GWG mess gets worse, chairman charged with $150M fraud

The $1.6 billion mess for investors of GWG Holdings Inc. took a turn for the worse this week when Bradley Heppner, the former chair of GWG and a related company, Beneficient, was charged by the Department of Justice with five counts, including securities and wire fraud, related to a scheme to steal $150 million.

GWG bond investors have incurred $1 billion in losses, according to the Department of Justice.

About 40 broker-dealers sold close to $1.6 billion in GWG L bonds, so-called because they were backed by life settlements, before the firm declared bankruptcy in 2022, leaving investors in the lurch.

According to the criminal indictment, which was made public on Tuesday, Heppner for years used a shell company that he controlled to funnel money from GWG.

“The indictment is pretty stark and crass reading,” said Kal Nekvasil, a plaintiff’s attorney. “The DOJ alleges Heppner created a fictitious debt owed to a company that he indirectly controlled and then stole that money. That’s the heart of the matter.”

Investors have sued broker-dealers that sold GWG bonds seeking damages via private industry arbitration overseen by FINRA. The federal charges against Heppner could spur more investor claims, Nekvasil said.

“Investors realize these bonds are worthless and now there’s this stark charge of fraud,” he added. “That will push more bondholders to sue their broker-dealers.”

“it’s no surprise, anyone who did reasonable due diligence on these investments, the GWG bonds, could easily spot issues,” said Adam Gana, also a plaintiff’s attorney.

As part of his scheme, Heppner allegedly denied any wrongdoing to a special committee of GWG’s board, according to the Department of Justice charges.

The shell company was dubbed Highland Consolidated Limited Partnership – HCLP - and Heppner repeatedly claimed Highland was independent even though he controlled it and it was acting for his benefit, according to the indictment. Heppner allegedly received more than $150 million in payments from GWG that were purportedly to be used to pay debts incurred by HCLP.

According to the indictment, Heppner used this money to fund his lifestyle and renovate his Dallas mansion. GWG eventually collapsed into bankruptcy in 2022 and caused $1 billion in losses to investors and bondholders, many of whom were retirees.

Heppner controlled an alternative investment company, Beneficient Company Group. The two companies became related when GWG, which bought and acquired life insurance policies, in 2018 purchased a stake in Beneficient.

With the two companies intertwined, Heppner became chairman of both in 2019.

Heppner could not be reached Wednesday to comment. He was charged on Tuesday with securities fraud, wire fraud, conspiracy to commit securities fraud and wire fraud, false statements to auditors, and falsification of records. 

Heppner was arrested Tuesday morning in Dallas, Texas, and was to be presented today in the Northern District of Texas. The case has been assigned to U.S. District Judge Jed S. Rakoff in New York. 

“In furtherance of this scheme, Heppner allegedly falsified documents, made misleading statements to investors and auditors, and obstructed an investigation by regulatory authorities,” said FBI Assistant Director in Charge Christopher G. Raia in a statement.

“As previously disclosed, Beneficient parted ways with Mr. Heppner earlier this year promptly after the company learned of clear and credible evidence of his fraud on the company and others,” the company said in a press release Wednesday morning.

“Beneficient will continue to vigorously pursue its own potential claims against Mr. Heppner and entities associated with him on behalf of its shareholders,” according to the statement. ”Beneficient has and will continue to cooperate with the government’s investigation of Mr. Heppner.”