Last week, this news outlet reported on a motion filed by attorneys for disbarred lawyer/ accused killer Alex Murdaugh. No … not one of those bombshell motions (a.k.a. the flurry of defense filings that have been dominating headlines in the still-unfolding ‘Murdaugh Murders’ crime and corruption saga for the past week).
For the purposes of this article, I am referring to a motion filed in connection with a high-profile civil case related to Murdaugh – a wrongful death action filed in 2019 after Murdaugh’s late son, Paul Murdaugh, slammed a boat owned by the former attorney into the piling of a bridge in Beaufort County, S.C.
Nineteen-year-old Mallory Beach of Hampton, S.C. was killed in that boat crash – which thrust the Murdaugh family onto the statewide stage. The family would become the focus of national and international headlines two years later when Alex Murdaugh allegedly killed his wife, 52-year-old Maggie Murdaugh, and Paul Murdaugh.
According to a request submitted through his lead attorney, state senator Dick Harpootlian, Murdaugh is seeking to compensate lawyers and experts in his murder trial with proceeds from his 401(k) retirement account. For him to do that, though, S.C. circuit court judge Daniel Hall must approve the arrangement.
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Hall (above) is the judge in the wrongful death case. Last November, he appointed attorneys John T. Lay and Peter McCoy to serve as receivers in the Murdaugh case – with the goal of preserving and protecting any assets Murdaugh may have been attempting to liquidate.
Obviously, a 401(k) account is different from those assets.
“Qualified retirement plans, such as a 401(k) plan, are protected from creditors under the Employee Retirement Income Security Act (ERISA),” financial attorney Robert P. Bethea explained to me on Friday. “There are limited exceptions to this protection for alimony, child support, former spouses, and amounts owed to the IRS. However, if a taxpayer withdraws assets from their 401(k), those assets are no longer subject to ERISA protection.”
By liquidating his 401(k) prior to attaining retirement age, Murdaugh faces steep penalties – and hefty taxes.
“An early withdrawal of assets from a 401(k) triggers a 10 percent penalty, in addition to federal and state taxes on the amounts distributed,” Bethea, of the Columbia, S.C.-based Adams and Reese law firm, added. “The combination of taxes and penalties results in roughly 50 percent of the withdrawal being owed to federal and state taxing authorities. The balance of the withdrawal would then be subject to creditors’ claims.”
In Murdaugh’s case, the total value of his 401(k) reportedly came to an estimated $1.7 million. After fees and taxes, approximately $900,000 was available to him.
Under an agreement (.pdf) reached between the court-appointed receivers and Murdaugh’s attorneys, the accused killer will retain two-thirds of that sum – $600,000 – for the “sole purpose of funding his criminal defense.”
Based on statements made by Harpootlian in open court this week, that sum is likely to be exhausted on compensation, travel, food and lodging for a host of expert witnesses.
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(Via: FITSNews/ Jenn Wood)
A source who watched Thursday’s hearing said he envisioned Harpootlian (above) and his co-counsel Jim Griffin are easily on the hook for “hundreds of thousands of dollars worth of experts” if they wish to mount a credible defense to Murdaugh’s murder charges.
“And that’s not including costs related to any new evidence that may come out between now and January,” the source added.
Per the agreement, Harpootlian and Griffin would be granted access to the funds the moment Hall lends it his imprimatur.
“Such funds will be immediately transferred to his counsel to hold in trust and be used solely for legal expenses and costs associated with the defense of his criminal prosecution,” an order memorializing the agreement noted, adding that Murdaugh “shall not use any money (withdrawn from his retirement) for any other purposes.”
The remaining $300,000 would go to the receivers to hold in trust in anticipation of providing victims of Murdaugh’s alleged multi-layered, multi-faceted criminality with some modest restitution.
Is that fair?
Of course not … but the argument made by the receivers is that absent Murdaugh’s “voluntary” withdrawal, they would be entitled to none of this money. Meaning the only way for them to access any of the money is if Murdaugh voluntarily agrees to liquidate the account.
“But for Murdaugh’s voluntary liquidation … (the receivers) would never have the ability to access those assets,” they wrote in their motion, noting the 401(k) monies “are beyond the reach of the (receivers) and are statutorily protected from the (receivers)’ garnishment.”
“The funds retained by Murdaugh are restricted to legal defense and not permitted to be used for living expenses or other indulgences,” they added. “No funds liquidated under this proposal would remain available to Murdaugh for any other purpose at any time – both now and after his criminal prosecution.”
Accordingly, the receivers urged Hall to “grant Murdaugh’s motion” to use his liquidated 401(k) funds subject to the restrictions contained in the agreement.
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ABOUT THE AUTHOR …
Will Folks is the founding editor of the news outlet you are currently reading. Prior to founding FITSNews, he served as press secretary to the governor of South Carolina. He lives in the Midlands region of the state with his wife and seven children.
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Why can’t the many people who have been cheated out of money and the family of the young woman who died due to the recklessness of Murdaugh’s son Paul force the sale of the property and any other assets to be awarded to them for their suffering?