NEW YORK, Nov 4 (Reuters) - In the end it all happened very quickly. Douglas Arntsen, a 33-year-old real-estate lawyer at Crowell & Moring, quit his job on Sept. 12, just as one of the firm's clients, Regal Real Estate, was discovering that about $4 million was missing from an escrow account maintained by Crowell.

When Regal's managing partner, William Punch, questioned Arntsen about the missing funds, Punch said Arntsen became distraught. "He broke down and told me he had used some of the escrow money," Punch told Reuters in September. Punch said Arntsen assured him that he'd get the money back.

According to Punch, the two men met the next day, a warm Tuesday, in downtown Manhattan, where Arntsen said he needed to make a few stops to get the money. They went to a Citibank branch, where Arntsen withdrew about $1.8 million, according to Regal's lawyer, Bruce Lederman of D'Agostino, Levine, Landesman & Lederman. Arntsen then took Punch to a Wachovia branch, where he withdrew an additional $43,000, according to Lederman.

Still short, Punch said Arntsen told him he needed to fly to Miami to get the rest, but then changed his destination.

"He went through this whole convoluted story -- he had to go to Hong Kong to get the money back, and he wanted me to go to Hong Kong with him," Punch said. The plan was to meet the next day on the corner of Chambers and Church Streets -- only blocks from the state and federal courthouses -- and go to Newark Airport, where they would catch a flight to Hong Kong.

According to Lederman, the meeting was a set-up: he and Punch reported Arntsen's plan to the Manhattan District Attorney's office, which sent police to intercept Arntsen at the meeting location the next morning.

But Arntsen never showed, Lederman said, and by the end of the day he was en route to Hong Kong by himself, leaving behind his wife and young daughter on Staten Island.

'MIND-BLOWING'

Arntsen was arrested on Sept. 15 in Hong Kong on a warrant for first-degree grand larceny, pursuant to a request the Manhattan DA made to the U.S. Department of Justice. He is in the custody of authorities there, awaiting an extradition hearing on Nov. 16. Arntsen has retained an attorney in Hong Kong, according to a spokeswoman in the DA's office, who declined to identify the attorney.

Meanwhile, friends and former colleagues are asking how a man with an apparently clean record and a seemingly stable future could have slipped so far off track.

"Two weeks ago if someone had told me Doug stole a paper clip off somebody's desk, I wouldn't have believed it," Punch said in September.

Many described Arntsen as a hard-working, good-natured fellow, even a bit of a square.

"It's unbelievable," said Christopher Carcich, a classmate of Arntsen's at Seton Hall University School of Law, from which they both graduated in 2002. Carcich described Arntsen as a "blue collar" kind of guy who had a reputation for making good grades. "When it came down to doing the work, he always did it," he said.

An attorney who worked with Arntsen for eight years described him as "a nice boy" who had "an air of innocence."

"It's mind-blowing," said the attorney, who asked not to be identified so that he could speak candidly. "The guys in the office, we'd go out for a few drinks after a long day, but not Doug. He'd have one Coke and go home."

'A REGULAR GUY'

On a recent weekday in the Woodrow section of Staten Island, the modest split-level ranch Arntsen has been living in with his wife, Stephanie, and their daughter was decorated with jack-o'-lanterns and a fall wreath on the door that said "Welcome." A black Infiniti SUV sat in the driveway, with the license plate "ESQ2002."

A woman who identified herself as Stephanie Arntsen answered the door but declined to answer questions about Douglas Arntsen.

Dave Giles, a neighbor who lives across the street from the Arntsens, said Douglas Arntsen "seems like a regular guy."

Until September, Arntsen's career path appeared to be just that -- regular. According to attorney-profile data from Westlaw, he completed internships at the U.S. District Court in New Jersey, the Office of the Public Defender in New Jersey, and at the New York Stock Exchange. He received a Master of Law degree in 2004 from Fordham University School of Law. While in law school at Seton Hall, he worked as a summer associate at Buchanan Ingersoll & Rooney before joining the firm full time after graduation.

Arntsen joined Crowell & Moring as counsel in 2007, part of a group of nine finance and distressed-debt attorneys from Buchanan Ingersoll. The group was led by William O'Connor, who did not respond to a request for an interview.

MULTIPLE SUITS

In addition to the criminal charge against him, Arntsen faces two civil lawsuits that also name Crowell & Moring as a defendant. Last month, a state court judge denied the firm's motion to dismiss one of the suits, which was originally filed against Regal Real Estate in May by Aristone Realty Capital over a failed building purchase. The suit was amended last month to assert that Arntsen, acting as Regal's attorney in the sale, thwarted Aristone's purchase of the property so that he could sell it to another buyer and pocket higher escrow fees. Aristone, which also added Crowell & Moring as a defendant last month, alleges $1 million in damages.

The second suit, filed by Regal on Sept. 23, seeks repayment plus damages from Arntsen and Crowell for the escrow money that it claims Arntsen stole, for a total of $6 million.

One key determination in the litigation -- the extent of Crowell & Moring's liability -- will ride on the details of Arntsen's access to client funds. The District Attorney's office and the plaintiffs in the civil suits will want to find out if the law firm had reason to believe that he would misuse those funds. Arntsen's authority to access the money while he worked at the firm was governed by attorney-ethics rules and the firm's own policy, said Jeffrey Schwartz, a partner at Wolf Haldenstein Adler Freeman & Herz whose practice focuses on real-estate transactions. New York's attorney-ethics rules allow for partners or employees of law firms to withdraw funds, as long as safeguards are in place to protect those funds and that attorneys act ethically with them.

Crowell & Moring attorneys declined to provide details about the case and issued a statement through a spokeswoman, who confirmed that Arntsen resigned on Sept. 12 and said that the Manhattan District Attorney's Office told the firm on Sept. 13 that he was under investigation. The firm said it is conducting an internal investigation and cooperating with authorities.

(Reporting by Leigh Jones; Additional reporting by Aruna Viswanatha and Noeleen Walder)

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