A former Crowell & Moring associate who fled to Hong Kong to avoid arrest and had to be extradited has admitted embezzling $10.7 million dollars from clients over a two-year period.

Douglas Arntsen, 34, pleaded guilty yesterday before Acting Manhattan Supreme Court Justice Jill Konviser (See Profile) in connection to the theft from an investment fund and a real estate management company he advised.

In exchange for a sentence of 4-to-12 years, Arntsen pleaded guilty to three counts of first-degree grand larceny, a B felony, and one count of first-degree scheme to defraud, an E felony. He also agreed to a restitution order for the $10.7 million, which he used to make loans and investments, but also on sporting events, strip clubs, meals at restaurants and the purchase of businesses for friends, family and himself including a laundromat and cookie and potato chip distributorships.  Read the arrest warrant.

Arntsen, who has been incarcerated since his extradition in January, has returned just over $151,000, according to court papers filed by prosecutors, who urged a five- to 15-year sentence. Sentencing is scheduled for Oct. 17.

"The trust between attorney and client is sacred. This defendant utterly betrayed that trust by stealing large amounts of money from his clients before fleeing to Hong Kong. Today’s conviction holds him accountable for fraudulent conduct that violated the law, abused his clients’ trust, and cost them millions of dollars," Manhattan District Attorney Cyrus Vance, Jr. said in a statement.

Arntsen answered, "Yes, your honor" over and over as Konviser questioned him about whether he had committed the crime to which he was pleading guilty and whether he was pleading guilty of his own free will. Arntsen did not elaborate.

His attorney, Alan Lewis of Carter Ledyard & Milburn, told reporters outside the courtroom that his client "always indicated his intent to resolve the case and put it behind him."

As an associate at Crowell & Moring’s New York office, Arntsen represented Doina Capital, a closely held corporation and investment fund, and Regal Real Estate, a closely held real estate management company.

Arnsten drafted Doina’s incorporation as a limited liability company, naming himself as "vice president" and "secretary," prosecutors said in court papers.

In a July 31 letter to the court, Arntsen said he was asked to be "directly involved in the making of investment/loan decisions" but that was disputed in a witness impact statement by Doina principal, Dr. Adrian Alexandru, a 73-year-old veterinarian and Roumanian immigrant.

Shortly after its formation in 2009, Doina transferred about $22 million to a Crowell & Moring escrow account. Arnsten then created several corporate accounts that tapped the escrow funds and designated him as sole signatory.

The money was used to support his lifestyle and investments that prosecutors claimed in court papers were "at best, high risk, short-term investments and, at worst, full blown scams."

As for Regal Real Estate, Arntsen tapped a tax-deferred account holding a $3 million building condemnation award. He also stole the deposits from six sales, totaling $4.3 million, which was discovered when Regal principal, 74-year-old Maurice Laboz, sought to liquidate his portfolio.

According to prosecutors, Arntsen was asked to leave Crowell & Moring in June 2011, and he was terminated on Sept. 12.

Regal employee William Punch confronted Arnsten on Sept. 13 and demanded that the money be returned immediately. Punch told prosecutors that Arnsten eventually admitted to him that he had stolen the money.

The two then went to a Citibank branch where Arnsten withdrew $1.8 million and gave it to Punch. He withdrew another $43,000 from a nearby Wells Fargo branch.

The attorney assured Punch he could get the remainder of the money if Punch traveled to Hong Kong with him on Sept. 14. He showed Punch an airline ticket to Hong Kong, but used a different route to flee.

Meanwhile, Arnsten arranged for another individual, with whom he had invested Doina funds, to meet Punch instead. When that man arrived, law enforcement authorities were on the scene expecting to apprehend Arntsen.

After his extradition from Hong Kong in January, Arntsen was arraigned (NYLJ, Jan. 24) and denied bail. He is being held at Rikers Island, according to the New York City Department of Correction website.

Arntsen’s arrest spawned litigation against Crowell & Moring. In May, the firm signed stipulations of discontinuance in three separate actions (NYLJ, May 24)

In one now-settled suit, Regal Real Estate v. Crowell & Moring, 151536-2012, Regal argued the firm’s lack of supervision of Arntsen exposed it to unnecessary litigation.

Regal had settled an earlier action against the firm seeking reimbursement of $5.5 million in escrow funds allegedly stolen by Arntsen (NYLJ, Dec. 12, 2011).

"We regret the harm caused by Douglas Arntsen to our clients and our firm and are pleased Mr. Arntsen has acknowledged his crimes with a guilty plea," Ellen Dwyer, Crowell & Moring managing partner said in a statement yesterday.

The prosecution’s case was handled by Assistant District Attorney Sophi Jacobs, Senior Investigative Counsel Richard Buckheit, and Senior Investigative Counsel Richard Gary Galperin.