NEW YORK, Dec 9 (Reuters) - The embattled law firm Crowell & Moring has settled a lawsuit filed by an ex-client alleging that one of the firm's former attorneys stole millions of dollars of the client's escrow funds.

The $5.5 million lawsuit was filed in September by Regal Real Estate, which alleged that Douglas Arntsen, 33, previously counsel at Crowell, embezzled funds from the company's escrow account and that the law firm failed to properly oversee the money in the account.

Arntsen is in custody in Hong Kong, to which he allegedly fled on Sept. 14 as authorities were about to arrest him. He is awaiting extradition to the United States on charges of grand larceny. Arntsen resigned from Crowell & Moring on Sept. 12, the firm has said.

In a statement released Friday, Crowell said that it had resolved Regal's suit. "We were appalled to learn that a former employee seems to have been involved in an elaborate plot to defraud our client and his colleagues at Crowell & Moring," the statement said.

Arntsen had represented Regal in several real-estate transactions in New York while he worked at Crowell & Moring.

The amount of the settlement is confidential under the terms of the agreement, and the firm declined to comment beyond its statement.

The firm also issued a letter of apology on Friday to Regal executives Maurice Laboz and William Punch for "any pain or inconvenience" that "resulted from Mr. Arntsen's actions." Reuters obtained the letter from Punch.

MORE CIVIL SUITS

Two other civil lawsuits in New York state court have been filed against Crowell & Moring related to Arntsen's conduct.

Aristone Realty Capital, which originally sued the firm last May, amended its complaint in October to allege that Regal was involved in a real-estate kickback scheme with Arntsen and that Crowell was liable for his conduct. Crowell's letter to Regal states that the firm's internal investigation of Arntsen's activities showed that it had no reason to believe Regal was "in any way complicit" with Arntsen in his handling of the escrow account.

Aristone attorney Luke McGrath said Friday that his client has not settled with Crowell. "We are reserving our rights and pursuing our claims," McGrath said.

Aristone asserts that it alerted Crowell as early as June to concerns about Arntsen's handling of its escrow funds. Crowell has declined comment on that lawsuit.

Also pending is a lawsuit filed in November by BCN 16th ST, a real estate developer that alleges it was under contract to buy a building in New York. BCN asserted that Crowell & Moring owes it $1 million for escrow money that Arntsen embezzled from that deal. The attorney for BCN did not return a call for comment.

A separate action filed in Illinois federal court in November by Oregon oil and gas company Xun Energy Inc also involves Arntsen's conduct, although neither he or nor Crowell & Moring is named as a defendant. In that suit, Xun chief executive Jerry Mikolajczyk asserted that in July he blind-copied Crowell's executive committee on an email that he had sent to Arntsen demanding an accounting of escrow funds.

According to the lawsuit, Arntsen was the escrow agent in a deal in which a investor was to pay $10 million to Xun. Mikolajczyk asserted that he sent the email after the deal fell apart and Arntsen failed to promptly return the escrow money.

(Reporting by Leigh Jones)

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