Examining the Alex Murdaugh Case from a Fraud Investigator’s Perspective

What role did financial and other crimes play in the unlawful killing of a lawyer’s wife and one of his two sons?

We’ve all heard that it wasn’t the racketeering, the murders, or the other dozens of crimes he ordered, but that it was the tax evasion that eventually landed Al Capone behind bars. In that vein, the world was recently fixated on the criminal trial of Alex Murdaugh, a former South Carolina attorney who was found guilty of the murders of his own wife and son, which prosecutors alleged was part of an effort to conceal financial crimes spanning over a decade. It’s also the subject of a newly released Netflix documentary.

During the trial, the State prosecutor, Creighton Waters, painted a picture of a growing storm of financial pressures stemming from multiple alleged frauds that were on the verge of being discovered, as well as a civil lawsuit against Murdaugh related to a fatal boat wreck involving Murdaugh’s son several years prior (the same son that Murdaugh was convicted of killing), which could have forced Murdaugh to pay up to $10 million in settlements to the families of the victims. On the same day that Murdaugh’s wife and son were murdered, the CFO of the law firm where Murdaugh practiced, Peters Murdaugh Parker Eltzroth and Detrick (PMPED), confronted Murdaugh about missing funds that should have been paid over a period of several years either to the law firm or to Murdaugh’s clients.

Why the alleged financial fraud was critical to the murder trial: In this largely circumstantial murder case (that is, there was limited physical evidence, video or otherwise, or recovered murder weapon), the financial pressures mattered, among other reasons, in terms of establishing motive. Murdaugh was wrestling with not one, but many financial issues – many of which we have not listed – leading to the time of the murders. The court was forced to try to make sense of the role the financial misdeeds played into the murders.

This is a case in which the court needed to balance several narratives, many crimes, and do so in a manner that did not overly burden or confuse the jury.

Murdaugh’s Alleged Financial Crimes Remain Open Matters

In the aftermath of the murder trial, Murdaugh is still facing approximately 90 individual criminal charges related to financial crimes to defraud his law firm and his clients of an estimated $8 to $10 million. Each of the financial charges carries with it separate sentences of up to five years each for the 54-year old Murdaugh, who is already serving two consecutive life terms for the murder of his family members.

From the perspective of a forensic accountant and fraud investigator, the fact that Murdaugh was able to carry out the alleged fraud for so long without being caught raises many questions. How did Murdaugh avoid detection from PMPED, banking institutions, and the clients from whom he allegedly stole proceeds from legal settlements?

Forge or “to” Forge?

As details emerged in trial, we learned that Murdaugh created a fictitious bank account linked to himself under the name “Forge,” which was designed to mimic Forge Consulting, LLC, a legitimate company used by lawyers in South Carolina to facilitate legal settlements. Using the fabricated Forge bank account, Murdaugh diverted settlement payments to himself that were intended to go to the clients of his law firm.

In addition to creating this fictitious bank account, Murdaugh worked with banks where he had personal ties and existing checking accounts, which enabled Murdaugh to launder funds. One banker in South Carolina, Russell Laffitte, has already been convicted for his role in conspiring with Murdaugh to carry out financial crimes. Laffitte is the former CEO of Palmetto State Bank who grew up next door to Murdaugh and family was closely intertwined with the Murdaugh family for generations.

In a recent interview, Laffitte stated that Murdaugh used his relationship with Laffitte to carry out the financial crimes because he knew he wouldn’t be questioned to the same extent as others. Laffitte also admitted that Murdaugh’s law firm was one of the bank’s largest customers and the bank wanted to help its client, which also included allowing unsecured loans to be taken out against client accounts for which Murdaugh served as the conservator.

A lawyer drowning in a teeming sea of financial burdens: Murdaugh’s partners at the well-known family-owned law firm confronted him on the same day the murders of his wife and son occurred. They questioned him about some $750,000 that went missing from a client’s account that was earmarked to pay firm fees. It is alleged that Murdaugh had diverted those sizable fees to himself.

Murdaugh has been disbarred and charged with schemes to allegedly defraud victims for over $8.5 million. His alleged victims include family friends, an undocumented immigrant, and a man in a car wreck. He has also been charged with money laundering, forgery, criminal conspiracy, computer crimes, and insurance fraud, amongst other charges.

In a different scheme, Murdaugh pledged his beach house as collateral for a bank loan. In this instance, the loan was funded but the paperwork was not completed until weeks later, which is an anomaly on its face. The paperwork was delayed because, as reported, his wife (just days before her death) would not agree to sign the beach house as collateral.

Legal Settlement Moneys Withheld from Clients

In trial testimony, Murdaugh also admitted to lying to his clients about legal settlements that were owed to them. Most notably, Murdaugh has been charged with absconding with millions of dollars that went missing from a multi-million dollar settlement involving the death of his housekeeper, who died in 2018 in an alleged “trip and fall” accident in the Murdaugh home. Court records showed that Murdaugh took out a homeowner’s insurance policy on that same property a month prior to the incident and convinced the late housekeeper’s family to sue him so they could receive a settlement through the policy. The housekeeper’s heirs trusted Murdaugh, who had known them for years, but were kept in the dark when the court approved a $4.3 million settlement that they were due to receive, which Murdaugh kept for himself.

Attorneys are generally required to hold client funds in what are called IOLTAs (interest on lawyer trust accounts). IOLTAs are trust accounts that are separate from the law firm’s operating accounts, and earn interest or dividends. IOLTAs require detailed and accurate record keeping and reconciliation, as they represent client funds that have been entrusted to the law firm.

Even though IOLTA accounts are not required in every state, each state has a mandatory system to protect attorney client funds, and, of special interest to our line of inquiry, banks have agreements with the bar association for the state(s) in which they operate.

Under oath from the stand, Murdaugh admitted that he stole money from PMPED for years before being confronted about having done so. There have been indications that the law firm, which was founded by Murdaugh’s great grandfather in 1910, had few financial controls to protect the firm against theft or embezzlement perpetrated by members of the firm. Like many small law firms, PMPED operated on the basis of trust with little in the way of verification. If Murdaugh told the law firm that a client settlement had been paid out, he was believed on his word.

Welcome to the types of cases our practice can be called on to investigate.

The alleged financial charges that Murdaugh faces for stealing from his clients and law firm are not in any manner isolated as the only instance of malfeasance involving IOLTAs and client trust fund accounts in the legal industry. Sadly, there have been similar instances in which attorneys or employees at law firms have embezzled funds that should have been held for their clients. Just last year, for example, a bookkeeper for a law firm in Boca Raton, Florida was charged with embezzling more than $3 million from the firm’s client trust accounts and transferring the funds to a personal bank account.

Unfortunately, these types of accounts are susceptible to fraud, as some law firms don’t have checks and balances in place and allow a single employee to authorize a disbursement without approval or verification. In the case of Murdaugh, he was questioned about some of the payments by the CFO but was able to use his stature within the firm to dismiss the concerns without repercussion. Generally speaking, attorneys are trusted by their clients and perceived as being guardians of the law. Murdaugh and his family were the law personified for many years, serving as the top prosecutor in Hampton County since the early 1900’s.

Robust Financial Controls Necessary for Even the Most Established Law Firms

In a high-profile investigation by members of Weaver’s team of the largest electric cooperative in the U.S. conducted, the investigation uncovered evidence of theft and money laundering through collusion with the law firm that represented the cooperative, which was one of the oldest and largest law firms in central Texas at that time. An elaborate scheme between the two entities to launder funds from the electric cooperative through the law firm, disguised as legal payments, was revealed and it had set in motion a domino-effect that led to the shuttering of the storied firm.

Watching the Murdaugh case unfold was yet another example that no matter their size, history or reputation, law firms are susceptible to fraud and theft if proper internal controls are not in place. Even the most storied law firms need to have financial controls in place to mitigate against the risk of such outlandish stories as the Murdaugh case.

If your law firm or business has concerns about fraud or questions about whether your financial controls are sufficient to deter theft, embezzlement and other white collar crime, Weaver’s Forensics and Litigations Services (FLS) team can help. Our team is comprised of seasoned professionals with years of experience investigating allegations of fraud or malfeasance. Contact us today.

©2023