Former New Jersey Law Firm CFO Sentenced to Five Years in Prison for Embezzling $1.5 Million

The New Jersey Attorney General's Office said in a press release Friday that John Dunlea, the former chief financial officer of a national law firm, was sentenced to five years in New Jersey state prison after pleading guilty in May to stealing more than $1.5 million from his former employer.

Dunlea was ordered to pay more than $1.5 million in restitution to his former employer, the law firm McElroy, Deutsch, Mulvaney & Carpenter, LLP, and more than $20,000 in restitution for taxes owed to New Jersey, where he resides, according to the press release issued Friday.

"The defendant admitted to giving himself a staggering, unauthorized, and illegal seven-figure raise, and using his employer's funds to pay for travel, hotel, and dining expenses for himself and his family," New Jersey Attorney General Matthew Platkin said in a statement included in Friday's press release. "Today's sentence demonstrates that the criminal justice division is firmly committed to holding accountable those who exploit positions of trust to commit financial fraud."

Dunlea, 61, was charged in February by Platkin's office with embezzlement and evasion of income taxes owed to New Jersey, according to a press release issued at that time.

He pleaded guilty in May to two counts of theft by deception and five counts of failure to pay taxes, admitting he embezzled more than $1.5 million from McElroy by "paying himself unauthorized excess compensation," the Attorney General's Office said.

Between January 2017 and December 2022, Dunlea paid himself more than $1.1 million in unauthorized compensation and "misled the company into paying for his personal credit card expenses," which included domestic and international flights, hotel reservations, and restaurant meals for himself and his family, totaling approximately $355,256, according to a press release issued in May. He also admitted to failing to pay $22,568 in state income taxes during the relevant period, related to income derived from the credit card scheme.

Under the plea agreement Dunlea reached in May, the state recommended that the former CFO serve five years in prison and pay restitution to his former employer and the state.

"We appreciate that the court recognized the negotiated disposition and plea agreement and sentenced Mr. Dunlea to the minimum term of incarceration available under the plea agreement," Dunlea's defense attorney, Ricardo Solano Jr., co-chair of Gibbons P.C.'s White Collar Crime and Investigations practice, said in an email statement to CFO Dive. "Now, Mr. Dunlea will focus on serving his time as quickly as possible and rebuilding his life upon release."

Former CFO overpaid himself by $160K

The New Jersey Attorney General's Office brought criminal charges against Dunlea months after McElroy Deutsch filed a civil lawsuit against its former CFO in June 2023. According to court documents in that case, Dunlea first joined the firm in 2003, later became its first CFO and chief operating officer on May 17, 2007, and was terminated in April 2023.

During his tenure as CFO/COO, he was responsible for managing the firm's payroll and compensation payment processes, including "paying attorneys and staff," the firm said in its complaint filed last year.

McElroy Deutsch said Dunlea had a fixed annual salary and received several "small bonuses" throughout the year as well as a year-end bonus, while also being responsible for ensuring the firm's bonuses were paid. His bonus amounts were set by the firm's executive committee, but instead of processing the amounts set by the committee, the former CFO "systematically, secretly, and dishonestly paid himself more than he was authorized to receive," McElroy alleged in the complaint.

Although the firm mentioned an ongoing internal investigation, the overpayments—which began in 2011 and continued for 12 years—were "substantial," with McElroy estimating Dunlea overpaid himself by at least $1.6 million.

The firm discovered the overpayments on April 11, 2023, and confronted Dunlea, who admitted to the misconduct and apologized but "offered no explanation other than saying he needed the extra funds to meet family obligations," the June filing said. After being warned he would be terminated if he did not resign, Dunlea resigned effective April 13 of last year.

The law firm sought compensatory and punitive damages, among other relief, from Dunlea and his wife, Nicole Alexander, also a longtime McElroy employee, involving the misappropriation of more than $3.2 million in firm funds over more than a decade, the filing said.

Alexander joined the firm as an associate in 2000 and became its director of legal recruiting on November 1, 2005, marrying Dunlea in 2015. McElroy determined that Alexander was "deeply involved" in Dunlea's misconduct, noting that the couple filed joint tax returns, "meaning Alexander actually knew that Dunlea reported annual income far exceeding any amount he could have earned as the firm's CFO/COO," the June filing said. Additionally, the couple resided in a $1.3 million home allegedly purchased with funds misappropriated from McElroy Deutsch, the June filing said.

Alexander filed a counterclaim in September of last year, accusing the firm of discrimination and retaliation against her, and her employment was also terminated in April.

"This case involves the aggressive and relentless persecution of a woman, simply because of who she married, and because of this misogynistic law firm's judgment of her so-called inappropriate lifestyle," the counterclaim said. Alexander never saw Dunlea's American Express credit card statements, the counterclaim said, and stated the couple had no joint accounts other than the one used to pay the mortgage on their home.

Dunlea filed for Chapter 11 bankruptcy protection on July 9, Solano said in an email, and he believes the civil case against him is therefore stayed.

The New Jersey Attorney General's Office declined to comment beyond the details in Friday's press release. McElroy did not respond to a request for comment.

McElroy and its attorney in the case against the former CFO, Kevin Marino, founder of Marino, Tortorella & Boyle P.C., had no comment, Marino said in an email. Nicole Alexander's attorney, Ayesha Hamilton of Hamilton Law, also did not comment.