NEW YORK, Nov 17 (Reuters) - In the ongoing fallout over a
lawyer charged with stealing client funds, and currently in the
custody of Hong Kong authorities, the lawyer's former firm,
Crowell & Moring, is facing a third lawsuit seeking to hold it
liable for his alleged actions.
The plaintiff, BCN 16th ST, claims that Crowell & Moring
owes it more than $1 million in escrow money embezzled by
Douglas Arntsen, former counsel at the firm, who is awaiting an
extradition hearing in Hong Kong. Arntsen, 33, was taken into
custody on Sept. 15 in Hong Kong on a warrant for first-degree
grand larceny, pursuant to a request by the Manhattan District
Attorney's Office and the Department of Justice.
Filed in State Supreme Court in Manhattan, the suit stems
from the sale of a building on East 16th Street that Arntsen
was handling. BCN 16th Street alleges that it was under
contract to buy the property and that Arntsen stole $1 million
it had put into a Crowell & Moring escrow account. It also
claims that the firm and its partner William O'Connor failed to
exercise proper control over the escrow account.
A separate suit was filed Sept. 21 by the property's
seller, Regal Real Estate, which claims it is owed $5.5 million
from Crowell & Moring for escrow funds that Arntsen took, and
for breach of contract and negligence.
A third lawsuit, originally filed in May by Aristone Realty
Capital against Regal, alleged that Aristone was also an
intended buyer of the 16th Street property. The action was
amended last month to include Crowell & Moring and Arntsen as
defendants, and asserts that Arntsen, acting as Regal's
attorney in the sale, worked with Regal to undo Aristone's
purchase of the property and to divert the escrow fees.
Aristone alleges $1 million in damages.
FAILED STING OPERATION
Crowell & Moring and O'Connor declined to comment. A
spokeswoman for the law firm previously said that it was
conducting an investigation into Arntsen's conduct.
Arntsen was arrested after an executive at Regal, William
Punch, told the Manhattan District Attorney's office that about
$4 million was missing from an escrow account the company had
entrusted to Arntsen while he was working at Crowell & Moring,
according to Punch's attorney, Bruce Lederman. Arntsen had
resigned from Crowell & Moring the day before, for reasons that
Punch alerted the district attorney's office about the
missing money, Lederman said, after Arntsen gave him vague and
conflicting answers when he asked Arntsen why it was gone.
After accompanying Arntsen to several banks in lower Manhattan,
where Arntsen withdrew about $1.8 million and gave it to Punch,
Arntsen told Punch that they could fly to Hong Kong to get the
rest of the money, Lederman said.
The two men planned to meet on a downtown Manhattan street
corner and go to the airport together, according to Lederman.
In the meantime, Punch told authorities about the scheduled
meeting, and the police planned to arrest Arntsen there. But
Arntsen never showed up, according to Lederman, instead taking
a train to Philadelphia and eventually flying alone to Hong
Kong, where he was arrested at the airport.
Arntsen, a 2002 graduate of Seton Hall University School of
Law, was living with his wife and daughter on Staten Island
prior to his arrest. Before joining Crowell & Moring as counsel
in 2007, he was an associate at Buchanan Ingersoll & Rooney.
Representing BCN East 16th Street is David Pfeffer an attorney
at Tarter Krinsky & Drogin in New York.
"We felt it was necessary to protect our client's interest
in the $1 million," Pfeffer said, adding that before filing
suit, his clients had asked Crowell & Moring to return the
money to no avail.
The case is BCN 16th ST v. Crowell & Moring, No.
For the plaintiff: David Pfeffer, Tarter Krinksy & Drogin,
For the defense: Not immediately available.
(Reporting by Leigh Jones)
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