and was cited in the federal complaint, Avenatti earned $250,000 a year as the CEO and chairman.

In a number of interviews with Business Insider throughout 2018, Avenatti said that he was no longer the owner or CEO of Global Baristas. Most recently, in October, he said he "sold the company for nearly $28 million a long time ago."

"To date, the government has been unable to locate any information confirming that Avenatti has sold Global Baristas LLC or Global Baristas US," states the recently unsealed complaint. "To the contrary, based on the information available to the government, it appears these statements are false."

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SEE ALSO: The US government is accusing Michael Avenatti of bank and wire fraud related to the failed coffee chain he purchased with TV actor Patrick Dempsey

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