Financial Crime Allegations Against Alex Murdaugh are a Lesson in Fraud Prevention for Small Businesses

The shocking story of Alex Murdaugh continues to unravel. While Murdaugh was convicted of the murder of his wife and son, he is also facing an unprecedented 99 charges in six different counties for allegedly defrauding his victims of approximately $8.7 million. Charges include fraud, attempted tax evasion, money laundering, embezzlement, breach of trust, obtaining property by false pretenses, computer crimes, forgery, insurance fraud, and conspiracy to commit insurance fraud.

But an important question for business owners is: how did Mr. Murdaugh allegedly manage to commit such a large and complex array of fraudulent transactions? Let's take a closer look. Keep in mind that these descriptions are, at this point, allegations that have not been proven in a court of law.

It all started in 2011 when Mr. Murdaugh requested a check for $325,000 from his law firm's client trust account with a memo "Settlement Proceeds: Natasha Thomas." The check was made out to Palmetto State Bank, allegedly used to purchase a money order payable to a family member, and converted into personal funds. This was just the beginning.

Perhaps emboldened by the lack of scrutiny regarding Natasha Thomas, in 2015, Murdaugh took his deceit to a new level by establishing Forge, a financial consulting company whose name was appropriated for his own benefit. He opened a bank account at Bank of America under the name "Richard A Murdaugh Sole Prop DBA Forge," allegedly using the account to divert funds from the law firm to himself.

One of the most talked-about financial crimes allegedly committed by Murdaugh relates to Gloria Satterfield, a longtime housekeeper he employed who tragically passed away after falling at his home in 2018. Mr. Murdaugh worked with Ms. Satterfield's sons to have them sue him and collect money from his homeowner's and personal liability insurance. An acquaintance filed legal action on the sons' behalf to collect the insurance money, and another friend served as the estate's personal representative. Mr. Fleming received a $4.3 million payout from the insurance companies for the Satterfield estate, allegedly directing some or all of the funds to Mr. Murdaugh.

His alleged actions highlight the importance of internal controls within an organization. His former partners allege that he "submitted false documentation to the firm and to clients that allowed him to funnel stolen funds into fraudulent bank accounts." As a descendant of the founders of the law firm, it was thought that he could be trusted, and his requests for checks to be written were not questioned.

The Murdaugh family reputation within the community and generations of successful lawyers that preceded him could also have enabled him to take advantage of his clients and the law firm. His well-known reputation gave his victims a sense of trust, which he allegedly used to defraud them.

Murdaugh may have also used his connections in the banking industry to commit financial crimes. He allegedly had help from banker and former Palmetto State Bank CEO Russell Laffitte, who became the court-appointed custodian for the settlement money of several of Mr. Murdaugh's underage clients. Mr. Laffitte was able to control the funds and loan both himself and Mr. Murdaugh money from the settlements. Mr. Laffitte was the first to be convicted in November 2022.

While Mr. Murdaugh is innocent until proven guilty, the allegations against him are shocking and have stunned the community. However, it highlights the importance of actions that can be taken by business owners to prevent fraud before it continues, something that is as important in family-run and community-based businesses as it is within the largest companies in the world.

UHY regularly works with clients to establish these controls, accounting for various vectors of fraudulent behavior. If you would like to discuss what UHY can do for you, please reach out to the Forensic group.