Murdaugh Case Study

This case study assignment is designed to have you apply the main topics from the readings and presentations assigned this week. Each week you will review the case and answer the questions posed based on the week’s content.

Review the Murdaugh Case Study and answer the questions below.

Before you begin, be sure to review the following resources:

Chapter 15: The Regulatory Process

Chapter 16: Regulating Competition — Antitrust Laws

Chapter 17: Financial and Securities Regulations

Chapter 18: Privacy and Consumer Protection

Please review the case studies and answer all the questions. Each case study response must be at least one double-spaced page, APA format.

Based on your understanding of these white-collar crimes, explain how PMPED could possibly escape being charged with similar charges.

How do you think PMPED could have possibly missed so many cases of fraud impacting clients?

What level of accountability do you think they have to clients of the firm represented by Murdaugh that were victims of the crimes in which he is charged?

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18-1
The Legal & Regulatory
Environment of Business 19e
Chapter 18
Privacy and Consumer Protection
Pagnattaro Cahoy Magid
Shedd
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18-2
Learning Objectives
• To analyze the Federal Trade Commission’s consumer protection
mission and why politics influence it
• To understand the general framework of consumer privacy
protection in the United States and evaluate how the law
protects consumers in particular contexts
• To understand the power of federal and state governments to
enforce laws against false and deceptive advertising
• To evaluate the provisions of various consumer and financial
protection laws concerning lending, credit reporting protection,
debt collection, and bankruptcy.
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18-3
Federal Trade Commission (FTC)
• Keeps competition free and fair, protects
consumers
– Trade practice regulation ensures fair competition
– Provides advisory opinion
– Issues industry guides
• Specifies FTC’s view of the legality of an industry’s trade
practices
– Prosecutes businesses for committing unfair or
deceptive trade practices
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18-4
Table 18.1 – Consumer Protection Laws the
FTC Administers
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18-5
FTC Penalties and Remedies
• Civil fines – $40,000 per violation in 2016, which is
adjusted for inflation (in 2019, it was $42,350)
– Assessed in situations for a violation of:
• Consent or cease and desist order
• Trade regulation rule
• Prior FTC orders against others
• Remedies
– Corrective advertising
– Rescission of contracts
– Refund of money or return of property
– Payment of damages to consumers
– Public notification of trade practice violations
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18-6
Politics, Economics and the Law: The FTC
Today
• Mission and enforcement of Section 5 varies
according to the economic orientation of the
president and Congress
• Allows the market to regulate advertising
• Determines what is deceptive or unfair, makes
new rules, and brings new cases
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18-7
Privacy – Limitations on Government
Intrusions
• Bill of Rights protections
• Privacy Act of 1974
– Places constraints on collection and usage of
information by the federal government
• Right to Financial Privacy Act of 1978
– Requires government agencies seeking depositor
records from financial institutions to notify the
depositors
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18-8
Case 18.1 – Electronic and Online
Privacy
• Case
– Carpenter v. United States
– 138 S.Ct. 2206 (2018)
– Supreme Court
• Issue
– How to apply the Fourth Amendment to the
ability to chronicle a person’s past movements
through the record of cell phone signals
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18-9
19-9
Traditional Business Privacy
• Common law privacy torts
– Intrusion on seclusion
– Public disclosure of private facts
• Examples of legislated privacy related to a
specific consumer transaction
– Health Insurance Portability and Accountability
Act (HIPAA)
– Video Privacy Protection Act (VPPA)
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18-10
Electronic and Online Privacy Protection
Electronic Communications Privacy Act
• Prevents the interception of electronic or wire communications by
unauthorized people
Stored Communications Act
• Prohibits unauthorized access or disclosure of stored communications
Children’s Online Privacy Protection Act
• Prohibits the collection of information on children under the age of 13
without a parent’s consent
Federal Trade Commission
• Scrutinize companies that make affirmative promises about privacy
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18-11
State Privacy Protection
• California has taken the lead on this front with
the passage of the California Consumer Privacy
Act (CCPA) in 2018.
• The law grants California consumers the right to
know what personal information is collected
about them as well as the right to delete it and
opt out of its sale to third parties.
• Applies to most businesses that conduct business
in California (even if located elsewhere).
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18-12
International Privacy Protection
• Data Protection Directive
– Mandates that companies can collect personal
information only with consent
• Information can be kept only until necessary, and
transferred to third parties only with permission
– Agreed to a safe harbor framework with the U.S.
– European Parliament voted in 2016 to replace
Data Protection Directive with the General Data
Protection Regulation (GDPR).
– The new regulation will take effect in 2018
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18-13
False Advertising – Determining Deception
Reasonable consumer
Express and implied claims
Misimpressions
Materiality
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18-14
Case 18.2 – False Advertising
• Case
– Lexmark International, Inc. v. Static Control
Components, Inc.
– 134 S.Ct. 1337 (2014)
– U.S. Supreme Court
• Issue
– Does the Lanham Act allow for Static Control to sue
Lexmark for stating its chips were illegal?
• The statute authorizes suit by “any person who believes that
he or she is likely to be damaged” by a defendant’s false
advertising
• Is this a violation of the act?
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18-15
Equal Credit Opportunity Act (ECOA)
• Prevents discrimination in credit extension
• Prohibits:
– Discrimination based on sex, marital status, race,
color, age, religion, national origin, or receipt of
welfare
– Discouraging a consumer from seeking credit
based on the categories
• Applies to all businesses which extend credit
regularly
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18-16
Equal Credit Opportunity Act (ECOA), II
• Responsibilities of a credit extender
– Must consider alimony, child support, and
maintenance payments as income
– Information on accounts used by both spouses must
be reported to third parties in their names
– Must provide specific reasons for credit denial
• Remedies and penalties
– Recovery of actual damages
– Punitive damages up to $10,000
– Attorney’s fees and legal costs
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18-17
Fair Credit Reporting Act (FCRA)
• Applies to anyone who prepares or uses a credit
report in connection with:
– Extending credit
– Selling insurance
– Hiring or firing an employee
• Consumer rights
– To be given the name of the agency making the report
– To require the agency to reveal the information given
in the report
– To correct the information in case of dispute
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18-18
Fair Credit Reporting Act (FCRA), II
• Investigative consumer reports
– Minimum of three days of advance notice must be
given to attain such report
• Credit reporting agencies must observe
reasonable procedures, or they will be liable
to consumers
• Penalties and remedies
– Violators are civilly liable to the injured consumer
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18-19
Case 18.3 – Punitive Damages (FCRA)
• Case
– Safeco Insurance Co. v. Burr
– 551 U.S. 47 (2007)
– U.S. Supreme Court
• Issue
– One applicant filed a lawsuit against Safeco and
two applicants sued GEICO under the Fair Credit
Reporting Act
• The companies had obtained credit reports on the
applicants without informing them
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18-20
19-20
Fair and Accurate Credit Transactions Act (FACT)
• Provides the right to dispute information on
credit reports
• Allows consumers to place fraud alerts on the
report to notify creditors of identity theft
• Permits consumer to get a free credit report
from national consumer reporting agencies
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18-21
Truth-in-Lending Act
• Covers transactions in which:
– Lender is in the business of extending credit
– Debtor is a natural person
– Finance charge can be imposed
– Credit is obtained for personal, family, household,
or agricultural purposes
• Applicable to loans secured by real estate and
personal property and unsecured loans
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18-22
Truth-in-Lending Act, II
• Full disclosure can be accomplished through:
– Finance charge
– Annual percentage rate
• Financial statement should include:
– Default or delinquency charges due to late
payment
– Description of property used as security
– Total amount to be financed
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18-23
Truth-in-Lending Act, III
• Penalties and remedies
– Civil liability provisions make creditors liable to
debtors for:
• Actual damages and an amount equal to twice the
finance charge
• Costs and attorney’s fees
– Debtors have the right to rescind or cancel certain
transactions for a period of three business days
– Allows consumer-borrowers to rescind their
mortgage agreements
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18-24
Truth-in-Lending Act, IV
• Trends
– Truth-in-Lending Simplification Act (1980)
• Eliminates statutory penalties based on technical
violations of the act
• Requires the government to issue model disclosure
forms
– Studies show that many involved in credit
extension fail to make required Truth-in-Lending
disclosures in their advertising
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18-25
Fair Debt Collection Practices Act (FDCPA)
Covers consumer
debt collection
Fair Debt
Collection
Practices Act
Protects against
certain debt
collection agency
techniques
Agency must be in
primary business of
consumer debt
collection for others
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18-26
Table 18.4 – FDCPA’s Restrictions on
Collection Methods of Collection Agencies
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18-27
Fair Debt Collection Practices Act (FDCPA)
Debtor must give
written notification
to agency to stop
Fair Debt
Collection
Practices Act
Remedies-debtor
can sue for actual
damages or $1,000
fine
Strict state laws
cannot be
preempted
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18-28
Consumer Financial Protection Act
• Created the Consumer Financial Protection
Bureau
– Authority overlaps that of the Federal Trade
Commission in administering consumer laws
– Makes and enforces rules regulating unfair,
deceptive or abusive acts toward consumers
– Applies to:
• Any covered person offering a consumer financial
product and to any business related with that person
• Banks and other financial businesses
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18-29
Bankruptcy
• Not subject to regulatory enforcement
• Proceedings
– Filing of a voluntary or involuntary petition
– Individual property can be:
• Liquidated under Chapter 7, debts are discharged
• Adjusted under Chapter 13
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18-30
Bankruptcy, II
• Trustee: Person elected by creditors to
represent the debtor’s estate
– Powers
• Affirm or disaffirm contracts with the debtor which are
yet to be performed
• Set aside fraudulent conveyances
• Void certain transfers of property by the debtor to
creditors
• Sue people who owe the debtor an obligation
• Set aside statutory liens against the debtor’s property
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18-31
Table 18.5 – Priority of Bankruptcy
Creditors
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18-32
Bankruptcy, III
• Discharge
– Secures a debtor of further obligation to the
creditor
– Debtor may fail to receive discharge if he or she
has:
• Concealed property or falsified books of record
• Refused to obey court orders
• Failed to explain any losses of assets
• Been discharged within the prior six years
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18-33
Bankruptcy, IV
Debts that may not be Discharged
• They include debts arising from:
– taxes,
– alimony and child support
– intentional torts (including fraud),
– breach of fiduciary duty,
– liabilities arising from drunken driving,
– government fines,
– debts not submitted to the trustee
– education loans which become due within five years
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18-34
Additional Statutes for Consumer
Protection
Fair Credit Billing Act
Electronic Fund Transfer Act
Consumer Product Safety Act
Magnuson-Moss Warranty Act
Federal Food, Drug and Cosmetic Act
Labeling laws
State consumer protection
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18-35
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16-1
The Legal & Regulatory
Environment of BusinessChapter
19e
16
Regulating Competition—
Antitrust Laws
Pagnattaro Cahoy Magid
Shedd
Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
16-2
Learning Objectives
• To understand the rationale for promoting a
competitive business environment and the
role of federal and state antitrust law in
preserving competition
• To evaluate how the Sherman Act scrutinizes
agreements that unreasonably restrain trade
• To analyze how the Sherman Act regulates
monopolization in business markets
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16-3
Learning Objectives, II
• To understand the penalties for violating the
Sherman Act and important exceptions to
liability
• To analyze how the Clayton Act expands the
national policy to preserve competition in the
marketplace
• To evaluate the powers of the Federal Trade
Commission in conjunction with and
independent from the Justice Department
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16-4
Introduction
Why study
antitrust law?
Applies
equally to
small and
large
businesses
Violations are
serious
•Fines
•Possible
imprisonment
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16-5
Historical Development of Antitrust
Laws
Sherman
Act
1890
Clayton
Act
Amended
1914
Federal Trade
Commission
Act
1936
1950
1980
1938
Amended
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16-6
Roles of Government
• Antitrust laws are enforced by:
– Federal government
• Enforcement procedures are applied through Department of
Justice and the FTC
– States
• Civil suits under Sherman act and injunction suits
• Enact interstate laws that cover both products and services
– Private parties
• Suits seeking monetary damages or sanction by antitrust
laws
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16-7
Pop Quiz
pop pop pop
QUIZQUIZQUIZ
The underlying purpose and objective of the
area of antitrust laws and regulations is
a. Social development
b.Environmental protection
c. Political advantage
d.Workable competition
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16-8
Sherman Act , Section 1—Agreements in
Restraint of Trade
• Prohibits contracts, combinations, and
conspiracies that restrict trade
– Price fixing: Pact among competitors to charge
the same price for their products
• Analyses are employed depending on the
relationship of the parties
– Horizontal restraints
– Vertical restraints
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16-9
Figure 16.1 – Horizontal Restraints
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16-10
Figure 16.2 – Vertical Restraints
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16-11
Analysis in Antitrust Law
• Rule of reason
– Contracts or conspiracies in restraint of trade were
illegal only if they constituted undue or
unreasonable restraints of trade
• Includes unreasonable attempts to monopolize
• Per se illegality: Agreements having malignant
effect on competition such that elaborate
inquiry is unnecessary
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16-12
Horizontal Price Fixing
• Agreement between competitors to fix prices
– Threatens free competition
• Antitrust laws intend to protect consumers
and not competitors
• Charges are not applicable when competitors
enter into a joint venture
• Extends to fixing of prices of services
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16-13
Case 16.1 – Horizontal Price Fixing
• Case
– Prosterman v. American Airlines, 747 Fed. Appx.
458 (9th Cir. 2018)
• Issue
– Whether airlines colluded to change one way fare
rules to eliminate cheaper flights by breaking a
trip into shorter multi-ticket bookings
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16-14
Table 16.1 – Examples of Horizontal PriceFixing Cases
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16-15
Vertical Price Fixing
• Attempts by manufacturers to control the
ultimate retail price for products
• Referred to as resale price maintenance
• Colgate doctrine
– Manufacturers announce product prices and refuse to
deal with those who fail to comply
• Not a per se violation of the Sherman act
• Vertical and territorial arrangements within
channels of distribution are analyzed under rule
of reason
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16-16
Indirect Price Fixing
• Indirect attempts to control prices to:
– Protect a channel of distribution or a marketing
system
– Keep marginal competitors in business to avoid
becoming a monopoly
• Antitrust laws warn competitors to stay out of
illegal cooperation
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16-17
Territorial Agreements
Horizontal
territorial
agreement
Vertical
territorial
agreement
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16-18
Concerted Activities
• Attempt by competitors to share activities or
join together in the performance of a function
• Beneficial to the society
• Joint efforts can reduce costs and improve
efficiency, with direct benefit to the public
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16-19
Provisions of National Cooperative
Production Amendment Act
• Joint production ventures will be subject to the
rule of reason analysis
• Joint venture must notify the Justice Department
and the FTC of its plans to engage in joint
activities
• Plaintiff can be awarded actual damages plus
costs in a private civil antitrust action brought
against the joint venture
– The joint venture will not be subject to triple damages
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16-20
Case 16.2 – Concerted Activities
• Case
– American Needle, Inc. v. National Football League
– 560 U.S. 183 (2010)
– U.S. Supreme Court
• Issue
– NFLP granted nonexclusive licenses to American
Needle, Inc
• It entered into a 10-year agreement with Reebok in 2000,
and the license awarded to American Needle was not
renewed. Have NFLP and Reebok violated sections 1 and 2 of
the Sherman Act?
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16-21
Sherman Act, Section 2—Monopolization
• Regulates monopoly
– Attempts to monopolize any part of interstate or
foreign commerce
• Violation requires plaintiff to prove that the
defendant:
– Had monopoly power
– Willfully maintained that power
• Monopoly must be deliberatively acquired to
be illegal
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16-22
Sherman Act, Section 2—Monopolization,
II
• Predatory conduct
– Seeking to advance market share by injuring
competitors by means other than improved
performance
– Predatory pricing: Selling at lower costs to drive
out competition
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16-23
Case 16.3 – Monopoly
• Case
– Apple, Inc. v. Pepper
– 139 S.Ct. 1514 (2019)
– Supreme Court
• Issue
– Does Apple monopolize the iPhone app market,
increasing consumer prices?
• Apple claimed the App store is merely a marketplace
and prices are set by app producers
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16-24
Sherman Act—Sanctions
Enjoined By Courts
Triple Damages
Subject To
Fines/Imprisonment
Property Subject To
Seizure & Forfeiture
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16-25
Exemptions to Sherman Act
• Insurance companies
• Farmers’ cooperatives
• Shipping
• Milk marketing
• Investment companies
• Activities required by state law
• Legitimate activities of labor unions
• Parker v. Brown case (state action exemption)
• Noerr-Pennington doctrine
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16-26
Pop Quiz, II
pop pop pop
QUIZQUIZQUIZ
Firms indicted under the Sherman Act
may choose to resolve the criminal suit
with a plea of nolo contendere.
How might this no contest plea benefit
the company?
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16-27
Pop Quiz, III
pop pop pop
QUIZQUIZQUIZ
Normal activities of labor unions are
not exempt from coverage under the
Sherman Act.
a. True
b.False
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16-28
Clayton Act
• Outlawed practices that substantially lessened
competition or created a monopoly
– Eased burden of proof
• Justice Department can obtain injunctions to
prevent violations
• Individuals or organizations injured by a violation
could obtain:
– Injunctive relief
– Triple damages, court costs and reasonable attorney’s
fees
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16-29
Clayton Act – Price Discrimination
• Section 2 – Unlawful for a seller to discriminate in
the price charged to different purchasers
• Robinson-Patman amendment
– Amendment to Section 2 that ensures equality of
price to all customers of a seller of commodities for
resale
– Extends only to interstate transactions of goods
– Provides FTC the jurisdiction and authority to regulate
quantity discounts
– Prohibits predatory pricing
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16-30
Robinson-Patman Amendment – Exceptions
Good-faith transactions
Changing conditions defense
Cost justification defense
Good-faith meeting-of-competition
defense
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16-31
Figure 16.4 – Analysis of Pricing
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16-32
Clayton Act – Special Arrangements
▪ Tying Contract
▪Full line forcing
▪Reciprocal Dealing
▪ Exclusive Dealing
▪ Requirements Contract
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16-33
Clayton Act – Mergers and Acquisitions
• Section 7 makes certain mergers and
acquisitions illegal
• Horizontal merger
• Market extension merger
– Product extension
– Geographic extension
• Vertical merger
• Conglomerate merger
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16-34
Clayton Act – Mergers and Acquisitions, II
• Department of Justice and the FTC have the
authority to challenge mergers
• Impact of proposed merger is determined by
the Herfindahl-Hirschman Index (HHI)
– HHI: Measure of market concentration
• Premerger notification
– Parties to a merger must notify the DOJ and FTC
before the merger
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16-35
Federal Trade Commission Act
• Wheeler-Lea amendment
– Added that unfair or deceptive practices in
commerce are unlawful under Section 5
• FTC determines what methods, acts or
practices constitute unfair competition
– Function – To prevent illegal business practices
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16-36
International Antitrust Enforcement
• Foreign companies must comply with U.S.
antitrust law if their activities have a
substantial impact on U.S. commerce
• U.S. companies doing business in other
countries must comply with their antitrust
laws
– European commission regulates anticompetitive
activity in European Union nations
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16-37
Alex Murdaugh was the benefactor of being born into a South Carolina legal dynasty. For many years, he
rose to local notoriety due to his family’s legacy and his own legal conquests. In fact, Murdaugh was a
partner at the law firm on which his great grandfather founded practicing alongside his father and
brother. From the outside, he had a picture-perfect life – a wife, two sons, a successful career, multiple
homes, wealthy lifestyle, etc.
While there had been many questionable events over the years, the Murdaugh family had remained
unscathed. However, a crack to the foundation of the Murdaugh’s occurred in 2019 which put his family
in the local spotlight, and they faced scrutiny like never before. Murdaugh underage son, Paul, had a
deadly boating crash that occurred while he was heavily intoxicated. Paul was charged criminally, and
the family faced a civil suit for the accident. As a result, the community began to report prior
questionable acts of the family which included an accident that resulted in the death of their maid,
unpaid client settlements of clients, and embezzlement of funds from his law firm.
As the scrutiny heightened and legal proceedings were eminent, Murdaugh’s wife, Maggie, and his son,
Paul, were brutally murdered on the family’s hunting property. As the investigation into the deaths was
initiated, the actions of Murdaugh hit a bizarre level. He plotted his own murder in order to allow his
surviving son, Buster, to collect on a life insurance policy. However, the plot failed miserably, raising
more questions. Murdaugh immediately checked into a rehabilitation facility and admitted to a severe
addiction to opioids. The wheels of justice were in motion for Murdaugh at this point and there was no
stopping the momentum.
Murdaugh was charged, tried and found guilty of the murders of his wife and son. While likely one of
the more publicized cases, this is just one of many legal cases against Murdaugh. In the next five weeks,
we are going to review some of the other cases that are still looming for Murdaugh related to business
law.
Ethics and the law can be intertwined at a minimum standard. Many times, ethics are considered a
higher standard of operating than the law requires. It is a requirement that an organization abide by the
laws, but it is a duty to establish ethical standards in which they, as an entity and their employees, are
held accountable.
During this review of the Alex Murdaugh legal saga, we will look at not only the legal quandary that he
currently faces but also the ethical failures that occurred over time that was not questioned until these
legal woes became too big to turn a blind eye any longer.
When an attorney is sworn into the South Carolina Bar, they take an oath of their responsibilities. Two of
the excerpts of their ethical standards and duties is noted below:
“To my clients, I pledge faithfulness, competence, diligence, good judgment and prompt communication;
and
I will respect and preserve inviolate the confidences of my client, and will accept no compensation in
connection with a client’s business except from the client or with the client’s knowledge and approval;”
Based on this oath, Murdaugh owed a legal and ethical duty to his client. The law firm in which
Murdaugh was associated also had a legal and ethical duty to provide oversight of his actions as he was
an acting fiduciary of the firm. However, both Murdaugh and his law firm failed his clients to ensure
they were represented in an ethical manner. As a result of his ethical violations, Murdaugh has been
disbarred from the South Carolina bar. To mitigate their damages, the law firm in which Murdaugh
worked has sued him for his unethical practices also. Below is a summary of the cases pending against
him.
Alex Murdaugh, the disbarred South Carolina lawyer convicted of murdering his wife and son,
was indicted Wednesday on more than 20 counts of orchestrating financial schemes that
allegedly stole millions of dollars from his clients over 16 years.
Among the charges is that Murdaugh defrauded the estate of Gloria Satterfield, the housekeeper
who died at his property in 2018, out of almost $3.5 million, prosecutors say.
The 22-count indictment unsealed by the U.S. attorney’s office for the District of South Carolina
says that Murdaugh, 54, “engaged in three different schemes to obtain money and property
from his personal injury clients” while he was a practicing attorney in Hampton, S.C.
Murdaugh, who was sentenced to life in prison without parole in March for the 2021 murders of
his wife, Maggie, 52, and son Paul, 22, has been charged with counts of conspiracy to commit
wire fraud and bank fraud, and committing bank fraud, wire fraud and money laundering,
according to prosecutors.
Murdaugh admitted during his murder trial that he had created a web of financial crimes that
bilked millions from vulnerable clients of his law practice, saying: “I believe the people I had stole
money from for all of those years trusted me.” Murdaugh, the patriarch of a South Carolina legal
dynasty whose case drew international attention, apologized several times during his testimony
for swindling clients among whom were teenage girls and a quadriplegic man.
“Trust in our legal system begins with trust in its lawyers,” U.S. Attorney Adair F. Boroughs said
in a news release announcing the charges. “South Carolinians turn to lawyers when they are at
their most vulnerable, and in our state, those who abuse the public’s trust and enrich themselves
by fraud, theft and self-dealing will be prosecuted to the fullest extent of the law.”
Dick Harpootlian and Jim Griffin, Murdaugh’s attorneys, said in a statement to The Washington
Post that their client “has been cooperating with the United States Attorneys’ Office and federal
agencies in their investigation of a broad range of activities.”
“We anticipate that the charges brought today will be quickly resolved without a trial,” the
attorneys said.
If convicted of all of the federal charges, Murdaugh faces up to 150 years added on to his life
sentence and fines up to $4.75 million.
Meanwhile, Murdaugh is expected to be deposed in the wrongful-death lawsuit brought against
him by the family of Mallory Beach, a 19-year-old who was killed in a 2019 drunken-boating
accident involving Murdaugh’s boat and his late son, Paul Murdaugh. A South Carolina judge
filed a consent order Monday “granting leave for parties to conduct the deposition” of Alex
Murdaugh, which could take place virtually or in person. The lawsuit names other parties,
including Murdaugh’s surviving son, Buster.
Prosecutors in South Carolina say Murdaugh engaged in three separate schemes to bilk his
clients of money and property.
In the first, Murdaugh devised “a scheme to defraud and to obtain money by means of false
pretenses” between at least September 2005 and September 2021, according to the indictment.
He allegedly routed and redirected his clients’ settlement funds to personally enrich himself in
several ways, including by sending settlement funds to his accounts without proper disclosure,
and collecting attorney’s fees on fake or nonexistent annuities.
In the second alleged scheme, from around July 2011 until at least October 2021, Murdaugh
conspired with his banker, Russell Laffitte, to commit wire fraud and bank fraud, prosecutors say.
Laffitte collected more than $350,000 in fees in his role as personal representative or conservator
for numerous personal injury clients of Murdaugh’s.
“As part of the scheme, the indictment alleges Murdaugh directed law firm employees to make
settlement checks payable to ‘Palmetto State Bank.’ The checks were then delivered to Laffitte,
whom Murdaugh directed to use the settlement funds for Murdaugh’s benefit,” prosecutors
wrote. “The funds were used to pay off Murdaugh’s personal loans and for personal expenses
and cash withdrawals.”
Lafitte was convicted in November on six federal charges, including conspiracy to commit wire
and bank fraud, and committing bank fraud and wire fraud. He is awaiting sentencing.
In the third alleged scheme, prosecutors say Murdaugh set up a bank account presented as a
legitimate corporation for structuring insurance settlements between May 2017 and July 2021.
The indictment says Murdaugh funneled stolen personal injury settlements through an account
named “fake Forge” to conceal his fraud efforts.
It was during this scheme, prosecutors say, that Murdaugh defrauded Satterfield’s estate and his
insurance carriers after she died. Murdaugh recommended that the housekeeper’s estate hire an
attorney to represent the estate and file a claim against Murdaugh to collect from his
homeowner’s insurance policies. Murdaugh’s insurance companies settled the estate’s claim for
$505,000 and $3.8 million, the indictment says. Then, Murdaugh and the attorney allegedly
“conspired to siphon settlement funds, disguised as ‘prosecution expenses,’ for their own
personal enrichment.”
“The indictment further alleges that Murdaugh directed the Beaufort attorney to draft checks
totaling $3,483,431.95 made payable to ‘Forge,’” prosecutors say. “Murdaugh then deposited
the checks into his ‘fake Forge’ account and used the funds for his own personal enrichment. The
estate did not receive any of the settlement funds.”
Eric S. Bland, the Satterfield family’s attorney, tweeted that the federal charges against
Murdaugh amounted to “a great day for justice in South Carolina.”
“While it is said that Lady Justice is blind, she is not a sucker,” he wrote. “Bottom Line — Cant
run or hide from justice.”
Murdaugh claimed during his trial that bad land deals and an addiction to opiate pills fueled a decadelong cycle of borrowing and spending by him that battered his family’s finances. His attorneys
have framed his alleged financial shadiness in recent court filings as being representative of “a bleak and
dispiriting story of a man brought to his knees by a crippling drug addiction, who also had the financial
means and knowledge to effect great financial harm upon others to feed that addiction.”
Contracts are an important tool in businesses and are the foundation of a lawyer’s relationship with their
clients. Contracts ensure that all parties understand and have confirmation of what they are agreeing to,
and to ensure there is no room for misrepresentation. Additionally, because the terms are outlined
clearly, there is legal accountability if a contract is not performed by one or more of the parties.
Attorneys generally enter into contracts with each of their clients as a representative of their firm.
Additionally, the attorneys also enter into contracts with their firms to agree to the terms of employment
and the expectations of how their cases are to be handled and managed as a member of the firm. This
was no different for Alex Murdaugh; he had a contractual obligation to each of his clients as well as his
firm.
The law firm that the prominent Murdaugh family helped start is now suing Alex Murdaugh.
In court documents filed Tuesday in Colleton County, the PMPED law firm is suing Murdaugh for
actual damages “together with punitive damages in an appropriate amount” after claiming
Murdaugh used money from clients and the firm for his own personal use.
A specific dollar amount was not mentioned.
According to the court filing, Murdaugh was covertly stealing the funds and putting them into a
Bank of America account in the name of “Alexander Murdaugh d/b/a Forge,” which was a
fictitious entity.
The lawsuit alleges Murdaugh put the account in that name to avoid detection, knowing the
longstanding relationship the firm had with Forge Consulting LLC in Columbia.
According to the court documents, the firm began investigating on September 2 after finding a
suspicious check on Murdaugh’s desk.
It was the following day that Murdaugh was confronted with the information PMPED learned,
and he admitted to taking the funds. The lawsuit reads that Murdaugh was asked to resign, and
he submitted his resignation that afternoon.
PMPED says it has reimbursed all client trust accounts who have suffered a loss due to
Murdaugh’s actions. But the firm says it may learn about additional losses.
“As a result of Alex Murdaugh’s conduct in breach of the contract, PMPED has suffered
damages,” the lawsuit reads. “These include but are not limited to monies paid by PMPED to
protect clients’ interests and to fully discover the improper actions of the Defendant as well as
any additional monies that may have to be paid in the future for Alex Murdaugh’s conduct.”
Jim Griffin, one of Alex Murdaugh’s lawyers, responded to the lawsuit on Wednesday.
“This is a very sad development,” he said. “Alex holds every member of the Peters, Murdaugh,
Parker, Eltzroth, Detrick law firm in very high esteem. He has pledged his full cooperation to the
firm.”
As you can see Alex’s firm has now initiated action for his breach of contract to the firm which created
significant liability for them to each of Murdaugh’s defrauded clients.
Peters, Murdaugh, Parker, Eltzroth, and Detrick, PA (PMPED) was the law firm in which Murdaugh was a
partner and his great grandfather founded. The firm was set up a Professional Association (PA) business
structure. A Professional Association is a business entity that is available to organizations offering
professional services like accounting and law firms. Professional Associations have all of the benefits of a
Limited Liability Corporation (LLC), but it is taxed as a corporation.
When a company has employees that act on their behalf or during the normal course of business to
conduct their job duties, the employer becomes a respondeat superior. This doctrine states an
employer is responsible for the actions of its employees performed during the course of their
employment.
This is a key reason for companies (or firms) to develop and implement policies and train employees on
the expectations and requirements. It is unknown what, if any, policies existed at PMPED or if attorneys
or employees received any training.
Referenced Articles:
https://www.washingtonpost.com/nation/2023/05/24/alex-murdaugh-federal-charges-stealing-millions/
https://www.greenvilleonline.com/story/news/2022/07/13/alex-murdaugh-news-officially-disbarred-scsupreme-court/10044376002/
https://www.cnn.com/2021/10/06/us/alex-murdaugh-sued-former-law-firm/index.html
https://www.wjcl.com/article/alex-murdaugh-pmped-lawsuit/37886606
https://abc7chicago.com/alex-murdaugh-fraud-case-news/12938583/