Alex Murdaugh: The Fraud Behind the Murders

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 wife and son, which prosecutors alleged was part of an effort to conceal financial crimes spanning over a decade.

While the trial centered on the murder charges against Murdaugh, much of the focus by the prosecution was on the financial frauds alleged to have been committed by Murdaugh and how those served as a motive for the murders. During the trial, the state prosecutor, Creighton Waters, painted a picture of a growing storm of financial pressures stemming from multiple alleged fraudulent schemes that were on the verge of being discovered. There was also 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 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.

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 leading to the time of the murders. The court was forced to try to make sense of the role the financial misdeeds played in the murders.

In this article, we will examine the fraud schemes in which Murdaugh was alleged to have been involved, based on information presented during and subsequent to his murder trial.

Diversion of Client Settlement Funds: The Fake Bank Account

Attorneys are generally required to hold client funds in IOLTAs (interest on lawyer trust accounts). IOLTAs are separate from the law firm’s operating accounts and earn interest or dividends on the funds held in the separate trust account. 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. 

As a personal injury attorney, Murdaugh would receive settlements and/or awards for his clients, which would be deposited in the PMPED IOLTA account. These funds were then divided into three parts: the first to cover litigation expenses, which would be paid to the law firm; the second part is the attorney’s agreed upon percentage of the settlement; and the third portion is the amount paid to the client. Clients could decide that, instead of receiving a lump sum for their settlement, they prefer to receive a structured annuity. Forge Consulting, LLC, is a company used by lawyers in South Carolina to facilitate legal settlements, including establishing annuities for their clients.

As details emerged in the murder trial, we learned that Murdaugh created a fictitious bank account linked to himself under the name “Forge.” Murdaugh would then deposit client funds into his own fake “Forge” account to set up an “annuity” for the client that he controlled.

In trial testimony, Murdaugh admitted to using this scheme and 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 multimillion-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. Murdaugh then convinced the victim’s family to hire Cory Fleming, a close friend of Murdaugh, to represent them as their attorney. 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. Murdaugh and Fleming allegedly kept the settlement funds.

Misappropriation of Attorney Fees

Murdaugh continued to escalate his fake “Forge” account scheme, which was finally discovered by PMPED when he sent the attorney fee portion of a settlement to his own fake “Forge” account. This was not only egregious, but it was also unusual and unexpected. Murdaugh was found out when his personal secretary was on vacation and an accounts payable department employee discovered the deposit of attorney fees to the “Forge” account.

In a separate scheme, Murdaugh worked on a personal injury case with his good friend, Chris Wilson, an attorney at a law firm that frequently worked on cases with Murdaugh. Wilson received the settlement funds for the case, and Murdaugh instructed him to send PMPED’s portion of the funds, which totaled $792,000, directly to Murdaugh. 

This scheme was discovered because Wilson’s firm sent the expense portion of the settlement to PMPED in a separate check, prompting PMPED CFO Jeanne Seckinger to ask for the attorney fees portion. Murdaugh insisted the funds were still in Wilson’s IOLTA account, while Wilson’s firm confirmed that the funds had been paid out from the account. Seckinger confronted Murdaugh about these fees just a few hours before the murders of Murdaugh’s wife and son.

Under oath from the stand, Murdaugh admitted that he stole money from PMPED for years before being confronted about having done so. How did he get away with it for so long? 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. When Murdaugh told the law firm that a client settlement had been paid out, he was taken at his word.

Murdaugh’s Close Ties with Local Banks

In addition to creating the fictitious bank account, Murdaugh was able to launder funds by working with banks with which he had personal ties and existing checking accounts. 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 the Murdaugh family. His family had had close ties with the Murdaughs for generations.

In an 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. The bank also allowed unsecured loans to be taken out against client accounts for which Murdaugh served as the conservator.

The Boat Wreck Lawsuit

Several years before the gruesome murder, Murdaugh’s underage son, Paul, was piloting Murdaugh’s boat while intoxicated. Paul and his friends suffered a boating accident, and 19-year-old Mallory Beach perished. The family of Mallory Beach filed a $10 million wrongful death lawsuit against Murdaugh, but he insisted he didn’t have anywhere near that amount to pay the Beach family. The Beach family’s attorney asked to subpoena Murdoch’s bank records. Murdaugh knew that this would lead to the discovery of the fake Forge account. The hearing about the subpoena was set for June 10, 2021, but was cancelled following the murders of Murdaugh’s wife and son on June 7, 2021.

The Fraud Triangle Applied to Murdaugh’s Alleged Financial Crimes

Pressure: The prosecution’s case during Murdaugh’s murder trial painted a clear picture for the jury of the immense financial pressure that Murdaugh was under. This included the need to repay funds to accounts from which he allegedly withdrew money that didn’t belong to him, as well as the possibility of having to pay the Beach family for the wrongful death lawsuit. Another source of pressure ties to Murdaugh admitting during the trial to being heavily addicted to opioids, taking as many as 60 pills a day.

Opportunity: Witnesses who testified during the trial spoke of the prominence of the Murdaugh family name in Hampton County, South Carolina, where a member of the Murdaugh family had served as the top prosecutor in the county for nearly 100 years. His family name allowed Alex Murdaugh to avoid scrutiny and questioning and to circumvent internal controls both within his law firm and in his dealings with local banks. Even Murdaugh’s clients hesitated to confront him because of his family’s status in the area.

Rationalization: While all the details are not yet known, there were indications during the trial that Murdaugh felt justified in taking money from his clients because he had earned the settlement payouts through his skill as an attorney and his family’s reputation.

Murdaugh’s Alleged Financial Crimes Remain Open Matters

In the aftermath of the murder trial, Murdaugh still faces some 90 individual criminal charges, including money laundering, forgery, criminal conspiracy, computer crimes and insurance fraud. It has been estimated that Murdaugh’s alleged financial crimes to defraud his law firm and clients total between $8 and 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.

Untangling the rampant fraud that took place over the course of many years is likely to continue to require significant time and effort by many parties. Looking back, it is impossible not to wonder how the story would have been told if Murdaugh’s fraudulent actions had been detected and addressed sooner.

About the authors:

Helga A. Zauner, CFE, CVA, MAFF, and Travis Casner, CFE, are managing directors with Weaver, a national accounting firm.

Helga is a testifying expert witness with more than 25 years of experience in litigation consulting, financial analysis, banking, research and teaching. She focuses on financial modelling and statistical techniques, with extensive experience in quantitative data analysis. In addition, Helga has built a successful practice as an expert witness in personal injury, divorce and commercial litigation.

Travis assists clients with the analysis and evaluation of the financial and accounting aspects of litigation and investigative matters. He has managed numerous financial forensics investigations involving allegations of fraud, financial mismanagement, financial misrepresentation, misuse of government funds, conflicts of interest, employee misconduct and theft, and other types of white-collar crime.