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Lawyers like Alex Murdaugh make life difficult for the rest of us

Murdaugh’s clumsy chicanery involving his client trust accounts has attorneys everywhere agape.

A federal grand jury in South Carolina on May 24 returned a 22-count indictment against Alex Murdaugh for conspiracy to commit wire fraud and bank fraud, bank fraud, wire fraud and money laundering. If Murdaugh stole that money, it will be relatively easy to prove it. What makes this indictment particularly galling to plaintiffs’ attorneys (like me) is that lawyers like Murdaugh make life harder for the vast majority of lawyers (like me) who don’t steal from clients.

Murdaugh’s strategy in his murder trial was to take the stand and admit to lying and stealing from his clients, but deny that he was a killer. It didn’t work.

Murdaugh was convicted by a jury in state court in March of the shooting deaths of his 22-year-old son, Paul and 52-year-old wife, Maggie. But there will be no jury trial in this federal case. Murdaugh will plead guilty. Unlike in state court cases, 90% to 98% percent of all federal criminal cases end in guilty pleas. And Murdaugh has already handed this case to prosecutors on a silver platter. Murdaugh’s strategy in his murder trial was to take the stand and admit to lying and stealing from his clients, but deny that he was a killer. It didn’t work. The jury still found him guilty of murder. Now he’s got to deal with all those confessions to financial crimes that he made under oath.

Even if Murdaugh hadn’t taken the stand, this federal case is a “paper” case, meaning it doesn’t rise and fall on the credibility of eyewitnesses. Instead, Murdaugh’s crimes will likely be evident from financial records: bank statements, check images and law firm records.

The federal indictment accuses Murdaugh of “claiming funds held in the law firm’s trust account as attorney’s fees and directing the disbursement of those funds for his benefit.” Murdaugh’s clumsy chicanery involving his client trust accounts has attorneys everywhere agape. An attorney has a duty to place funds of clients and in a client trust account separate from his own bank accounts. An attorney can be disciplined if the attorney just fails to maintain good records for the account, even if he never steals from it. Sloppy bookkeeping is not an excuse when it comes to client trust accounts. It’s grounds for discipline by the state bar.

The government will introduce the client trust account records, identify what money came into that account for what client, and then identify where that money went. Simple. The sad truth is that it’s easy for plaintiffs’ attorneys like Murdaugh to get away with financial crimes, at least at first. This is because we largely operate on the honor system. We have primary access to (and responsibility for) the client’s trust account, so we can theoretically manipulate it.

When attorneys like Murdaugh settle a case in favor of a client, they typically take the big settlement check, and it goes directly into the client trust account. It does not go into the attorney’s operating account. It’s not the attorney’s money. It’s the client’s money. The South Carolina Rules of Professional Responsibility dictate a detailed process for disbursing the funds: When a lawyer receives settlement funds for a client, the lawyer must promptly notify the client. The lawyer has to check to see if the client has any outstanding liens. For example, if the client was treated at a hospital, there may be unpaid bills. The hospital will be expecting to get at least some of those bills paid from the settlement. The lawyer also has to add up all the expenses the firm advanced, to calculate reimbursement. The firm also has to calculate the percentage that is the firm’s fee, as set out in the retainer agreement between firm and client. The rules require the lawyer to “render a full accounting,” provide that accounting to the client in the form of a memorandum, and then “promptly” deliver the funds due the client.

There’s nothing cavalier about client trust accounts and client funds. Even lawyers who make honest mistakes can expect to be disciplined, in South Carolina and everywhere else. Client trust accounts are no joke.

A sophisticated client might catch a lawyer’s theft during the disbursement process. In fact, lots of clients do scrutinize a disbursement memorandum. Sometimes they complain about excessive costs. Here’s a secret: Most attorneys would rather eat some minor costs than argue with the client, or, heaven forbid, deal with a client complaining to a judge or a disciplinary board. But many other clients never even glance at the disbursement memorandum. These are clients who are often just happy to have some amount of money. They are also clients who just trust their lawyer. That’s why a lawyer like Murdaugh is so dangerous — not just for clients but also for the legal profession.

Murdaugh had clients who trusted him. Perhaps they were even intimidated by his reputation. But once suspicion was aroused and the accounts audited, it should have been easy to figure out that the trust had been violated. Stealing from clients is hardly a sophisticated crime.

Lawyers like Murdaugh make life difficult for the rest of us. And they motivate disciplinary boards to make harsh examples of the lawyers they do catch, to make up for the lawyers they don’t. Many of the lawyers who do get into trouble with disciplinary boards over their client trust funds are not outright thieves like Murdaugh, but rather reckless or negligent.

Ultimately, Murdaugh’s disbarment is the least of his punishments as he stares down a guilty plea and even more prison time. But for lawyers like me, it has significant symbolic meaning.