Business of Law

Crowell & Moring Sued; Ex-Client Claims $15M Lost Due to Embezzlement by Then-Associate of Law Firm

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A former real estate client has sued Crowell & Moring for malpractice, contending that it lost $15 million as a result of the actions of an inadequately supervised New York associate who jumped off the tracks of standard law practice.

In addition to the $15 million it could cost to defend litigation resulting both from problems with real estate contract documents and from a multi-million-dollar embezzlement from escrow accounts by Douglas Arntsen, Regal Real Estate is seeking another $20 million in punitive damages in a complaint (PDF) the company filed last week in New York Supreme Court in Manhattan along with other co-plaintiffs .

The company contends that partners of the Washington, D.C.-based law firm grossly breached their fiduciary duty.

Crowell & Moring previously settled with Regal concerning $5.5 million that the company claimed was embezzled by Arntsen. He is currently incarcerated, after being extradited to the U.S. from Hong Kong in a grand theft case.

“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 & Moring,” the firm said in a written statement provided to the ABA Journal in December, at the time the settlement was announced. “The alleged conduct of this former employee is in stark contrast to everything we stand for as a firm and is entirely inconsistent with the strong reputation of trust we have built among our clients over the years. 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.”

Hat tip: New York Law Journal (sub. req.).

Additional coverage: “Crowell Client Asked in July re Use of Trust Account By Ex-Counsel Now Accused of Stealing” “Crowell & Moring Settles $5.5M Client Suit re Ex-Counsel Awaiting Extradition in Hong Kong” “Ex-Crowell Lawyer Held Without Bail in $2.5M Client Theft is Investigated re $21M More, Gov’t Says”

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