Jan Malinowski — Direct/Cross/Redirect/Recross
570 linesFRIDAY, FEBRUARY 3, 2023
(Court resumed at 9:39 a.m.)
(PSB DOCUMENTS MARKED AS STATE'S EXHIBIT NUMBER 354 FOR IDENTIFICATION.)
JUDGE NEWMAN: Good morning.
(A response of good morning.)
JUDGE NEWMAN: Next witness.
MR. WATERS: Thank you, Your Honor. The State would call Jan Malinowski.
IN-CAMERA HEARING
The witness, JAN MALINOWSKI, was first duly sworn and testified as follows:
COURT CLERK: State your name again for the record and spell your last name.
JAN MALINOWSKI: Jan Malinowski.
DIRECT EXAMINATION
BY MR. WATERS:
MR. WATERS: Mr. Malinowski, how are you doing today?
JAN MALINOWSKI: Very well, thank you.
MR. WATERS: Good. If you would, introduce yourself to the Court just a little bit. Obviously we're not in front of a jury but just so that the Court knows who you are, tell us just a very quick history of how you got to your current position.
JAN MALINOWSKI: I'm currently the president and CEO of Palmetto State Bank headquartered in Hampton. Started my banking career out of the Citadel in 1977, went on to graduate school at the university. Upon completion of a master's program in Columbia joined the Wachovia Bank and Trust Company, went to Zurich, Switzerland. From there went to Barnett Bank in Miami, Florida, and subsequently I traveled Europe with the old Barnett. Moved to First Union National Bank in Savannah for a brief period of time, and then in February of 1991 joined Palmetto State Bank.
MR. WATERS: All right, and you currently serve as the CEO. Is that right?
JAN MALINOWSKI: That's correct.
MR. WATERS: And how long have you been the CEO?
JAN MALINOWSKI: Since August of last year.
MR. WATERS: August of 2021?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And who was the CEO prior to you?
JAN MALINOWSKI: Russell Laffitte.
MR. WATERS: And was he terminated not long before you became CEO?
JAN MALINOWSKI: Yes, he was.
MR. WATERS: Back in June of 2021, what was your role at that time?
JAN MALINOWSKI: I was executive vice president and responsible for branches in Beaufort; we have two branches in Beaufort.
MR. WATERS: All right, and were you also a member of the board of directors with Palmetto State Bank?
JAN MALINOWSKI: At that time, yes.
MR. WATERS: Okay, and you mentioned that you were in charge of some branches in Beaufort. Could you explain just a little bit to the Court about sort of how it operated then with the branches in Beaufort and the branches perhaps in Hampton or elsewhere?
JAN MALINOWSKI: Yes, sir. At the time we were about a $700 million asset bank. We have seven branches, operated somewhat decentralized. I was given responsibility in '91 for the two offices in Beaufort, as I said, one in Burton location and one in Lady's Island. Other officers of the bank would be responsible for the other branches, Hampton being the main office, and then with Allendale, Fairfax, Estill, and Bluffton.
MR. WATERS: All right. When you say y'all were a little bit decentralized, is it fair to say that for the most part, you were primarily responsible for the operations in Beaufort and someone else was primarily responsible for the operations in the Hampton area?
JAN MALINOWSKI: Correct.
MR. WATERS: And who was primarily responsible for the operations in the Hampton area?
JAN MALINOWSKI: Russell Laffitte and his father, Charlie Laffitte.
MR. WATERS: And when you say somewhat decentralized, obviously there was a board of directors that looked at the institution as a whole.
JAN MALINOWSKI: Yes.
MR. WATERS: But in practice, there was kind of a deference to the local folks on scene, you being in Beaufort and the Laffittes being in Hampton. Is that correct?
JAN MALINOWSKI: Yes.
MR. WATERS: All right. I'm going to ask you to explain just a little bit, though, about the board of directors and the executive committee. And, again, if you could briefly describe to the Court what those two entities are and how they operate so that we can understand the next set of questions.
JAN MALINOWSKI: Well, the board of directors of the bank has the absolute authority and responsibility to run the bank, but they delegate the day-to-day managerial responsibilities to officers. Charlie Laffitte was long serving CEO and chairman, Russell COO, subsequently became the CEO. I was executive vice president and ran the two branches. But the board of directors would delegate, as I said, the day-to- day control to the executive committee, and certain senior officers.
MR. WATERS: All right, and when it came to authorizing loans, what was the role of the executive committee in authorizing certain loans? Was there a threshold, and how did that work?
JAN MALINOWSKI: There is a threshold. The board of directors would authorize individual loan officers, loan authorities on an annual basis, branch managers having a certain level of authority, and then executive officers having higher loan authority. And then organizationally two executive officers could approve a single loan or a -- up to X-million dollars, and then once it got beyond the threshold for two executive officers it would go on to the executive committee, which would review the loan requests and either approve or deny any loan that exceeded a million and a half dollars.
MR. WATERS: At the time in June of 2021 or thereabouts in that area of the year, were you the secretary of the executive committee?
JAN MALINOWSKI: I was.
MR. WATERS: All right, and I'm going to show you what's been marked as Exhibit 354 to your testimony and see if you recognize that document.
MR. WATERS: And, Your Honor, I have a copy for you I've provided one to the defense.
MR. WATERS: Would you mind handing that to the judge for me?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: All right. Do you recognize that document?
JAN MALINOWSKI: I do.
MR. WATERS: And tell me what that is, please.
JAN MALINOWSKI: It's the minutes of the executive committee of August 12th of 2021.
MR. WATERS: All right.
JAN MALINOWSKI: And a number of topics were discussed, but primarily the relationship of Richard Alexander, Alex, Murdaugh and his total relationship with the bank.
MR. WATERS: All right, and this is on August 12, 2021?
JAN MALINOWSKI: Correct.
MR. WATERS: Can I get the ELMO, please? Thank you.
(Break in proceedings.)
(TRACE SUMMARY/MEMO MARKED AS STATE'S EXHIBIT NUMBER 385 FOR IDENTIFICATION.)
MR. WATERS: All right. So, these are the minutes that you were referring to. Is that correct?
JAN MALINOWSKI: That's correct.
MR. WATERS: And there's a discussion right there, including reference to a memo that was distributed outlining the bank's relationship with Mr. Alex Murdaugh. Is that correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And there's a reference also to the total indebtedness that Alex Murdaugh had to the bank at that point in time?
JAN MALINOWSKI: Yes, sir. As of the day of that memo that was presented to the executive committee, Mr. Murdaugh owed directly or indirectly $4.2 million.
MR. WATERS: $4.2 million. Is that correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: All right. I forgot to ask you this, but tell me real quick. When did the board typically meet, and when does the executive committee typically meet?
JAN MALINOWSKI: The executive committee typically meets the second Tuesday of every month, and the board meets on the third Tuesday of every month.
MR. WATERS: I'm going to show you what's been marked as Exhibit 385 to -- for the purposes of this in-camera hearing and see if you recognize that document.
JAN MALINOWSKI: This is a copy of the minutes of the directors of Palmetto State Bank describing what took place at a board meeting on Tuesday, July 20, 2021.
MR. WATERS: All right, and who's the secretary that authored those minutes?
JAN MALINOWSKI: Gray Henderson.
MR. WATERS: And you were present as a board member for the -- for this discussion?
JAN MALINOWSKI: I was.
MR. WATERS: All right, and what's the date again on this particular one?
JAN MALINOWSKI: July 20, 2021.
MR. WATERS: July 20, 2021. At that time, was there any discussion or any record of a discussion of any loan to Alex Murdaugh for $750,000?
JAN MALINOWSKI: No, sir, there is not.
MR. WATERS: And again, that's July 20th of 2021?
JAN MALINOWSKI: That's correct.
MR. WATERS: All right. Going back to this August 12, 2021, executive committee notes, I want to walk back just a little bit, and tell me. Was there -- did Alex Murdaugh come up in any discussion of the board members prior to August 12, 2021?
JAN MALINOWSKI: Yes.
MR. WATERS: And tell me about that, how that happened, please.
JAN MALINOWSKI: On August 9th, Norris Laffitte, a board member, sent an email to members of the executive committee and the board asking for a full accounting of Mr. Murdaugh's relationship with the bank.
MR. WATERS: All right. Can you pull this mic just a little bit closer?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: Thank you. All right, and what happened after that? Did that spark any particular activity?
JAN MALINOWSKI: Sparked quite a bit of activity, conversation, and then activity inside the bank.
MR. WATERS: All right, and explain that to the Court. What happened?
JAN MALINOWSKI: Shortly after Mr. Laffitte, Norris Laffitte, sent his email to members of the executive committee and the board, the -- a deposit was made to Mr. Murdaugh's account in the amount of $400,000 which cleared up an overdraft, a large overdraft which had been in his account that day.
MR. WATERS: All right. Who caused that deposit to happen?
JAN MALINOWSKI: Russell Laffitte.
MR. WATERS: All right. So, there was a significant overdraft in Alex Murdaugh's account?
JAN MALINOWSKI: On that day, yes, sir.
MR. WATERS: Was it over $350,000 overdraft?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And so Russell Laffitte caused a -- $400,000 to be deposited into his account?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And that was after the email from Norris Laffitte asking about Alex Murdaugh on August 9, 2021.
JAN MALINOWSKI: Yes, sir.
MR. WATERS: All right. At that time that Russell Laffitte caused $400,000 to be put into Alex's account to cover a over $350,000 overdraft, were there any loan documents or any sort of application or anything in existence supporting any such disbursement?
JAN MALINOWSKI: No, sir.
MR. WATERS: Just put the money in there.
JAN MALINOWSKI: Yes, sir.
MR. WATERS: You mentioned other activity. What other activity was sparked by that August 9th email?
JAN MALINOWSKI: There was some activity to create an application to go through our typical loan approval process through one of our software underwriting pro -- one of our underwriting programs software driven.
MR. WATERS: Okay, and we're going to look at those documents here in a minute.
(Break in proceedings.)
(ACCOUNT STATEMENT MARKED AS STATE'S EXHIBIT NUMBER 356 FOR IDENTIFICATION.)
(PSB MINUTES MARKED AS STATE'S EXHIBIT NUMBER 357 FOR IDENTIFICATION.)
MR. WATERS: All right, I'm going to show you what's been marked as State's 356 and see if you recognize that.
JAN MALINOWSKI: This is a photocopy of a page 2 of a deposit checking account statement in the name of Richard Alexander Murdaugh.
MR. WATERS: All right, and what does that reflect on August 6th of 2021? What balance was in his account?
JAN MALINOWSKI: A overdraft balance of $347,784.67.
MR. WATERS: And what happens on August 9, 2021?
JAN MALINOWSKI: A deposit of 400,000 is made to this account.
MR. WATERS: All right. We see after that there's a transfer to checking of $20,000 that's done as well?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And do you know what the purpose of that transfer was?
JAN MALINOWSKI: No, sir, I don't.
MR. WATERS: So, right there on August 6, 2021, Alex's account was negative $347,000. Is that correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And then off the books, Russell Laffitte caused $400,000 to be put into his account. Is that right?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: All right. Let's talk more about that.
MR. WATERS: Your Honor, may I approach?
JUDGE NEWMAN: Yes.
MR. WATERS: I'm going to show you what's been marked as Exhibit 357 to your testimony and see if you recognize that.
JAN MALINOWSKI: It's a copy of minutes of the directors of Palmetto State Bank dated August 17, 2021.
MR. WATERS: Okay, and who was the secretary for these? Do you know?
JAN MALINOWSKI: Gray Henderson.
MR. WATERS: All right, and were you present for those board meetings?
JAN MALINOWSKI: I was.
MR. WATERS: All right, and these minutes accurately reflect what was discussed with the board?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: I'm going to turn over to the second page. And was there a discussion at that time about -- and again, this is on August 17th of 2021. Was there a discussion about loans to Richard Alexander Murdaugh?
JAN MALINOWSKI: There was.
MR. WATERS: All right, and is there a reference there of Alex's intention to sell the farm?
JAN MALINOWSKI: Yes, there is.
MR. WATERS: All right, and is there a reference in there to the extent of Alex's liability in total loans?
JAN MALINOWSKI: Yes, there is, $3,544,897.
MR. WATERS: All right, and was there then a discussion of additional loans that Alex had that had been charged off?
JAN MALINOWSKI: Yes, there were.
MR. WATERS: And very quickly, are you familiar with two entities called Zero United and Red Beard?
JAN MALINOWSKI: I am.
MR. WATERS: Are those entities associated with Alex Murdaugh?
JAN MALINOWSKI: They are.
MR. WATERS: And are those loans that, in fact, the bank had charged off?
JAN MALINOWSKI: That's correct.
MR. WATERS: All right, and explain very quickly what a charge off is without too much detail for these purposes.
JAN MALINOWSKI: Certainly. In a situation where a loan is deemed not performing to the point where the bank's executive committee and/or senior management decides it's time to take it off the books, you charge it off. It's an accounting treatment, but it doesn't remove the obligation of the borrower, or in this case members of the LLC, any legal obligation to repay the loan.
MR. WATERS: So, Alex Murdaugh was still on the hook required to pay those loans. Is that correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And were there real properties associated with both of those loans?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And in the event Alex Murdaugh had tried to sell those properties, would the bank expect to be paid any outstanding balance plus interest and all of the rest of it?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And, in fact, was Alex still paying on those notes even though they were charged off?
JAN MALINOWSKI: He had periodically, yes.
MR. WATERS: So, the ultimate liability to the bank for Alex was somewhat larger with those included. Is that correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: There's a discussion in here about a $750,000 loan in this particular board discussion. Is that correct?
JAN MALINOWSKI: Yes, there is.
MR. WATERS: And this is on August 12, 2021, I believe. Is that right?
JAN MALINOWSKI: The day --
MR. WATERS: I might have got the date wrong, I'm sorry.
JAN MALINOWSKI: It was the 17th.
MR. WATERS: 17th, excuse me. Had you been aware of any sort of $750,000 loan to Alex Murdaugh prior to these discussions coming up as you moved to the board meeting on August 17th of 2021?
JAN MALINOWSKI: Only to the extent that a $750,000 loan had been referenced in -- by -- in -- during the executive committee in the memo that was referred to in my executive committee minutes.
MR. WATERS: Which would have been shortly -- or a couple of days before this. Is that correct?
JAN MALINOWSKI: Yes, sir, the preceding week.
MR. WATERS: All right, and at the time that the $400,000 had been disbursed back on August 9th, there was no loan paperwork in existence at that time. Is that correct?
JAN MALINOWSKI: No, there was not.
MR. WATERS: All right. Was that the only disbursement made pursuant to this supposed $750,000 loan?
JAN MALINOWSKI: It was not the only disbursement.
MR. WATERS: All right. Stand by for me.
(Break in proceedings.)
(PSB WIRE REQUEST MARKED AS STATE'S EXHIBIT NUMBER 358 FOR IDENTIFICATION.)
(COPY OF CHECK MARKED AS STATE'S EXHIBIT NUMBER 359 FOR IDENTIFICATION.)
(COPY OF CHECK MARKED AS STATE'S EXHIBIT NUMBER 360 FOR IDENTIFICATION.)
(ACCOUNT DOCUMENT MARKED AS STATE'S EXHIBIT NUMBER 361 FOR IDENTIFICATION.)
(PROMISSORY NOTE MARKED AS STATE'S EXHIBIT NUMBER 362 FOR IDENTIFICATION.)
(BUSINESS PURPOSE STATEMENT MARKED AS STATE'S EXHIBIT NUMBER 363 FOR IDENTIFICATION.)
(EMAIL MARKED AS STATE'S EXHIBIT NUMBER 364 FOR IDENTIFICATION.)
MR. WATERS: Your Honor, this is in that first packet I gave you.
MR. WATERS: I show you what's been marked as State's 358 and see if you recognize that.
JAN MALINOWSKI: It's a wire request form on our standard documentation dated July 15, 2021. Palmetto State is going to wire funds to South State Bank. The beneficiary of the wire is the Wilson Law Group, LLC, to their IOLTA account in the amount of $350,000.
MR. WATERS: $350,000 to the Wilson Law Group?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: All right, and then what's the next page on this document?
JAN MALINOWSKI: Are the wiring instructions to the Wilson Law Group.
MR. WATERS: And does it have contact information?
JAN MALINOWSKI: Contact information is to Chris, Chris@WilsonlawgroupSCcom.
MR. WATERS: All right, and is that Chris Wilson the lawyer in South Carolina in Barnwell -- in Bamberg, South Carolina, excuse me?
JAN MALINOWSKI: As I currently understand, yes, sir.
MR. WATERS: This is on July 15, 2021.
JAN MALINOWSKI: Yes, sir.
MR. WATERS: $350,000 is wired to Chris Wilson.
JAN MALINOWSKI: Yes, sir.
MR. WATERS: Was there any documentation, loan documentation, loan application, any sort of papers whatsoever justifying Palmetto State Bank sending $350,000 to Chris Wilson?
JAN MALINOWSKI: No, sir.
MR. WATERS: And whose benefit was this sent for?
JAN MALINOWSKI: Alex Murdaugh's.
MR. WATERS: Alex Murdaugh's. All right. Let me ask you about this, and I'm going to put it up on the screen. Right there it says sender information, and what does that say right there, please?
JAN MALINOWSKI: Palmetto State Bank LNOS.
MR. WATERS: And can you explain very quickly what LNOS is, what that is?
JAN MALINOWSKI: It's an account the bank maintains. It's called Loans Not On System.
MR. WATERS: Okay, and should that -- should this wire have listed that as the sender?
MR. WATERS: And explain that to the Court, please.
JAN MALINOWSKI: Had loan documents been signed that day, the sender would have been the borrower on the loan. In this case, it would have been Alex Murdaugh.
MR. WATERS: That's not what was listed, is it?
JAN MALINOWSKI: No, sir.
MR. WATERS: I'm going to show you what's been marked as 359 to your testimony and see if you recognize this document.
JAN MALINOWSKI: This is a -- the customer copy of the cashier's check in the amount of $400,000 that was deposited to Alex Murdaugh's checking account.
MR. WATERS: All right, and is there a sticky note on there, a copy of a sticky note?
JAN MALINOWSKI: Yes, sir, there is.
MR. WATERS: And what does it say, if you would, please?
JAN MALINOWSKI: It says: Alex Murdaugh, $750,000, one share of Green Swamp, Inc. stock. And the date is 7/15/21.
MR. WATERS: We're going to talk more about that more in a minute. We've got State's 360 and 361. Just real quick I'm going to show you those and see if you recognize those.
JAN MALINOWSKI: The top document is the checking deposit slip for -- credited to -- 400,000 to be credited to account 69406092. The account holder name is Alex Murdaugh. The date is 8/9/2021, and then we see a copy of the cashier's check dated 8/9/2021 in the amount of $400,000.
MR. WATERS: All right, and then the next exhibit, 361?
JAN MALINOWSKI: Next exhibit is the debit to the Loans Not On System account in the amount of $400,000, which was the source for the cashier's check in the same amount.
MR. WATERS: And the date on those again?
JAN MALINOWSKI: 8/9/2021.
MR. WATERS: And that was the same day that Norris Laffitte sent an email to the board of directors asking -- making an inquiry about the bank's relationship with Alex Murdaugh.
JAN MALINOWSKI: That's correct.
MR. WATERS: Just a couple more. You've already testified that there was no loan application or loan paperwork or anything like that supporting the bank's disbursement already of a total of $750,000. Is that right?
JAN MALINOWSKI: That's correct.
MR. WATERS: And that was a wire on July 15th for $350,000 that went to Chris Wilson, correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And then a $400,000 disbursement on August 9th after Norris Laffitte sent his email to the board of directors.
JAN MALINOWSKI: Yes, sir.
MR. WATERS: That covered a negative 400 -- $347,000 overdraft in Alex's account?
JAN MALINOWSKI: That's correct.
MR. WATERS: Little bit extra for some walking around money, another 50K or so, correct?
JAN MALINOWSKI: I can't answer that.
MR. WATERS: All right. I'm going to show you what's been marked as State's 362 and see if you recognize that.
JAN MALINOWSKI: This is a copy of a promissory note commercial single advance, loan number 6996048, in the amount of $750,750, note dated 7/15/2021.
MR. WATERS: Just real quick, what's the $750 for?
JAN MALINOWSKI: That's a note fee we charge.
MR. WATERS: A note fee?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: 750 bucks for $750,000 loan?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: Is that typical?
JAN MALINOWSKI: Possibly in the Hampton office, yes, sir.
MR. WATERS: Okay. All right. Now, I'm going to let you hold that one for a second. Look at the back page and tell me. Is that application signed?
JAN MALINOWSKI: Yes, it is signed.
MR. WATERS: All right, and who was it purportedly signed by?
JAN MALINOWSKI: Richard Alexander Murdaugh.
MR. WATERS: And what is the date on that application?
JAN MALINOWSKI: Date on the note is July 15, 2021.
MR. WATERS: All right, and is that the same day as that wire to Chris Wilson?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: Have you had a chance to examine that document and look at the records of the entity for which you are the chief executive officer?
JAN MALINOWSKI: I have.
MR. WATERS: Have you had a chance to look at the loan number?
JAN MALINOWSKI: I have.
MR. WATERS: And are those loan numbers sequentially generated by your system?
JAN MALINOWSKI: They are.
MR. WATERS: And in looking at that loan number, is there any way that document could have even been in existence in July of 2021?
JAN MALINOWSKI: No, sir.
MR. WATERS: And, in fact, it had to have been generated after the August 9th email and after these disbursements. Is that correct?
JAN MALINOWSKI: That's correct.
MR. WATERS: I show you 363. Just give me one second while I put this on the screen. Just real quick, can you see that on the screen?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And is that the loan number, the sequential loan number that you're talking about?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And that's the signature and date at the top.
JAN MALINOWSKI: That's correct.
MR. WATERS: All right. That last exhibit I just handed to you, can you tell me the number on the back of it?
JAN MALINOWSKI: 6996048.
MR. WATERS: I'm sorry, I was talking about that number. 363.
JAN MALINOWSKI: I'm sorry.
MR. WATERS: State's 363. No, that was my job. I was asking you to do my job. All right, tell me what that document is, please.
JAN MALINOWSKI: It's a business purpose statement.
MR. WATERS: All right, and --
JAN MALINOWSKI: It accompanied the loan, 6996048.
MR. WATERS: And what is the supposed purpose for the loan that's listed on that?
JAN MALINOWSKI: Business expenses.
MR. WATERS: Okay, and, again, this document is also dated 7/15/21?
JAN MALINOWSKI: That's correct.
MR. WATERS: All right, but is this the kind of document that also would be generated along with the application that we just saw?
JAN MALINOWSKI: It would in the note documentation system, yes, sir.
MR. WATERS: All right. The application that you said could not have existed in July of 2021.
JAN MALINOWSKI: That's correct.
MR. WATERS: All right. Let me go back. We had a reference to the board minutes from August 17, 2021, and there was some discussion of this particular loan at that board hearing -- board meeting. Is that correct?
JAN MALINOWSKI: Yes, there was.
MR. WATERS: And there had been a discussion at the executive committee meeting a little bit prior to that. Is that correct?
JAN MALINOWSKI: That's correct.
MR. WATERS: What was your understanding at that time from those meetings what the collateral was supposedly for this new $750,000 loan?
JAN MALINOWSKI: It would be a mortgage on Edisto Beach house and a share of the Green Swamp stock.
MR. WATERS: And is that the Green Swamp that was referred to on the sticky note that we saw earlier?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And what is your understanding, though, as things developed as to whether or not that collateral was actually able to be used for this particular loan?
JAN MALINOWSKI: Certainly the second mortgage did not exist or was not placed on the property; the property was in the name of Ms. Murdaugh.
MR. WATERS: Okay, and what about the Green Swamp? Was that already collateralized?
JAN MALINOWSKI: It was cross collateralized with other loans.
MR. WATERS: So, this loan was heavily uncollateralized. Is that correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: Okay. Give me one second.
(Break in proceedings.)
(PSB MEMO MARKED AS STATE'S EXHIBIT NUMBER 365 FOR IDENTIFICATION.)
(PSB NOTE MARKED AS STATE'S EXHIBIT NUMBER 366 FOR IDENTIFICATION.)
MR. WATERS: There's been some discussion about whether or not an appraisal had been ordered prior to June of 2021 for this supposed $750,000 loan. Was there an appraisal that had been ordered prior to June of 2021 on the Edisto property?
JAN MALINOWSKI: There was.
MR. WATERS: Did that have anything at all to do with some sort of loan for an additional $750,000?
JAN MALINOWSKI: No, sir.
MR. WATERS: And I want to show you what's been marked as State's 364 and see if you recognize that document. It's an email but there's an attachment.
JAN MALINOWSKI: Email from Chastity Malphrus to Charles Laffitte, III, who's the bank's appraisal officer referencing 3606 Big Bay Drive, Edisto, and it's an appraisal request form dated April 22, 2021. The intended use of the appraisal is for a refinance, and the balance is $200,000.
MR. WATERS: All right, and so it's for a refinance. Explain what the refinance was for, if you could, to the Court.
JAN MALINOWSKI: At the time the mortgage had matured, or the mortgage loan had matured, and we needed to renew it.
MR. WATERS: All right. It had already matured. Is that correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: So this was an existing debt, not any sort of new debt, and so the appraisal was because you have to renew this note that had already matured, correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: Or it has to be paid off or one or the two.
JAN MALINOWSKI: Correct.
MR. WATERS: All right.
MR. WATERS: Your Honor, may I approach?
JUDGE NEWMAN: Yes.
MR. WATERS: I'm going to show you what's been marked as State's 365 and see if you recognize that document.
JAN MALINOWSKI: This was the memo summarizing -- or this is a copy of the memo that summarizes the relationship of Alex Murdaugh with the bank. It was prepared and presented at the executive committee meeting.
MR. WATERS: Okay, and then I'll put that up on the screen. But this lists some of the indebtedness that Alex had with the bank that you previously described earlier?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And including the Zero United with outstanding $307,761?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And then outstanding and charged off, not only Zero United, but also $362,896 for Red Beard?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: I'm going to show you what's been marked State's 366 and see if you recognize that document.
JAN MALINOWSKI: It's a document produced from our loan accounting system, and it lists all the notes -- outstanding notes in the name of Alex Murdaugh and also co-borrower with his father, Randolph Murdaugh, III.
MR. WATERS: And that -- it lists the balances on those particular loans as of June 7, 2021?
JAN MALINOWSKI: That's correct.
MR. WATERS: It does not include, though, the charged off loans Zero United and Red Beard. Is that correct?
JAN MALINOWSKI: That's correct.
MR. WATERS: So on the first one, is that the balance right there, $104,198.80?
JAN MALINOWSKI: That's the principal owed, yes, sir.
MR. WATERS: That is the principal owed. These are not deposits, correct?
JAN MALINOWSKI: That's correct.
MR. WATERS: Owed by who?
JAN MALINOWSKI: I think for the 104,000 was Williams Islands.
MR. WATERS: I mean what borrower are those?
JAN MALINOWSKI: That would have been Mr. Murdaugh, Alex Murdaugh, yes.
MR. WATERS: All right, and then this next one, what's the balance on that, and how much is owed for this loan?
JAN MALINOWSKI: $806,666.26.
MR. WATERS: The next one, how much is owed for this loan?
JAN MALINOWSKI: $195,171.64.
MR. WATERS: How much is owed for this loan?
JAN MALINOWSKI: 999,650.94.
MR. WATERS: And this is actually a million dollar line of credit. Is that correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: It's pretty much maxed out, isn't it?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And then finally this one right here, what is the balance on that?
JAN MALINOWSKI: $91,368.90.
MR. WATERS: Last set of documents here. I'm going to show you what's been marked-- stand by for me real quick.
(PSB STATEMENT MARKED AS STATE'S EXHIBIT NUMBER 367 FOR IDENTIFICATION.)
(PSB STATEMENT MARKED AS STATE'S EXHIBIT NUMBER 368 FOR IDENTIFICATION.)
(PSB STATEMENT MARKED AS STATE'S EXHIBIT NUMBER 369 FOR IDENTIFICATION.)
(PSB STATEMENT MARKED AS STATE'S EXHIBIT NUMBER 370 FOR IDENTIFICATION.)
(PSB STATEMENT MARKED AS STATE'S EXHIBIT NUMBER 371 FOR IDENTIFICATION.)
(COVERSHEET MARKED AS STATE'S EXHIBIT NUMBER 372 FOR IDENTIFICATION.)
MR. WATERS: All right, I'll show you State's 367 and see if you recognize that document.
JAN MALINOWSKI: It's a copy of the bank statement, Alex Murdaugh farm account.
MR. WATERS: And what is the balance of that on June 7, 2021?
JAN MALINOWSKI: June 7, 2021, shows a deficit balance of $2,458.23.
MR. WATERS: All right. Negative balance?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: I show you what's been marked as 368, and do you recognize that?
JAN MALINOWSKI: Again, it's a checking account statement, account Richard Alexander Murdaugh for account 602.
MR. WATERS: All right, and can you tell me what the balance was on June 7th of 2021?
JAN MALINOWSKI: $2,185.23.
MR. WATERS: All right. I'm going to show you what's been marked as State's 369 and see if you recognize that.
JAN MALINOWSKI: This is, again, a statement for a health savings account, 3094, in the name of Richard Alexander Murdaugh.
MR. WATERS: All right, and what's the balance on that?
JAN MALINOWSKI: $7,540.61.
MR. WATERS: And that's a health savings account?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: Can that be used for any purpose or only for legitimate medical purposes?
JAN MALINOWSKI: I think the latter, medical purposes.
MR. WATERS: I'll show you what's been marked as State's 370 and see if you recognize that.
JAN MALINOWSKI: Again, a bank statement -- copy of a bank statement in the name of Alex Murdaugh, account number 6649, and the balance on 6/7 would have been $62,115.06.
MR. WATERS: All right, and then finally 371. If you could, tell me if you recognize that.
JAN MALINOWSKI: This is an account statement, interest checking account in the name of Margaret Maggie Murdaugh and Alex Murdaugh, number 5109, and the balance on 67$3,900.04.
MR. WATERS: I just have a couple of more questions for you for purposes of this hearing at least. It's fair to say that as of June of 2021 and the months after, the indebtedness to Palmetto State Bank from Alex Murdaugh was very large.
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And it's fair to say he also had charged off loans in the past. Is that correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: If it had come out at any particular time from, let's say, 2010 on up to June of 2021 or at any time that Alex Murdaugh had been stealing money from his partners or stealing money from his clients, would this bank have continued to loan him money?
JAN MALINOWSKI: No, sir.
MR. WATERS: Nothing further at this time, Your Honor.
JUDGE NEWMAN: By the defense?
MR. GRIFFIN: Yes, Your Honor, briefly.
CROSS-EXAMINATION BY MR. GRIFFIN:
MR. GRIFFIN: Just to be clear, Mr. Malinowski, on June 7, 2021, Mr. Murdaugh was not overdrawn at Palmetto State Bank, correct?
JAN MALINOWSKI: No, sir. Well, June 7th?
MR. GRIFFIN: Yes, sir.
JAN MALINOWSKI: Do you have his bank statement?
MR. GRIFFIN: Well, we just went through them.
JAN MALINOWSKI: Right.
MR. GRIFFIN: Well, there was one statement in a farm account that was minus $2,045. There was another account that was plus $2,185 according to Exhibit 368. His health savings account, Exhibit 369, had $7,540. Exhibit 370 had a positive balance of $62,000 and some change. And then Maggie's account, Exhibit 371, had $3,904. So --
JAN MALINOWSKI: Yes, sir.
MR. GRIFFIN: -- so there was one account that was --
JAN MALINOWSKI: Overdrawn --
MR. GRIFFIN: -- overdrawn for 2,000 but positive balances in all of the others.
JAN MALINOWSKI: Yes, sir.
MR. GRIFFIN: And Alex Murdaugh had been a customer of Palmetto State Bank for many, many years. Is that correct?
JAN MALINOWSKI: That's correct.
MR. GRIFFIN: And had he ever, ever been denied a request from Palmetto State Bank for a line of credit or a loan up until September of 2021?
JAN MALINOWSKI: To my knowledge, no.
MR. GRIFFIN: And in July of 2021, apparently he got a $750,000 loan that was approved, according to the documents here, by three members of the board of directors. Do you remember that? Let me see if I can find that.
(Break in proceedings.)
MR. GRIFFIN: Can you see the highlighted language there?
JAN MALINOWSKI: I can see the highlighted language, yes, sir.
MR. GRIFFIN: Yes, sir, and this is from -- minutes of the board of directors' meeting August 17, 2021. Is that correct?
JAN MALINOWSKI: Yes, sir.
MR. GRIFFIN: And here there's -- it says Charles: Chairman Laffitte reviewed the loans to Richard Alexander Murdaugh. Russell Laffitte stated that his intention is to sell the farm. We had mortgages on the properties that superceded the properties being transferred into Maggie's name. Now, what does that mean? Tell me about that. You have a mortgage on the property that superceded the property being transferred into Maggie's name. Do you remember that?
JAN MALINOWSKI: I guess it would reference the mortgages -- the date of the mortgage and the date they were recorded on previous loans.
MR. GRIFFIN: But at some point in time, Alex transferred the Moselle property into Maggie's name.
JAN MALINOWSKI: It's my understanding, yes.
MR. GRIFFIN: And before that date, your bank already had a mortgage on the property.
JAN MALINOWSKI: Yes, sir.
MR. GRIFFIN: Is that the Moselle property? Are we talking about the Moselle property here?
JAN MALINOWSKI: If you're referring to the farm, I'm assuming it's referring to Moselle, yes, sir.
MR. GRIFFIN: Then at the last sentence of this paragraph it says: Elizabeth Malinowski commented that the $750,000 did not appear to have been approved by the executive committee. Russell Laffitte explained that three of the five members approved the loan. Do you recall that?
JAN MALINOWSKI: I recall it, yes, sir.
MR. GRIFFIN: And who are the three of the five members of the executive committee that approved the loan?
JAN MALINOWSKI: It would have been Charlie Laffitte, Gray Henderson, and Russell Laffitte.
MR. GRIFFIN: And do you recall Charlie Laffitte telling you at some point in time, maybe around in here or even before, that if Alex Murdaugh wanted to receive a loan from the bank that he would get it?
JAN MALINOWSKI: That was Mr. Laffitte's opinion, yes.
MR. GRIFFIN: And who was Mr. Laffitte in relation to the bank in June of 2007?
JAN MALINOWSKI: 2007?
MR. GRIFFIN: Excuse me, June 7th of 2021.
JAN MALINOWSKI: He was chairman of the bank.
MR. GRIFFIN: And was Russell Laffitte related to Mr. Laffitte?
JAN MALINOWSKI: His son.
MR. GRIFFIN: And who are the members of the executive committee?
JAN MALINOWSKI: The executive committee was Charlie Laffitte, Gray Henderson, Russell Laffitte, Scott Swain, and myself.
MR. GRIFFIN: And so Mr. Laffitte, Mr. Charlie Laffitte's opinion was if Alex Murdaugh wanted a loan from the bank that he would get it. Is that correct?
JAN MALINOWSKI: That was his opinion.
MR. GRIFFIN: And on the 750,000 loan he was providing apparently without a lot of paperwork done on the front end, but it was approved by Mr. Laffitte, his son, Russell Laffitte. Is that correct?
JAN MALINOWSKI: Yes, sir.
MR. GRIFFIN: And his daughter, Gray Henderson. Is that right?
JAN MALINOWSKI: Yes, sir.
MR. GRIFFIN: And you mentioned that there was some -- in June of 2021 there was some $4.2 million or something outstanding. I don't have the exact number, but if I can find that -- do you know how much was secured and unsecured when you reviewed the indebtedness?
JAN MALINOWSKI: Do you have a document I can refer to?
MR. GRIFFIN: I'm going to put it on the screen here and see if we're talking about the same document we looked at that had the highlighted language. It says here -- well, let's just refer to the -- it says: Norris Laffitte had found a mathematical error, which will be corrected at $3,544,897 total loans and other total loans to Mr. Murdaugh. Is that correct?
JAN MALINOWSKI: According to another memo that came.
MR. GRIFFIN: And I'm -- so as to this amount, how much of -- was it all secured?
JAN MALINOWSKI: Without seeing the memo, I couldn't tell. If you've got the memo, I will certainly go down the loans.
MR. GRIFFIN: I don't have the memo. I only have what I was provided.
(Break in proceedings.)
MR. GRIFFIN: Thank you.
MR. GRIFFIN: Does this memo set forth the collateral for the indebtedness of Mr. Murdaugh?
MR. WATERS: Can you refer to the exhibit?
MR. GRIFFIN: And I am referring to Exhibit Number 365.
JAN MALINOWSKI: Can you pull down that memo -- there you go, thank you.
MR. GRIFFIN: Can you read that?
JAN MALINOWSKI: Yes, sir.
MR. GRIFFIN: And so we went through that. Is that the collateral for those loans?
JAN MALINOWSKI: As stated in the memo, yes.
MR. GRIFFIN: Okay. Now, you mentioned that some loans had been written off. Are you aware that Mr. Murdaugh was still paying on the loans that had been written off?
JAN MALINOWSKI: Yes, sir, I was.
MR. GRIFFIN: And you mentioned that -- had Mr. Murdaugh always paid the bank interest, monies he owed, and did he ever go in default? Well, let's put it like -- did he ever go into default on any notes issued to him by Palmetto State Bank?
JAN MALINOWSKI: Read Beard and Zero United.
MR. GRIFFIN: And those were the ones that were written off?
JAN MALINOWSKI: Yes, sir.
MR. GRIFFIN: But he continued to pay those, right?
JAN MALINOWSKI: He periodically made payments, yes, sir.
MR. GRIFFIN: And are you aware that on the day that Maggie Murdaugh -- well, Maggie Murdaugh was murdered some time on the night of June 7th. Are you aware that she was scheduled to meet her appraiser at Edisto on June the 8th?
JAN MALINOWSKI: No, sir.
MR. GRIFFIN: The Moselle property was titled in Maggie Murdaugh's name in June of 2021, correct?
JAN MALINOWSKI: I believe that's correct.
MR. GRIFFIN: The bank had filed mortgages on property that predated whenever that was transferred to Ms. Murdaugh, right?
JAN MALINOWSKI: Yes, sir.
MR. GRIFFIN: The Edisto Beach house was titled in -- jointly in Alex Murdaugh's and Maggie Murdaugh's name, correct?
JAN MALINOWSKI: At one point.
MR. GRIFFIN: Before her death.
JAN MALINOWSKI: I believe it was in her name solely at the time of her death.
MR. GRIFFIN: You do? Are you sure about that?
JAN MALINOWSKI: I believe so.
MR. GRIFFIN: And what information are you relying upon to say that?
JAN MALINOWSKI: Looking at the Colleton County deed records.
MR. GRIFFIN: One second.
(Break in proceedings.)
MR. GRIFFIN: Did the bank undergo routine FDIC audits, Palmetto State Bank?
JAN MALINOWSKI: Yes, sir.
MR. GRIFFIN: And had Mr. Murdaugh's relationship with the bank ever been flagged in any audit conducted by FDIC or their contract auditors?
JAN MALINOWSKI: To my knowledge, no.
MR. GRIFFIN: That's all of the questions I have.
MR. WATERS: Mr. Malinowski, just a few more questions. May it please the Court?
REDIRECT-EXAMINATION
BY MR. WATERS:
MR. WATERS: If I can get 365 back that we were just looking at? This was that memo that was prepared for the board meetings, correct?
JAN MALINOWSKI: This was the one that was prepared for the executive committee.
MR. WATERS: And what does it say right there at the bottom, the purpose that's being recorded that the $750,000 is for?
JAN MALINOWSKI: To remodel of the house in Edisto.
MR. WATERS: Does it say anything about sending $350,000 to Chris Wilson to try to make up the funds that he had diverted from his law firm?
JAN MALINOWSKI: No, sir.
MR. WATERS: Does it say anything about $400,000 to cover a 347,000 overdraft?
JAN MALINOWSKI: No, sir.
MR. WATERS: After June 7th, was the first significant activity from the bank to Alex to provide that $350,000 off the books with no application whatsoever?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And after June the 7th, did his account run to negative $347,000?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And the bank kept paying?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: Perhaps the most generous overdraft policy I've ever seen.
JAN MALINOWSKI: Quite possibly.
MR. WATERS: You were asked a little bit about Zero United and Red Beard, which are up on the screen. The bank did not foreclose on those properties. Is that correct?
JAN MALINOWSKI: That's correct.
MR. WATERS: So, Alex Murdaugh still owned those properties, correct?
JAN MALINOWSKI: He and partners, yes, sir.
MR. WATERS: All right, but if he were to try to sell them, could he have sold them without having to account to the bank?
JAN MALINOWSKI: He would have had to pay back the monies he owed -- borrowed from the bank.
MR. WATERS: And we see up on that screen --
MR. WATERS: What happened to my exhibit?
MR. WATERS: Back to 365. If he had tried to sell those properties, would he have just had to pay the bank those amounts listed there, or could it potentially be much higher than that?
JAN MALINOWSKI: Potentially much higher.
MR. WATERS: And explain to the Court very quickly why it could be much higher than that that he would have to satisfy before he could sell those properties.
JAN MALINOWSKI: It would be accrued interest and any late charges and fees that accumulated since the date of the charge off.
MR. WATERS: Once y'all charged it off, it no longer was accruing interest and penalties and fees on the books at least, correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: But if you were to -- if he was to try to sell that property and the buyer came to you to see how much that they needed to pay y'all out of the proceeds before title could transfer, y'all would go look back and look at all that interest that hadn't been paid over that time.
JAN MALINOWSKI: Yes. We would provide a payoff statement which would have included principal, accrued interest or lost interest to that date and any late fees and charges.
MR. WATERS: And he would be unable to sell those properties and transfer title until some arrangement was reached with the bank.
JAN MALINOWSKI: Yes, sir.
MR. WATERS: We just -- you were just asked about whether or not Maggie was going to be meeting an appraisal (sic) at the Edisto property, but you testified in no uncertain terms that that appraisal was to renew the mortgage that was already in existence that had matured, correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: It had nothing to do with the a new 750.
JAN MALINOWSKI: Yes, sir.
MR. WATERS: We just talked about the negative $347,000 overdraft policy, correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: In two months, his account had went to negative $347,000.
JAN MALINOWSKI: Yes, sir.
MR. WATERS: If it had come out that Alex Murdaugh had been diverting fees from his law firm, if Alex Murdaugh had been forced to resign from his law firm, if it had come out that that he had been misappropriating money from his clients, would the bank have continued to pay charges coming in on that account?
JAN MALINOWSKI: No, sir.
MR. WATERS: Nothing?
JAN MALINOWSKI: No, sir.
MR. WATERS: No uncertain terms about that?
JAN MALINOWSKI: No uncertain terms.
MR. WATERS: So, all of this testimony about the relationship and the bank, if the truth had come out, it's a new ballgame, correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And in the wake of all of this, Russell Laffitte was terminated and you became CEO. Is that correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: And now there's a new sheriff in town at Palmetto State Bank, correct?
JAN MALINOWSKI: Yes, sir.
MR. WATERS: Thank you.
JUDGE NEWMAN: Anything further?
MR. GRIFFIN: Just briefly.
RECROSS-EXAMINATION
BY MR. GRIFFIN:
MR. GRIFFIN: Mr. Malinowski, how much in interest did Alex Murdaugh pay Palmetto State Bank over the years?
JAN MALINOWSKI: I don't know.
MR. GRIFFIN: It's in excess of $4 million, isn't it?
JAN MALINOWSKI: I don't have a figure.
MR. GRIFFIN: Thank you.
JUDGE NEWMAN: You may step down.
JAN MALINOWSKI: Thank you.
(The witness exited the stand.)
JUDGE NEWMAN: You may call your next witness.
MR. WATERS: Thank you, Your Honor.
JUDGE NEWMAN: We will stand while that next witness is coming.
(Break in proceedings.)
JUDGE NEWMAN: All right. Be in order. You may call your next witness.