Ex-Palmetto State Bank CEO Laffitte indicted on federal fraud charges

A federal grand jury has indicted former Palmetto State Bank chief executive Russell Laffitte on charges alleging that the veteran banker meddled with customer accounts to help his friend, disbarred attorney Alex Murdaugh, steal from their mutual clients.

The five-count indictment charges Laffitte with conspiracy to commit wire fraud and bank fraud, bank fraud, wire fraud, and misapplication of bank funds - an array of alleged criminality that began in July 2011 and carried on for a decade. The charges carry up to 30 years in prison.

The July 20 indictment represents the first charges federal authorities have filed in their secretive probe of the alleged financial crimes of Alex Murdaugh, a prominent Hampton County lawyer who earlier this month was charged with two counts of murder in the June 2021 fatal shootings of his wife and son.

The new indictment echoes felony charges that state investigators brought against Laffitte on May 4. The state grand jury accused the 51-year-old banker of helping Murdaugh steal more than $1.8 million from accounts he controlled at the Hampton-based bank, including to pay back loans Laffitte had issued Murdaugh from a client's account.

But federal charging documents reveal new details about how Laffitte and Murdaugh's alleged financial conspiracies worked and how crippling money problems might have motivated a prominent, well-respected trial attorney to begin stealing vast sums from his own clients.

The indictment details Laffitte's personal involvement in Murdaugh's alleged theft. Charging documents reveal several cases in which Laffitte allegedly drained nearly $2 million in settlement funds from Murdaugh's legal clients. He then used a flurry of wire transfers, money orders and deposits to repay loans and route the money to relatives, associates and personal bank accounts of Murdaugh and Laffitte, the indictment states.

Bart Daniel, one of Russell Laffitte's defense attorneys, told The Post and Courier, "We intend to vigorously fight the charges at trial."

Efforts to reach Palmetto State Bank's attorney for comment were unsuccessful.

A close relationship

The federal grand jury alleged Laffitte was Murdaugh's personal contact at Palmetto State Bank, handling nearly all of his banking needs. Laffitte served as the personal representative or conservator for several of Murdaugh's clients and collected nearly $392,000 in fees for safeguarding the high-dollar settlements or judgments they won in court, charging documents state.

But Laffitte did anything but protect his customers' money, the grand jury alleged. Instead, charging documents indicate:

Laffitte loaned Murdaugh nearly $1 million from their accounts and loaned himself another $355,000. Laffitte knew Murdaugh was using the money to cover hundreds of thousands of dollars in overdraft charges on his account, making the loans risky investments. Laffitte also knew Murdaugh was stealing heaps of money from his clients in order to pay back those loans - and helped him do it.

Laffitte also misspent Palmetto State Bank funds, charging documents allege. On Oct. 28, and without the bank's permission, Laffitte sent $680,000 to a Hampton law firm to pay back money he had fraudulently transferred to Murdaugh, according to the indictment.

In July 2021, Laffitte misused $750,000 in bank funds by extending Murdaugh an unsecured commercial loan to "pay an attorney and to cover hundreds of thousands of dollars" in overdraft charges on Murdaugh's account, the indictment states.

More charges are expected as state and federal investigators continue to untangle a decadelong web of transactions in which Murdaugh allegedly pilfered more than $8 million from legal settlements owed to his clients and associates.

Laffitte was long suspected to be a target of the federal Murdaugh investigation.

In January, his own relatives on the Palmetto State Bank board fired him as CEO as law enforcement agents probed Laffitte's dealings with Murdaugh.

Laffitte hired two pricey defense attorneys, former prosecutors Daniel and Matt Austin, to represent him in the investigation. They insisted Laffitte was no co-conspirator of Murdaugh, but rather had been deceived by the since-disgraced lawyer.

Laffitte has been on house arrest since his May 6 bond hearing on the state charges, when Circuit Judge Alison Lee released him from jail on a $1 million surety bond.

A bond hearing has not been announced on his new charges.

'Personal slush fund'

Laffitte's schemes date back to July 2011, when he extended himself the first of eight loans totaling $350,000 from the conservatorship account of a young girl, charging documents state. Months later, he would begin loaning Murdaugh money from the same account - ultimately issuing the lawyer 14 loans worth nearly $990,000. Murdaugh needed the money to fill five-digit overdrafts on his personal accounts, the charging documents indicate.

According to the indictment, Laffitte never sought formal permission for the loans and failed to notify his client or probate court of their existence.

But when his client turned 18 and Laffitte had to pay back the loans, he didn't have the money, the indictment states. Laffitte had to take out a $245,000 loan to make her account whole, the charges state. Laffitte is still paying off that loan.

Murdaugh stole more than $663,000 from at least four of his own clients to pay back his loans from the conservatorship account, charging documents state.

In a written statement released shortly after Laffitte's indictment was unsealed, trial attorneys Eric Bland and Ronnie Richter said that conservatorship belonged to their clients, Hannah Plyler and Alania Spohn. The money stemmed from a legal settlement Murdaugh won for the pair of sisters after their mother and brother were killed in 2005 auto accident.

"The girls viewed Russ Laffitte as a father figure and trusted him to navigate the waters ahead for them and to guide them," the lawyers wrote. "It is difficult to express the emotions and disappointment of learning years later that those who had sworn to protect the Plylers chose instead to prey upon them. Russ Laffitte and Alex Murdaugh plundered their conservator accounts and treated it like their own personal slush fund."

In other cases, Laffitte directly facilitated the theft of mounds of money owed to Murdaugh's clients, the grand jury alleged.

At Murdaugh's direction, the banker misdirected a $1.3 million legal settlement meant for a single client, charging documents state. Among a series of transfers, Laffitte used $482,000 of the settlement to pay back loans from the Plylers' conservatorship account, sent $75,000 to Murdaugh's father, directed $7,500 to Murdaugh's wife and deposited nearly $251,000 in Murdaugh's personal accounts, the indictment alleges.

In another case, Laffitte divvied up nearly $635,000 owed in settlements to a pair of victims who were severely injured in a 2009 car crash, charging documents state. The banker sent $10,000 to Murdaugh's wife, paid more than $4,000 toward Murdaugh's boat loan, directed $100,000 to Laffitte's father to pay off a personal loan and spent more than $50,000 to pay back loans from the Plylers' conservatorship account, the indictment states.

Birds of a feather

Laffitte and Murdaugh share more than their alleged financial schemes. Both grew up in wealthy families that wielded great social and political influence in the rural southern corner of South Carolina. And both went into the family business.

Murdaugh's father, grandfather and great-grandfather served as the elected solicitor of the 14th Judicial Circuit, a five-county region covering the state's swampy southern tip. The family also ran the high-powered Hampton-based Peters, Murdaugh, Parker, Eltzroth, Detrick law firm in Hampton.

Murdaugh was a badge-carrying volunteer prosecutor for the solicitor's office and worked as a trial attorney at PMPED.

Laffitte, meanwhile, went to work at the century-old bank his family purchased for $250,000 in 1955. He joined the bank as a teller in 1997, won a promotion to chief operating officer in 2015 and became CEO in 2020.

His father had led Palmetto State Bank for decades, helping to expand it into a Lowcountry institution with offices in three counties and more than $700 million in assets. Other relatives ran branches of the bank and sat on its board. They rose to prominence within S.C. banking circles, winning tours as chairmen of trade groups like the S.C. Bankers Association and Independent Banks of South Carolina.

One of South Carolina's oldest state-chartered banks, Palmetto State Bank had enjoyed a sterling reputation until last fall, when it was dragged into the Murdaugh saga.

Another of the bank's executives, Vice President Chad Westendorf, was named as a defendant in a lawsuit alleging Murdaugh had stolen millions from a pair of settlements owed to the sons of his late housekeeper.

According to that September lawsuit, Murdaugh had advised the sons of housekeeper Gloria Satterfield to bring a wrongful death claim against him after her death from a 2018 fall at his family's hunting lodge. Then Murdaugh recruited Westendorf to serve as the sons' personal representative and watch over any money they received from the claim.

But Westendorf didn't do that - not well, at least. Despite accepting a $30,000 fee as personal representative, he neglected to tell the Satterfield family that their attorney later won some $4.3 million for them in settlements from Murdaugh's insurance carriers.

On Westendorf's watch, Murdaugh ultimately stole more than $3 million from those settlements, prosecutors have charged.

In a February deposition that has fueled scrutiny of Palmetto State Bank's practices, Westendorf testified that he never met or interacted with Satterfield's sons during that case. He also swore he didn't know specifics about their wrongful death claim or his responsibilities as the estate's personal representative.

Palmetto State Bank denied any wrongdoing in the matter, claiming Westendorf represented the Satterfield estate in a personal capacity. But it then reached an undisclosed settlement with Satterfield's family in November. Westendorf was dismissed as a defendant after reimbursing the Satterfield family his $30,000 fee.