Defense begins arguments for former Palmetto State Bank CEO charged with financial crimes

The defense team of former Palmetto State Bank CEO Russell Laffitte began presenting its case in a federal courtroom in Charleston Wednesday morning.
Published: Nov. 16, 2022 at 3:17 PM EST|Updated: Nov. 16, 2022 at 8:22 PM EST
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CHARLESTON, S.C. (WCSC) - The defense team of former Palmetto State Bank CEO Russell Laffitte began presenting its case in a federal courtroom in Charleston Wednesday morning.

For a week, the federal government has tried to prove Laffitte committed financial crimes, helping former attorney Alex Murdaugh steal millions of dollars from clients. Laffitte is charged with conspiracy to commit wire fraud, bank fraud, and misapplication of bank funds.

The defense began their arguments by calling Palmetto State Bank Compliance Officer John Peters to testify. In his testimony, Peters first said he never filed suspicious activity reports on Alex Murdaugh and his finances at PSB. Describing Murdaugh, Peters said he borrowed a lot and always paid back loans, “but very slowly at times. Peters said his account was overdrawn “many times over the years.”

Prosecutor Emily Limehouse asked if Peters ever brought Murdaugh’s debts and late payments to Russell and Charles Laffitte’s attention.

“I did not ‘bring it to their attention because I was positive they were aware, but I did mention it to them,” Peters said.

During cross-examination, Peters clarified an earlier point and said he did file multiple suspicious reports about Murdaugh loans and checks. He made the reports after an internal investigation where he found a lot of red flags about how Murdaugh and Laffitte were loaning money and depositing checks.

Documents show Murdaugh was bringing large checks made out to PSB and splitting the money across accounts where he had debts or depositing it to himself and family members. When presented with the nature of how Laffitte and Murdaugh moved the money, Peters said, “I would not have done it.”

Chastity Malphrus , a former bank employee also testified that it’s common to make unsecured loans.

“Community banking means you know most everyone who comes through the door. You’re able to make a few more exceptions. I don’t know if that’s the right word,” she said.

John Marvin Murdaugh, brother of Alex Murdaugh and friend of Russell Laffite, was on the stand for barely five minutes. The defense asked him about his friend Russell.

“Well he’s an honest man,” he said. The prosecution asked him if he ever worked for the firm or bank or had any knowledge of this case. He said no and the court dismissed him.

SPECIAL SECTION: The Murdaugh Cases

Charles Laffitte Jr., Russell’s father testified. He walked through the history of Palmetto State Bank and described the Laffitte family’s close involvement and ties to the company. Laffitte Jr. said he knew about Murdaugh’s overdrafts and discussed it with Russell. He told his son to “get it done” about covering the overdraft for the $750,000 beach house loan.

Laffitte Jr. says when Murdaugh was found out for stealing from his firm and clients, Russell a letter to the board saying that “it was not an option not to pay” the law firm back. Laffitte Jr. says he talked with Russell and agreed that when PSB owes people money, they pay it.

Laffitte Jr. continued his testimony into the afternoon.

Laffitte Jr. also testified that he was under the impression C.E. Smith, one of the people Alex Murdaugh paid with his loan, was doing construction work on the beach house. Smith has been accused of four counts of money laundering, three counts of forgery and criminal conspiracy. He was also accused of attempting to shoot prominent Lowcountry attorney Alex Murdaugh in what investigators called an insurance fraud scheme.

Henderson says she and her father looked over all the converted checks of allegedly stolen money presented by the government earlier in the trial. She and her father approved a payment to Alex Murdaugh’s firm on behalf of the bank to reimburse the client Arthur Badger. That is about when the internal investigations began.

For about half an hour, the judge excused the jury to address the lawyers. The defense asked the judge to introduce new evidence. The defense claimed it shows that bank board members had motives and bias to testify against Russell Laffitte. Gergel would not allow it. “I think if that’s your defense, it’s not a very good one…I won’t let you turn my trial into a circus,” Gergel said.

There is no court Thursday since the judge has a conflict, and the defense plans to rest its case on Friday.