September 23, 2011 6:43 PM
Ex-Vorys Sater, Crowell Lawyers Caught Up in Legal Troubles
Posted by Brian Baxter
UPDATE: 9/27/11, 11:30 a.m., EDT. The district attorney's office in Manhattan has requested that Douglas Arntsen be extradited from Hong Kong on a single charge of first-degree grand larceny, according to sibling publication the New York Law Journal.
It was a bad week for two former Am Law 200 lawyers now facing allegations of criminal conduct.
Former Vorys, Sater, Seymour and Pease corporate partner Anthony Calabrese III was charged in connection with a federal corruption probe on Thursday, while ex-Crowell & Moring financial institutions counsel Douglas Arntsen was reportedly arrested this week in Hong Kong on charges that he allegedly stole at least $2.5 million in client escrow funds.
Arntsen joined Crowell's New York office in February 2007 from Buchanan Ingersoll, where he was part of an eight-lawyer group that handled transactional and litigation matters for banks and other financial institutions, according to a story at the time by sibling publication the New York Law Journal.
Reuters reported late Wednesday that Arntsen had been arrested in Hong Kong on suspicion of fraud. Arntsen is alleged to have pilfered funds from an escrow account belonging to New York property manager Regal Real Estate, whose managing partner, William Punch, told Reuters that the Crowell lawyer admitted to him that he took money from a third-party account set up as a deposit for $40 million in property deals.
A spokesperson for the Hong Kong Police Force told sibling publication The Asian Lawyer via e-mail that a 33-year-old man had been arrested Monday following a request by the U.S. government under arrangements for the surrender of international fugitives, but did not confirm the man's identity, a standard practice in British legal systems. The police statement said that the unidentified man had appeared before the Eastern Magistrates' Courts in Hong Kong this past Tuesday, and had been remanded in custody until September 27.
The New York Post and South China Morning Post are reporting that the man in question in Arntsen. Citing unnamed Hong Kong police officials, the two newspapers report that Arntsen is being held in the Lai Chi Kok Reception Center until next Tuesday, when he will be turned over to U.S. law enforcement officials for extradition.
A spokeswoman for the district attorney's office in Manhattan did not respond to a request for comment on whether it has asked that Arntsen be extradited to face fraud charges for stealing from Regal. The New York Observer reports that Gary Galperin, a deputy chief of the trial division in the office's rackets bureau, is working with Regal on investigating Arntsen's alleged thievery. (The Observer has a timeline for how things developed between Arntsen and Regal, which is owned by Maurice Laboz.)
As of Friday, Crowell had scrubbed its Web site of any mention of Arntsen, whose practice focused on real estate lending and commercial litigation. An e-mail address for Arntsen at Crowell was no longer active when The Am Law Daily attempted to contact him through it on Friday. A Crowell spokeswoman declined a request for comment on the matter.
Regal sued Crowell on Friday in Manhattan, claiming that the firm cannot account for almost $6 million of its funds, according to a story by the NYLJ. (Click here to download Regal's 11-page complaint filed in New York State Supreme Court.) Kelly Currie, a former federal prosecutor in Manhattan who joined Crowell in July 2010, is investigating Arntsen's conduct for the firm.
Regal's lawyer, Bruce Lederman of New York's D'Agostino, Levine, Landesman & Lederman, told Reuters that Arntsen returned $1.8 million to the company when Punch accompanied him on September 13 to a Citibank branch in Manhattan. Punch and Arntsen then visited a local Wachovia branch where the Crowell lawyer withdrew a further $43,000, Reuters reports.
But Arnsten then told Lederman that he needed to travel to Miami to retrieve Regal's remaining funds, Reuters reports, and followed that up by claiming he needed to travel to Hong Kong. The two men were supposed to meet on a lower Manhattan street corner on September 14, but Arntsen failed to show, likely after being tipped off that local police were preparing to arrest him, Reuters reports.
Meanwhile, in Ohio, agents from the Federal Bureau of Investigation arrested former Vorys Sater partner Calabrese on Thursday at his law office at the One Cleveland Center office tower in downtown Cleveland. Calabrese was placed on leave by Vorys Sater in February 2009 and subsequently opened his own small firm, which is located in the same building as Vorys Sater's Cleveland office.
"Mr. Calabrese is no longer associated with the firm and therefore it would be inappropriate to comment further," said a Vorys Sater spokeswoman. "During the course of the government's investigation, the firm has cooperated fully with the U.S. attorney's office. The U.S. attorney's office has confirmed that the firm is neither a target nor a person of interest in the investigation."
Federal prosecutors slapped Calabrese—the son of a Ohio state court judge of the same name—and former public official Sanford Prudoff with conspiracy, bribery, racketeering, and fraud charges after a three-year federal investigation into corruption by public officials in Cuyahoga County, whose seat is in Cleveland. The probe has resulted in the arrest of more than 50 government officials, businessmen, and contractors, according to The Cleveland Plain Dealer.
Among those individuals charged by federal prosecutors were several name partners at now-defunct Armstrong, Mitchell, Damiani & Zaccagnini. William Mitchell was sentenced in June to eight years in prison on a bribery conviction, while his two fellow name partners Timothy Armstrong and Bruce Zaccagnini pleaded guilty to bribery charges and are serving prison terms. (Zaccagnini was disbarred this week.)
The 39-year-old Calabrese is accused of paying off public officials in return for them sending business to his clients and Vorys Sater, according to a 71-page, 18-count indictment against him handed down by a federal grand jury. The Am Law Daily reported two years ago on a subpoena sent by the FBI to Vorys Sater seeking documents on work the firm did for various Cuyahoga County officials.
Gregory Lockhart, a former U.S. attorney for the Southern District of Ohio and current partner at Taft Stettinius & Hollister in Columbus, is representing Calabrese. Lockhart did not immediately respond to a request for comment on the charges against his client.
Calabrese pleaded not guilty to all charges at an arraignment on Thursday before U.S. magistrate judge Nancy Vecchiarelli. The Plain Dealer reports that as a condition of his release, Calabrese agreed to avoid any contact with roughly a dozen potential witnesses and unindicted coconspirators put together by federal prosecutors in a court document that is under seal.
Assistant U.S. attorneys Antoinette Bacon and Nancy Kelley in Cleveland are prosecuting the case against Calabrese, according to a government press release on the charges.
Additional reporting by Ben Lewis in Hong Kong.
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