Russell Laffitte heads to federal court on charges in the first Murdaugh-related trial

For nearly a year, fraud allegations have swirled around former Hampton banker Russell Laffitte, a purported accomplice in white-collar theft schemes masterminded by disgraced lawyer and accused killer Alex Murdaugh.

On Tuesday, those charges will be put to the test in a Charleston federal courtroom, when a long-awaited federal jury trial gets underway. Laffitte faces six counts of banking and wire fraud, crimes involving nearly $2 million he allegedly stole and misused in concert with Murdaugh, 54.

The trial of Laffitte, 51, a former bank official and Murdaugh’s longtime friend, will likely expose inner workings of a storied South Carolina law firm known for big verdicts and the secretive money world of a Lowcountry bank.

It will be the first Murdaugh-related criminal trial in an ongoing three-year saga of alleged financial fraud and violent death in Murdaugh’s orbit. And, in the upcoming trial, Laffitte will take center stage as the man who prosecutors say enabled Murdaugh to carry out his financial crimes.

“This trial will connect a lot of dots that people are asking questions about,” said Eric Bland, a Columbia attorney who represents two sisters, Alania Plyler and Hannah Plyler, who as young girls were awarded a large legal settlement that was allegedly misappropriated by Murdaugh and Laffitte.

Connections that will be exposed at trial deal with the relationships between Murdaugh, his former law firm — at that time known as PMPED, or Peters, Murdaugh, Parker, Eltzroth & Detrick — their clients, Laffitte and his former bank, Palmetto State Bank, Bland predicted.

As young girls, the Plyler sisters were awarded millions of dollars in a legal settlement after their mother died in a 2005 car crash caused by faulty tires. Murdaugh, who helped engineer the legal settlement, steered the money to Laffitte’s bank, and Laffitte then oversaw the money in conservatorships.

The sisters are expected to testify for the prosecution along with other alleged victims, as well as members of Murdaugh’s former law firm and officials from Palmetto State Bank. Prosecutors also will put Timothy Rich, a Federal Deposit Insurance Corp. official, on the witness stand to testify about “sound and sound” banking procedures, according to a pretrial filing. The FDIC is an agency created by Congress to instill public confidence in the banking system.

Laffitte is expected to testify in his own defense and undergo a stiff cross-examination by government prosecutor Emily Limehouse. His lawyer, Bart Daniel, declined comment last week.

Federal Judge Richard Gergel, who has a no-nonsense reputation and who handled the Dylann Roof death penalty trial, will preside.

Laffitte’s defense: Murdaugh is at fault

Among revelations that might surface include how Murdaugh and Laffitte, who was CEO of Hampton-based Palmetto State Bank, were able to get away with stealing and misusing other peoples’ money for so long in two businesses that are supposed to be stewards of funds entrusted to them.

The two men’s schemes lasted 10 years, from 2011 to 2021, according to an indictment against Laffitte.

During that time, Murdaugh was a prosperous customer of Laffitte’s bank.

“He borrowed millions of dollars and paid back millions over the years,” Laffitte testified at a September court hearing where his lawyers sought to loosen his bond conditions.

Prosecutors allege that Murdaugh, then a lawyer with PMPED, a powerhouse Hampton law firm, steered large amounts of settlement money he had won for various clients to Laffitte and his bank, where the banker set up conversatorships meant to safeguard the money.

In this case, Murdaugh and Laffitte are alleged to have misused nearly $2 million for their personal benefit in violation of federal banking laws.

Laffitte’s lawyers are expected to tell the jury a different tale: That the former banker is a hapless victim of Murdaugh, who duped him into making questionable transactions. They will also say that small banks like Laffitte’s have “relaxed standards,” according to pretrial filings.

Laffitte and his bank were just two of many people and institutions “victimized” by Murdaugh over the years, Laffitte’s attorney Daniel told a federal magistrate judge in September. Laffitte may have been “negligent” but is not a criminal, Daniel said.

Murdaugh, who faces more than 80 fraud charges already in state court, is not federally charged in Laffitte’s case for reasons federal prosecutors have not and will not disclose.

But people familiar with the case said the bank-related charges against Laffitte were a natural fit for federal authorities to bring, since several federal laws regulate banks and the FBI has considerable expertise in working bank fraud cases.

Laffitte also faces several charges of violating state fraud and money laundering charges.

Very early, Laffitte and his lawyers demanded a prompt trial, his right under the Constitution’s Sixth Amendment, which guarantees “a speedy and public trial.” He was indicted on federal charges in July.

Recent court filings have suggested how Laffitte’s lawyers may try to fight the case.

One piece of now-confidential evidence that may be introduced at trial is called the “Harris report,” named for Greg Harris, a Columbia lawyer and former federal prosecutor. In fall 2021, Palmetto State Bank top officials became suspicious of Laffitte, then CEO, and hired Harris to investigate his actions at the bank.

Although Laffitte was fired apparently as a result of material in the Harris report, Laffitte’s lawyers have said they want to see it because they believe it contains information that will help prove Laffitte’s innocence. The bank has refused to hand it over, saying its confidentiality is covered by attorney-client privilege.

Another disputed matter, court documents show, are audio tapes of four meetings late last year between the Palmetto State Bank’s board of directors and Harris, meetings that took place shortly before Laffitte was fired in January 2022. Laffitte contends the tapes will help him, while the board insists they are confidential under attorney-client privilege, according to court filings.

Gergel has scheduled a Monday pre-trial hearing on motions related to these and other matters.

Alex Murdaugh ‘s role in Laffitte case

Murdaugh, who is currently in Richland County jail on charges of murder in the June 2021 shooting deaths of his wife and son, is not scheduled to appear at Laffitte’s trial.

But he is frequently mentioned in Laffitte’s indictment as a co-conspirator, identified only as a “bank customer” who interacted with Laffitte and who was a “personal injury attorney” with a Hampton law firm. Other public court records in the case identify the “bank customer” as Murdaugh.

Laffitte’s lawyers have subpoenaed Murdaugh to testify in Laffitte’s defense at the trial, according to Jim Griffin, one of Murdaugh’s lawyers.

“We have notified the defense that, if called, he would assert his Fifth Amendment rights not to testify,” Griffin said.

The reason Laffitte’s lawyers want to get Murdaugh and his actions into the trial is to show that Murdaugh — not Laffitte — is at fault for any crimes and “improperly advised Mr. Laffitte about their validity and legality,” according to a Nov. 2 defense filing.

The government is selectively and unfairly targeting Laffitte when Murdaugh is the real culprit, defense lawyers have said.

“Alex Murdaugh stole all this money,” Daniel told a federal magistrate judge in September. “He stole from his own client. ... Russell Laffitte never stole one red cent.”

In response, in an Oct. 21 motion, federal prosecutors argued that Laffitte’s lawyers should not be allowed to blame Murdaugh.

Blaming Murdaugh for all of Laffitte’s crimes is “a strategy by the defense to argue that Laffitte should be acquitted because Murdaugh is more culpable than he is,” the motion said.

“Such an argument ... should be excluded because it would steer the jury toward nullification,” prosecutors continued. Jury nullification happens when a jury returns a “not guilty” verdict even though evidence clearly shows the defendant broke the law.

“The Court should ... prohibit any argument or evidence from Laffitte suggesting that he was singled out for prosecution,” prosecutors said.

Murdaugh will figure into the trial even before the first day.

During voir dire — the process of questioning jurors to see if they can be fair and impartial — jurors can be expected to be asked about their knowledge of the case.

Specifically, defense attorneys want to ask prospective jurors if they have read any news articles about Murdaugh or Laffitte, or “posted, liked or commented” on stories posted to social media about the case.

A longtime friendship lands in court

Murdaugh, and to a lesser extent, Laffitte, are all but household names throughout South Carolina and even the nation.

Allegations surrounding Murdaugh’s alleged 2021 killings of his wife, Maggie, and son, Paul, as well as his financial swindles — he is accused of taking more than $8 million taken from clients and associates for personal benefit — have been trumpeted in newspapers and on television.

Murdaugh’s family and legal troubles have been broadcast on CNN, Dateline NBC, ABC and, most recently, a docuseries on HBO.

He is slated to go to trial Jan. 23 on murder charges in Walterboro. No date has been set for a trial on the fraud charges.

Murdaugh and Laffitte have known each other since childhood.

Each went into the family business and each did well, described in one lawsuit as “the two rising lions of their families.”

Murdaugh was known for negotiating multimillion-dollar settlements for clients, while Laffitte became CEO of the family bank, where both Murdaugh and his law firm were major customers.

Murdaugh is a past president of the S.C. Association for Justice, a group of trial lawyers; Laffitte was president of the Independent Banks of South Carolina.

Former U.S. Attorney Bill Nettles said Murdaugh, Laffitte and the upcoming trial have been well publicized.

“Everybody seems to have an opinion about this, but the universe of people right now who have enough information to make a fully formed opinion is very small,” Nettles said. “At the end of the day, what matters is what a jury decides after it receives admissible evidence.”

Laffitte is represented by Charleston attorney Daniel, who as U.S. Attorney for South Carolina in 1989 worked with the FBI in Operation Lost Trust, an undercover operation that exposed corruption in the General Assembly. Daniel is known for a sharp mind, a quick tongue and an aggressive nature. Daniel’s team includes attorneys Matt Austin and Josh Myers.

Federal prosecutor Limehouse leads the government legal team along with fellow prosecutor Winston Holliday.

Both were on the team that won guilty pleas from top officials of SCANA, the now-defunct utility giant that went belly up in a doomed effort to build a $10 billion nuclear power plant in Fairfield County. Holliday also helped prosecute former Lexington lawyer Richard Breibart, who pleaded guilty in 2014 to looting clients’ funds of millions of dollars.

Also on the government’s courtroom team is Katie Stoughton, who heads up the U.S. Attorney’s office appellate division. It will be her job to help keep their case free of any issues that the defense might exploit on appeal, should the government win a guilty verdict.