What CFEs Can Learn from the Alex Murdaugh Fraud Case
/
Certified Fraud Examiners (CFEs) with a penchant for true crime were all ears as Travis Casner, CFE, and Helga Zauner, CFE, CVA, MAFF, examined the Alex Murdaugh case from a fraud investigator’s perspective at the 35th Annual ACFE Global Fraud Conference. Casner, a partner with accounting firm Weaver, and Zauner, managing director of forensics and litigation services at Weaver, analyzed Murdaugh’s frauds against clients and his own law firm, expounding why the frauds persisted and how Murdaugh finally got caught.
In a surprise twist, FBI agent Brian Womble made a special appearance at the end of the session. Womble interviewed Murdaugh over the course of two days last year. Describing the convicted murderer and fraudster as “very slimy,” he added that Murdaugh “wants to know what you know first before he talks to you about anything.”
The Case Against Murdaugh
A jury found Murdaugh guilty of two counts of murder on March 2, 2023. A judge then sentenced him to two consecutive life sentences without the possibility of parole. (Murdaugh has appealed the murder conviction.) Prior to being convicted of the murder of his wife and son, Murdaugh worked as a personal injury attorney in South Carolina and was a partner at Peters Murdaugh Parker Eltzroth & Detrick (PMPED). The firm first confronted Murdaugh about missing fees on September 3, 2021.
Last September, Murdaugh pleaded guilty to 22 counts of financial fraud and money laundering in state court. Murdaugh is accused of stealing $8.5 million to $10 million over the course of 10 years in connection with more than 100 financial fraud-related charges. Murdaugh received a 27-year sentence as part of a plea deal. Victims include former clients, PMPED, the Gloria Satterfield estate, insurance companies, banking and financial institutions, as well as state and federal government agencies.
In April, a federal court judge sentenced Murdaugh to serve a concurrent 40-year sentence after he pleaded guilty to a slew of financial crimes, including nearly two dozen charges of conspiracy, fraud and money laundering. The judge ordered Murdaugh to pay more than $8.7 million in restitution to his victims.
Murdaugh’s Financial Crimes
Casner and Zauner detailed Murdaugh’s financial wrongdoing. From 2011 through 2021, Murdaugh diverted client settlement funds for his own benefit by using various schemes, including:
Diverting client funds through Palmetto State Bank.
Diverting client funds through a fake bank account under the name Forge.
Intercepting settlement checks deposited into his bank account.
Fabricating attorneys’ fees.
Claiming fraudulent expenses.
Diverting payments from other law firms intended for PMPED.
Among Murdaugh’s many fraud schemes, Casner and Zauner said the fake Forge account stands out. Atlanta-based Forge Consulting, LLC, (a legitimate company) facilitates structured settlements for individuals who receive settlements after a lawsuit. Forge Consulting works with plaintiff law firms including PMPED. In 2015, Murdaugh created an account with Bank of America under the account name “Richard A Murdaugh Sole Prop DBA Forge.” The account, designed to mimic the real Forge Consulting, served as Murdaugh’s conduit to divert millions of dollars of client funds from 2017 to 2021. Murdaugh directed PMPED’s paralegals to issue check payments to Forge as part of structured settlements for client accounts.
In another scheme, Murdaugh stole from his own law firm in 2021 after he and attorney Chris Wilson won a $5.5 million settlement for their client. PMPED’s portion of the attorneys’ fees was $792,000. Upon Murdaugh’s request, Wilson made the $792,000 check payable directly to Murdaugh instead of PMPED. The law firm received the litigation expense portion in a separate check. PMPED’s receipt of the expense check prompted Chief Financial Officer Jeanne Seckinger to confront Murdaugh about the rest of the fees, hours before the murders occurred.
Lack of internal controls and other preventive measures allowed Murdaugh to commit fraud. Casner and Zauner said Murdaugh used his name and position in the law firm to avoid scrutiny from others within PMPED. (Murdaugh’s great-grandfather founded the firm in 1910.) In addition, paralegals and administrative staff risked losing their jobs if they questioned him.
Casner said few financial controls at PMPED facilitated Murdaugh’s crimes. “He didn’t have to provide verification of check payments. Nobody else from the finance department had to review them. There wasn’t a monthly reconciliation of the trust account with the bank statements to identify any discrepancies,” he explained.
The Fraud Triangle and Prevention
Casner and Zauner contended that the three tenets of the Fraud Triangle — pressure, opportunity and rationalization — converged to push Murdaugh over the edge and into fraudulent activity. And it may have ultimately led him to kill.
“He [Murdaugh] was about to be exposed for all these financial crimes. That pressure lays the foundation for what appears to motivate and drive the murders,” Casner said.
In addition to the financial pressure that he faced to repay the stolen funds, Murdaugh was embroiled in a wrongful death lawsuit (potentially on the hook for $10 million). Murdaugh’s long-term relationships with banks, attorneys and clients who trusted him provided an opportunity for him to steal. He may have rationalized his crimes with feelings of being entitled to clients’ settlement funds because he earned them through his skill as an attorney, Casner and Zauner posited.
Reflecting on Murdaugh’s fraud schemes, Casner and Zauner focused on these financial controls, which could have prevented the frauds or led to earlier detection:
Monthly reconciliations of deposits and disbursements.
Segregation of duties. “He [Murdaugh] shouldn’t be the only person making deposits at the bank. Others should be involved in reviewing and approving that process,” Casner said.
Dual verifications and approvals.
Implementation of Positive Pay with the bank.
Surprise audits.
No one knows what happened to the money Murdaugh stole.
“There were debts he paid, and he had a pretty expensive drug habit. He had a lavish lifestyle and made bad investments. Those are some theories, but we don’t know,” Zauner said.
On top of his murder and fraud convictions, Murdaugh’s currently facing several civil lawsuits.
