John Dunlea, the former CFO of a national law firm, was sentenced to a five-year term in New Jersey state prison after pleading guilty in May to embezzling over $1.5 million from his former employer, according to a Friday press release by the New Jersey Attorney General’s Office.

Dunlea was ordered to pay over $1.5 million to his former employer, the law firm McElroy, Deutsch, Mulvaney & Carpenter, LLP, as well as over $20,000 to the state of New Jersey, where he is a resident, as restitution, according to the Friday release.

“The defendant admitted to giving himself a staggering, unauthorized, and illegal seven-figure pay raise, and treating himself and his family, at his employer’s expense, to travel, hotels, and meals,” NJ AG Matthew Platkin said in a statement included in the Friday release. “Today’s sentence demonstrates the Division of Criminal Justice’s firm commitment to holding individuals accountable who exploit positions of trust to commit financial fraud.”

Dunlea, 61, was charged with embezzlement and with evading income tax payments owed to the state of New Jersey by Platkin’s office in February, according to a press release at the time.

He pled guilty to two counts of theft by deception and five counts of failure to pay taxes in May, admitting to misappropriating more than $1.5 million from McElroy by “paying himself unauthorized excess compensation,” the AG’s office said.

From a period between January 2017 and December 2022, Dunlea paid himself over $1.1 million in unauthorized compensation, as well as “misled the firm into paying his personal credit card charges” for both domestic and international flights, hotel bookings and restaurant meals for himself and his family to the tune of about $355,256, according to the May release. He also admitted to not paying $22,568 in state income tax during the period in question, related to income derived from the credit card scheme.

In accordance with the plea agreement entered by Dunlea in May, the state recommended the ex-CFO serve five years in prison and pay restitution to both his former employer and to the state. 

“We are grateful that the court agreed with the negotiated sentence and the plea agreement and sentenced Mr. Dunlea to the minimum sentence available in accordance with the plea agreement,” defense attorney for Dunlea Ricardo Solano Jr., co-chair, white collar & investigations for Gibbons P.C., told CFO Dive in an emailed statement. “Now, Mr. Dunlea will focus on serving as little time as possible, being released, and rebuilding his life.”

Ex-CFO overpaid himself by $.16M

The NJ AG’s office filed criminal charges against Dunlea several months after McElroy Deutsch filed a civil lawsuit against their former CFO in June 2023. Dunlea first joined the firm in 2003, before becoming its first CFO and Chief Operating Officer on May 17, 2007 and was terminated in April 2023, according to court filings in that case.

In his role as CFO/COO, he was responsible for managing the firm’s wage and salary payment processes, which included “the payment of compensation to attorneys and staff members,” the company said in its complaint filed last year.

Dunlea, who received an annual salary and several “small bonuses” throughout the year as well as a year-end bonus, was also responsible for ensuring company bonuses were paid, McElroy Deutsch said. His bonus amount would be set by the firm’s executive committee, but rather than processing the amount dictated by the committee, the ex-CFO “systematically, surreptitiously, and dishonestly paid himself more than was authorized,” McElroy said in the complaint.

While it cited an ongoing investigation by the firm, the overpayments — which occurred for a 12-year period beginning in 2011 — were “significant,” with Dunlea estimated to have overpaid himself by at least $1.6 million, McElroy said.

The firm discovered his overpayments on April 11, 2023 and confronted Dunlea, who confessed to wrongdoing and apologized, but “offered no explanation other than to say that he needed the extra money to meet family obligations,” the June filing stated. After warning that he would be terminated unless he resigned, Dunlea tendered his immediate resignation on April 13 of last year.  

The law firm is requesting compensatory and punitive damages, among others, against Dunlea as well as his wife, Nicole Alexander — also a long-time McElroy employee — relating to misappropriation of over $3.2 million in company funds over a decade-long period, per the filing.

Alexander joined the company as an associate attorney in 2000 and became its director of legal recruiting in Nov. 1, 2005 — marrying Dunlea in 2015. McElroy determined Alexander “was deeply involved” in Dunlea’s misconduct, noting that the couple filed joint tax returns, “meaning Alexander was on actual notice that Dunlea’s reported annual income far exceeded any sum he could possibly have earned as the Firm’s CFO/COO,” the June filing said. Additionally, the two reside in a $1.3 million home, purchased with funds embezzled from McElroy Deutsch, the June filing alleges.

Alexander filed a countersuit last September, alleging the firm engaged in discrimination and retaliation against her, with her employment also terminated in April.

“This case involves the aggressive and relentless victimization of a woman, merely because of who she is married to and because of the perceived inappropriate lifestyle as judged by this misogynistic law firm,” the countersuit argued. Alexander had never seen Dunlea’s American Express credit card statements, the countersuit claims, which also said the two do not have joint accounts barring the one used to pay their home mortgage.

Dunlea filed for Chapter 11 bankruptcy protection on July 9, at which point Solano believes the civil case against him was stayed, he said in an email.

The NJ AG’s office declined to comment beyond the details included in its Friday release. McElroy did not respond to requests for comment.

McElroy and Kevin Marino, founder of Marino, Tortorella & Boyle P.C. and attorney for the firm in its case against the ex-CFO, do not have any comment, Marino said in an email. Attorney for Nicole Alexander Ayesha Hamilton of Hamilton Law had no comment.