Laffitte defends loans he approved to Murdaugh as prosecutor grills him in bank fraud trial

Russell Laffitte began Monday morning on the witness stand under withering cross-examination by the lead federal prosecutor in his federal bank fraud trial.

The former small-town banking CEO admitted to prosecutor Emily Limehouse that he approved a series of moves initiated by disgraced attorney Alex Murdaugh to take money out of the accounts of Murdaugh’s clients to pay off Murdaugh’s personal debts.

In a two-hour grilling by lead prosecutor Limehouse, former Palmetto State Bank CEO Laffitte admitted over the years that he moved hundreds of thousands of dollars to cover Murdaugh’s substantial frequent overdrafts from his checking account, gave Murdaugh nearly $1 million in low-interest unsecured loans from conservatorships under his steward ships and used the conservatorships to give himself hundreds of thousands of dollars worth of low-interest loans.

Laffitte was the ninth and final witness for the defense. He spent three hours on the witness stand Friday, undergoing friendly questioning from one of his attorneys, Matt Austin, about the dozens of financial transactions he made over the years.

The defense is trying to show that Laffitte was an unwitting dupe of Murdaugh, whom he trusted because of his and his former law firm’s long relationship with the bank.

The prosecution is trying to convince the jury that Laffitte was Murdaugh’s willing and knowing accomplice in a conspiracy that lasted 11 years until the bank fired Laffitte in January. The charges are outlined in a six-count indictment against Laffitte, alleging bank and wire fraud and the misappropriation of bank funds.

Questioned about loans

Laffitte told Limehouse Monday that he knew a large loan he approved to Murdaugh for “farming” purposes would actually go to pay off loans Murdaugh made from the account of Hannah Plyler, then underage.

Plyler was injured in a car crash and received a settlement through Murdaugh’s Hampton County law firm.

“I was assuming that, yes,” Laffitte said of the loan.

“You knew, because you’re the one who did it,” Limehouse said.

Laffitte said he unknowingly set up a conservator account for client Natarsha Thomas at Murdaugh’s direction even though Thomas had already turned 18 and was no longer required by law to have a conservator to oversee her account. The document Laffitte signed misrepresented Thomas’ age, saying that she was only 15.

Laffitte said the document was filled out by Murdaugh, and Laffitte depended on Murdaugh’s guidance in setting up the account.

“I had not checked her driver’s license or ID,” he said.

In another case, Laffitte was operating as a conservator for an account for another settlement recipient, Hakeem Pinckney, after Pinckney had died.

Laffitte said repeatedly Monday that he relied on Murdaugh’s direction on how to disburse money, including when Murdaugh made out checks to Palmetto State Bank instead of the individual conservator accounts. But Limehouse stressed that it was Laffitte who moved all the checks Murdaugh asked him to as a banker at Palmetto State Bank.

Laffitte acknowledged the loans to Murdaugh were unsecured, as Murdaugh was more than $100,000 overdrawn at the bank at the time. Laffitte testified that unsecured loans were not uncommon for the bank.

At one point, Laffitte said he depended on Murdaugh’s direction “as their attorney” when making money moves from the account.

“You can’t be relying on him as conservator unless you know those funds belonged to Natarsha Thomas and Hakeem Pinckney,” Limehouse said, to which Laffitte said he misspoke.

Limehouse pressed Laffitte on the stated reason for a $750,000 loan Laffitte made to Murdaugh ostensibly to cover the cost of renovations to an Edisto Beach house that was assessed to be worth less than the cost of the loan.

Laffitte said the loan was also intended to cover other expenses. But Limehouse said Laffitte represented the loan to the bank board of directors as only covering beach house renovations. Laffitte said that was not meant to hide the purpose of the loan but was instead normal operating procedure with the board.

“We don’t talk about how the funds are spent with the board,” Laffitte said.

The other spending was not mentioned in emails at the time because, “We had been instructed by our attorneys to keep our emails short,” he said.

Limehouse pointed out that Laffitte took loans from Plyler’s account to pay off loans he received from another bank, credit card bills and other personal expenses, as well as giving Murdaugh $1 million to pay off his loans. Laffitte made $450,000 in fees overseeing Murdaugh’s clients accounts, and “in exchange you let Alex Murdaugh use that money however he wanted,” Limehouse said.

“It was not an exchange, it was a business decision,” Laffitte said. “If he needed money, I made the decision whether or not to pay them.”

‘I just didn’t want to pay taxes on it’

Under questioning by Limehouse, Laffitte also admitted that he failed to pay federal income taxes for years on hundreds of thousands of dollars in fees that he made overseeing money in conservatorships for Murdaugh’s former clients, who came into large sums of money in legal settlements.

Not only did Laffitte earn fees from the conservatorships, he repeatedly allowed Murdaugh to borrow money out of the conservatorships, he testified.

Limehouse also pointed out that Laffitte only paid income taxes on the fees in 2021, after the FBI, the State Law Enforcement Division and his bank began asking questions about the fees.

Laffitte told the jury he paid his bank taxes after talking with his unidentified accountant, not because of any questions from law enforcement, who urged him to do so.

“I just didn’t want to pay taxes on it,” he said, acknowledging that it “was stupid.”

Limehouse repeatedly asked Laffitte if he knew that some of the money Murduagh was asking him to transfer into his own account and to Murdaugh’s relatives and associates was stolen money.

“I didn’t recognize that they were stolen funds,” Laffitte replied repeatedly.

Laffitte also said when asked to sign forms disbursing money to various parties by Murdaugh that he didn’t always look at the specific lines on the forms directing where the money was going.

And when Murdaugh would give him settlement checks with the name of an individual conservatorship on it, Laffitte said he didn’t put the money in the conservatorship but divided up the money and wrote checks or money orders to other parties.

Asked by Limehouse why he (Laffitte) did not ask questions about why Murdaugh was directing him to divide up the checks and send the money to other parties instead of the person written on the check memo line, Laffitte said he didn’t pay attention to check memo lines. He said those were only for the check writer — not the check recipient.

“If I start calling into question every check you get in the bank, you would be doing that all day,” Laffitte testified.

Laffitte testified that he regarded Murdaugh as a good customer, and said, “I did as my customer requested” — a sentence he previously repeatedly Friday.

When it became known that Murdaugh had spent millions over the years and was deep in debt in spite of having a substantial income, Laffitte said he thought the lawyer had a gambling problem.

“That was the only thing I could figure out how he could spend the amount of money he had stolen,” he said.

When Limehouse asked Laffitte about hundreds of thousands of dollars in checks that Murdaugh had written to C.E. Smith in summer 2021, Laffitte testified he believed Smith was doing construction work at Murdaugh’s beach house and was being paid for it.

Smith has been charged as Murdaugh’s accomplice in money laundering and drug trafficking.

After Laffitte testified, Judge Richard Gergel dismissed a request from Laffitte’s lawyers to dismiss the case, saying there was plenty of evidence for the case to go to the jury on all six counts.

Laffitte was the final witness to testify at the two-week trial.

In the prosecution’s closing argument Monday, Limehouse said, “Absolute power corrupts absolutely. … It was this absolute power that gave (Laffitte and Murdaugh) the opportunity to exploit the vulnerable.”

Despite the defense’s argument that Murdaugh was the one who devised a scheme to steal money from his own clients and that Laffitte was misled into helping him, Limehouse made the case that a “chaotic” Murdaugh needed someone as “meticulous” as Laffitte to carry out the plan.

“Maybe this wouldn’t have happened without Alex Murdaugh, but none of it could have happened without the defendant,” Limehouse said.

The defense was scheduled to give its closing argument later on Monday.

‘I absolutely did unintentionally’

Laffitte told jurors Friday ,when he first took the stand in his own defense, that he followed the directions of Murdaugh in withdrawing money from clients from Murdaugh’s law firm.

Laffitte said he never intentionally stole money from anyone, but said Friday that “I absolutely did unintentionally.”

He also testified that as a bank executive and as the conservator empowered to oversee many of the accounts Murdaugh’s law firm set up, Laffitte could legally move money for investment purposes.

Two other Palmetto State Bank executives, Laffitte’s father and sister, had approved a particularly controversial payment of $680,000 to cover funds Murdaugh had directed Laffitte to remove from the account of client Arthur Badger.

Questions about the move raised by members of Palmetto State Bank’s board of directors eventually led to Laffitte being fired by the board. On Friday, Laffitte’s attorneys played a recording of a closed-door board meeting in which the bank’s attorney discussed the payment with the board, hoping to show bank officials were aware of his actions at the time.

This is a developing story. It will be updated.

©2022 The State. Visit thestate.com. Distributed by Tribune Content Agency, LLC.