Missing Murdaugh law firm money raises questions: How much taken? How did it happen?

The prominent South Carolina family law firm that is accusing Alex Murdaugh of misappropriating its money has for years been known for its wealth and hefty awards from juries and settlements in court cases.

In Hampton, where the firm’s main office is, its multi-story brick building is called “The House CSX Built” for the many lawsuits the firm’s lawyers won from the railroad company over the years in injury and death cases that happened at railroad crossings around the state.

One senior member, John E. Parker, did so well that he donated $1 million in recent years to upgrade the Hampton County courthouse and also gave land for a county nature trail.

Alex Murdaugh resigned on Friday from Peters Murdaugh Parker Eltzroth and Detrick, which was founded by his family, after the firm discovered he had “misappropriated funds.” Murdaugh said in a statement Sunday he has entered drug treatment and issued an apology to his family, friends and colleagues.

How much money is Murdaugh accused of taking? Over how long a time? Were client funds taken?

The firm is not saying.

However sources have told The Island Packet and The State newspapers that the amount is well over a million dollars.

A statement released Monday night said the matter of the “misappropriated” funds has been referred to law enforcement and the S.C. Bar.

“A forensic accounting firm will be retained to conduct a thorough investigation,” said the statement, which invited clients with questions to contact the law firm.

When reached by phone Tuesday, Danny Henderson, an attorney with PMPED, said the firm would not be releasing any further statements.

Alex Murdaugh was already in the news. Three months ago, on June 7, his wife Maggie and son Paul were found shot to death at the family’s Colleton County estate. The State Law Enforcement Division has yet to announce a suspect or make an arrest in that case.

On Tuesday morning, a reporter left a message for the executive director of the S.C. Bar. A spokesperson for SLED did not answer a phone call or text message.

The questions that still remain include how much money Murdaugh may have taken, or whether the missing money was taken from clients’ accounts or from money the law firm was using to pay its lawyers’ and staff salaries and expenses.

Money comes into law firms from various sources. The sources include client retainers, jury awards, hourly billings and settlement proceeds.

Jay Bender, a Columbia lawyer who represents media clients including McClatchy newspapers and the S.C. Press Association, said the times he has received money on behalf of clients, the money has come in the form of a check deposited into a trust account. Paperwork accompanying the incoming funds includes information on how much money came in, how much the fee is, how much is owed for costs associated with the legal action.

“And then a check for the balance is written to the client. All of that is handled by the bookkeeping department,” Bender said.

“Most law firms have internal controls designed to catch missing money,’’ said John Crangle, a Columbia lawyer who monitors ethical questions in state and local governments.

A partner in a sizable Columbia law firm said at his firm, two signatures of senior partners are required to write a check to an individual lawyer in the firm.

“Here’s how you could get around that — a lawyer could have gotten a settlement, and he could have just told the insurance company, ‘Just send that to a trust account I have set up’,” said the attorney, who didn’t want his name used because he is not authorized to speak publicly about his firm’s internal finances.

Legal trouble through the years

In recent years, South Carolina’s legal world of lawyers and judges has been rocked by various financial scandals.

One of the most notable legal criminals was Lexington attorney Richard Breibart, who convinced clients to let him handle their money, supposedly to “keep it safe,” according to federal court testimony.

In 2014, Breibart, a prominent local lawyer, admitted to fleecing 13 clients of $2.5 million and pleaded guilty to federal mail fraud before U.S. District Judge Margaret Seymour. She gave him five years and three months in prison. Breibart’s case landed in federal court because his clients used wires, which come under federal jurisdiction, to transfer their money to him.

However, Breibart may have misappropriated even more millions from clients for proposed legal work he then failed to do, law enforcement officials and lawyers have said. His motive was to keep his growing firm — it had a $300,000 monthly payroll — afloat, according to evidence in the case.

Also in 2014, U.S. District Judge Terry Wooten sentenced Florence attorney William Rivers III to five years in prison for stealing some $3 million from 26 clients.

According to evidence in Rivers’ case, Rivers agreed to represent people making personal injury claims. He would then further agree to accept a percentage of the money recovered as a fee and to pay clients’ medical expenses. The client would get the rest of the money.

But under the scheme, when Rivers received the settlements, he would not tell the clients and would keep all the money from settlements, according to evidence in the case.

Rivers’ partner, John Schurlknight, also stole millions from clients but committed suicide and never went to prison. Federal law enforcement was able to get involved in their case because Rivers used the U.S. mail to carry out his scheme.

In 2018, the S.C. Bar released a study saying that during a seven-year period, from 2011 to mid-2017, the S.C. Bar’s Fund for Client Protection reported that more than 130 S.C. lawyers stole from clients or mishandled their funds. The fund paid out more than $2.9 millions to the lawyers’ victims, the Bar reported.

In the Bar’s most recent annual report, for calendar year 2019-20, the Bar’s fund paid out $445,793 as compensation for 49 claims against 17 attorneys.

“The number of attorneys involved in Lawyers’ Fund claims remained a very small percentage of the members of the South Carolina Bar over the past five years,” the Bar’s most recent report said.

“On average, approximately 19 attorneys out of 12,627 active members of the South Carolina Bar had claims awarded against them in this five-year period,” the Bar said.

‘Decisions that I truly regret’

On Monday night, the Murdaugh law firm released this statement: “On Friday, September 3, 2021, Alex Murdaugh resigned from the Law Firm. He is no longer associated with PMPED in any manner.

“His resignation came after the discovery by PMPED that Alex misappropriated funds in violation of PMPED standards and policies. A forensic accounting firm will be retained to conduct thorough investigation. Law enforcement and the SC Bar have been notified by PMPED.

“This is disappointing news for all of us. Rest assured that our firm will deal with this in a straightforward manner. There’s no place in our firm for such behavior. Due to the ongoing investigations into these matters and client confidentiality, PMPED cannot comment further at this time.

“We encourage any client with questions to contact our offices regarding their file.”

The firm’s statement followed by a matter of hours a statement released by a spokesperson for Alex Murdaugh, who was said to be recovering from a gunshot wound to the head that he received on Saturday on a rural Hampton County road.

“The murders of my wife and son have caused an incredibly difficult time in my life,” the statement said.

“I have made a lot of decisions that I truly regret. I’m resigning from my law firm and entering rehab after a long battle that has been exacerbated by these murders. I am immensely sorry to everyone I’ve hurt, including my family, friends and colleagues.

“I ask for prayers as I rehabilitate myself and my relationships.”