NEW YORK, Jan. 20 (Reuters) - Douglas Arntsen, the former Crowell & Moring lawyer accused of stealing client funds and fleeing to Hong Kong to avoid arrest, was arraigned Friday night on charges of grand larceny and ordered held without bail.
Arntsen, 34, allegedly fled the United States last September after being charged by the Manhattan District Attorney’s Office with embezzling $2.5 million in client funds that had been placed in escrow for his client, Regal Real Estate. The amount he is accused of stealing has since risen to $7.4 million. Meanwhile, at the arraignment, prosecutors said Arntsen is under investigation for stealing an additional $21 million.
At Friday’s bail hearing at about 9:00 p.m. in Manhattan criminal court, Arntsen, the father of a 5-year-old daughter, stood expressionless in a black Adidas sweatshirt with his hands cuffed behind his back. His wife and parents sat in the back of the courtroom during the 30-minute hearing.
Assistant District Attorney Sophi Jacobs told Criminal Judge Abraham Clott that Arntsen’s alleged orchestration of a complicated scheme involving “no less than 24 bank accounts” and his use of a decoy so he could escape to Hong Kong were reasons why he shouldn’t be granted bail.
“The investigation into stolen funds is continuing. The victims of this defendant have not been compensated by him,” Jacobs told the judge.
But Arntsen’s attorney Alan Lewis told the judge that his client had planned the trip to Hong Kong with a business associate before he was accused of any wrongdoing.
“The trip was not made for the purpose of running away from these charges,” Lewis said.
He offered to post as bail Arntsen’s parents’ home in Staten Island, valued at more than $500,000.
FLIGHT RISK 'ABSURD'
A life-long resident of Staten Island, Arntsen has “extremely strong community ties and had never been arrested before, factors that his attorney said weighed in favor of granting bail.
Lewis called the idea that his client was a serious flight risk “absurd."
”The judge perfunctorily rejected that offer, remanded Arntsen and set his next court date for April 19.
Prosecutors have said they began investigating Arntsen after a Regal Real Estate employee told them that the attorney was unable to account for the company’s escrow funds and needed to go to Hong Kong to retrieve them. When authorities went to arrest Arntsen on Sept. 14, he had already fled the country, prosecutors said.
A graduate of Seton Hall University School of Law, Arntsen joined Crowell & Moring as counsel in 2007, part of a group of nine finance and distressed-debt attorneys from Buchanan Ingersoll. He resigned from Crowell & Moring on Sept. 12, just a day before the Manhattan District Attorney’s office told the firm that he was under investigation.
He is charged with two counts of first-degree grand larceny and scheme to defraud in the first degree. He faces up to 25 years in prison on the top count.
Arntsen and Crowell & Moring face at least three civil lawsuits pertaining to his alleged theft of escrow funds.
A spokeswoman for Crowell & Moring declined to comment on the arraignment, citing the ongoing investigation.
She said that the law firm has “cooperated fully” with prosecutors and has hired outside counsel to conduct a full investigation into Arntsen’s activities while he was at the firm.
(Reporting by Noeleen Walder and Leigh Jones)
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(Corrects misspelling of first name of Arntsen's attorney from Allen to Alan).