Business of Law

Crowell Client Asked in July re Use of Trust Account By Ex-Counsel Now Accused of Stealing

Accused in September of mishandling millions in client trust money, a now-former counsel of Crowell & Moring traveled to Hong Kong and, at last report, was awaiting extradition back to the United States.

But a CEO of another Crowell & Moring client says he sent an email to the firm’s executive committee in July that might have sounded an alert about possible misappropriation of funds by Douglas R. Arntsen, Reuters reports.

Jerry Mikolajczyk is CEO of Xun Energy Inc., a small company based in Oregon that filed a federal lawsuit earlier this month against a third party in a transaction that Crowell & Moring handled. While the Southern District of Illinois suit names neither Arntsen nor the law firm as defendants, it references a transaction in which Arnstein also oversaw client trust money, the article explains.

Mikolajczyk tells Reuters that he blind-copied the Crowell & Moring executive committee on a July 27 email to Arntsen demanding return of a $25,000 escrow deposit related to the transaction at issue in the suit.

The money was returned to Xun Energy the next day. Hence, it isn’t clear that the executive committee ever saw a July 22 letter attached to the lawsuit in which Mikolajczyk not only seeks return of the $25,000 but seeks bank records providing how it was held: “We wish to verify that the funds were held per the instructions … and that there was no misappropriation of the escrowed funds,” the letter states.

When he got the $25,000 back, the day after he copied the executive committee on the email, Mikolajczyk said, he noticed it was sent from a different account than the one to which he had originally wired the money. “I am an accountant by profession so I asked him: how did it get from A to B, and when?” Mikolajczyk told Reuters.

Crowell & Moring declined to comment when contacted by Reuters, except to say that it was aware of the lawsuit.

Earlier coverage: “BigLaw Attorney Is Accused by Client of Stealing $2.5M in Escrowed Funds” “Client Sues Crowell & Moring, Claims Law Firm Can’t Account for $5.5M in Escrow Money” “Add $1M More to Funds Ex-Counsel of Crowell & Moring Is Accused of Taking from Client Trust Accounts”

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