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Crowell Reimburses Regal For the Missing $5.5M Escrow Funds
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A Crowell spokeswoman said on Friday that Crowell & Moring LLP has resolved a dispute with New York real estate firm Regal Real Estate LLC over the alleged embezzlement of $5.5 million by a former Crowell attorney that is now waiting extradition from Hong Kong to face criminal charges.

One of the spokeswomen for the firm has fully reimbursed Regal for the funds that vanished from the escrow account the firm maintained on behalf of Regal and several other New York real estate companies. Douglas Arnsten, who was in the counsel in Crowell’s real estate department until he resigned back in September, is under investigation for allegedly stealing the money by funneling it to a personal account.

  
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Back in November, the New York Country District Attorney’s Office announced that Arnsten was in custody in Hong Kong and awaiting extradition after fleeing from the country.

In a recent statement, the Crowell spokeswoman said that Arnsten’s alleged misconduct is anathema to the firm’s standard of conduct as well as its established reputation of trustworthiness.

”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,” the spokeswomen said. ”We are grateful to our client Regal for their patience in this matter and are pleased finally to be in a position to honor our obligations to them through this settlement.”

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The exact amount of Crowell’s reimbursement payments to Regal has yet to be announced. The spokeswoman for Crowell said that the firm would decline to comment any further for the time being.

Several of the New York real estate companies including Regal have sued Crowell in New York state court in September, accusing Arnsten of improperly rerouting funds related to four Manhattan properties into his personal account. The companies said that the law firm was unable to return the bulk of the funds purportedly in the escrow account and could not account for the missing funds.



According to the companies’ complaint, Arnsten and Crowell & Moring partner William O’Connor represented Regal and the other companies on several of the real estate transaction between March of 2007, and September of 2011, including the receipt of a $3 million condemnation award for one property and the sale of three other buildings totaling $4.3 million.

They have recently said that the proceeds from the condemnation award and the sales were supposed to be help in an escrow account maintained by the law firm.

Bruce Lederman of D’Agostino Levine Landesman & Lederman LLP, who is on the counsel for the real estate companies, told the media outlets in November that the companies demanded their money back after discovering the funds were being held in Arnsten’s personal account. Lederman said that Arnsten returned all of the $1.8 million funds to a Regal executive, and then he fled the country.



 

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