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
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
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
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)
Follow us on Twitter: @ReutersLegal