NEW YORK, Dec 2 (Reuters) - Douglas Arntsen, the Crowell & Moring lawyer accused in September of misusing client funds and fleeing to Hong Kong to avoid arrest, has surfaced as a key figure in a fifth lawsuit, the details of which suggest that Crowell knew of concerns about Arntsen's behavior as early as July.

Arntsen is currently in the custody of Hong Kong authorities and awaiting extradition on charges that he stole $2.5 million in escrow funds from a client of Crowell's, Regal Real Estate.

Now Xun Energy, Inc, a small oil and gas firm based in Oregon, has sued a purported investor, Lea Kennedy, for reneging on a contract to take a $10 million stake in the company.

While the suit, filed Nov. 4 in the U.S. District Court for the Southern District of Illinois, does not accuse Arntsen or Crowell of any wrongdoing, the company's chief executive alleges that Arntsen engaged in a questionable side deal involving the escrow funds related to the deal.

According to the complaint, after Xun inked the deal with Kennedy last May, it wired a $25,000 deposit into an escrow account managed by Arntsen, who was working at Crowell at the time. Arntsen served as the escrow agent at Kennedy's request, Xun's chief executive, Jerry Mikolajczyk, told Reuters.

Kennedy had 45 days to purchase the stock, which she did not do, according to the complaint.

After repeated attempts to complete the transaction, the lawsuit alleges, Xun sent Kennedy a letter notifying her she was in default of the agreement.

'HOW DID IT GET FROM A TO B?'

In a July 22 letter to Arntsen that was attached to the complaint, Mikolajczyk asked that he return the escrow funds and provide a copy of the bank records detailing how the funds were held.

"We wish to verify that the funds were held per the instructions ... and that there was no misappropriation of the Escrowed Funds," Mikolajczyk wrote.

Arntsen did not immediately return the funds, Mikolajczyk said. On July 27, Mikolajczyk said, he sent an email to Arntsen, blind-copied to Crowell's executive committee, demanding the funds' return.

The next morning Arntsen returned the money, Mikolajczyk said, but the funds came from a different account than the one he initially wired the money to.

"I am an accountant by profession so I asked him: how did it get from A to B, and when?" Mikolajczyk said.

Mikolajczyk said neither Arntsen nor the firm gave him information about the accounts, but that he subsequently obtained an email indicating that Arntsen had a side agreement with Kennedy to loan her the escrow funds.

Mikolajczyk's lawyer, Christopher Cobb, said, "My understanding, and we are still very early on in the investigation, is that there was some relationship between Lea and Doug. We're still trying to figure out the relationship."

Cobb said that after the deal fell through, Kennedy vanished. Her office address in Illinois turned out to have been empty for the last three years, and a British fax number she provided was inactive, Cobb said.

Kennedy did not respond to a voicemail message left at the number listed on her contract.

A spokeswoman for Crowell & Moring declined to comment on the recent lawsuit, but said the firm was "aware of it." The firm has previously said that Arntsen resigned on Sept. 12.

MORE EMPLOYEES LEAVE CROWELL

Meanwhile, a partner and a secretary from Crowell have left the firm in the midst of an internal investigation into Arntsen's activities, said two sources who previously worked at the firm.

According to the sources, the partner had practiced at one point in the same group as Arntsen, who joined Crowell & Moring in 2007 as counsel with eight other finance and distressed-debt attorneys from Buchanan Ingersoll.

A spokeswoman for the firm declined to comment on the employees' departure.

The new lawsuit is the fifth involving Arntsen since he left for Hong Kong on Sept. 14, just as authorities planned to detain him.

After the failed arrest, the Manhattan District Attorney's office charged Arntsen with first-degree grand larceny for allegedly embezzling Regal Real Estate's escrow money.

On Sept. 21, five days after Arntsen's arrest in Hong Kong, Regal sued him and Crowell & Moring for $6 million over the missing funds.

On Oct. 10, another real-estate company, Aristone Realty, filed an amended complaint in a $1 million state-court lawsuit that it had brought in May against Crowell, Regal and others in connection with an alleged kickback scheme involving Arntsen.

And on Nov. 16, real-estate company BCN 16th St. filed suit claiming that Crowell & Moring owes it more than $1 million in escrow money allegedly embezzled by Arntsen. The lawsuit stems from the sale of property at issue in two of the other suits.

Arntsen is currently being represented by Ng Man Kin, according to a spokesperson for the Hong Kong Department of Justice. The department said in a statement that Arntsen appeared in court Nov. 16 and "consented to surrender to the US."

Mr. Ng could not be reached for comment.

A spokeswoman at the District Attorney's office declined to comment.

(Reporting by Aruna Viswanatha and Leigh Jones)

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