NEW YORK, Sept 26 (Reuters) - A real-estate company is
suing a prominent law firm for failing to return $5.5 million
in escrow funds at the same time that Manhattan prosecutors are
investigating whether one of the firm's lawyers stole $2.5million of the money.
Regal Real Estate accused Crowell & Moring of negligence
and breach of contract for failing to maintain "adequate checks
and controls over escrow accounts to prevent diversion of funds
by its employees," according to the lawsuit filed Friday in
state Supreme Court in Manhattan. Regal is seeking $6 million
Regal discovered the missing funds on Sept. 13 and demanded
the law firm commit to returning the money by 3 p.m. last
Friday, said its lawyer, Bruce Lederman of D'Agostino, Levine,
Landesman & Lederman.
When the firm did not respond by that time, Lederman said,
Regal filed suit.
Former Crowell & Moring attorney Douglas Arntsen is the
subject of the litigation, as well as the investigation by the
Manhattan District Attorney's Office, launched after Regal's
managing partner William Punch had an unusual meeting with
Arntsen, Lederman said.
At about 11 a.m. on Sept. 13, Arntsen told Punch that he
was leaving Crowell for a new position. Punch asked for
confirmation that more than $4.3 million in escrow funds for
six pending contracts were being transferred to the new law
firm, Lederman said.
Arntsen met with Punch that afternoon, and said there was a
problem with the escrows, Lederman said. Punch accompanied
Arntsen to banks where Arntsen withdrew more than $1.8 million,
"which should have been at Crowell & Mooring," Lederman said.
Arntsen told Punch that the only way to get the rest of the
cash was to fly with him to Hong Kong.
The "unseemliness" of the suggestion prompted Punch to
report Arntsen to prosecutors.
Arntsen was arrested last week in Hong Kong, on a New York
warrant for first-degree grand larceny, and the extradition
process is underway, according to the District Attorney's
According to the suit, Arntsen also recommended Regal
deposit more than $3 million of proceeds from a condemnation
award with a qualified intermediary, but that Arntsen moved
those funds back to Crowell's escrow account without Regal's
"To date, the law firm has not been able to confirm to us
that it is still holding such funds," Lederman said.
Crowell spokeswoman Nicole Quigley declined to comment on
the litigation, but confirmed that Arntsen is no longer with
The case is Regal Real Estate et al v. Crowell & Moring,
New York State Supreme Court, No. 652616-2011.
For Regal et al: Bruce Lederman and Christopher Tarnok of
D'Agostino, Levine, Landesman & Lederman.
For Crowell & Moring: not immediately available.
(Reporting by Jennifer Golson; additional reporting by
Follow us on Twitter: @ReutersLegal