Beneficient executives and attorneys pleaded Thursday for patience and understanding from the Kansas Legislature after the indictment of the firm’s founder, Bradley Heppner, who in the past used spectacular predictions of wealth creation to charm state lawmakers into awarding the company a special bank charter, according to news website, the Kansas Reflector.
Heppner, the former chair of GWG Holdings Inc. and Beneficient, a closely related company, on Tuesday was charged by the Department of Justice with five counts, including securities and wire fraud, related to a scheme to steal $150 million.
According to the federal indictment, Heppner received more than $150 million in payments through funneling money from GWG to a shell company he controlled at Beneficient.
Heppner used these funds for a variety of expenses, according to the indictment. Meanwhile, GWG declared bankruptcy in 2022.
Heppner’s expenses allegedly included: “More than $40 million in renovations and decorations in Heppner’s Texas mansion; more than $10 million for upkeep, expansion and various IT services at Heppner’s ranch and mansion; more than $10 million for personal credit card and air travel expenses; roughly $20 million to cover tax expenses; and more than $500,000 on jewelry.”
Beneficient is an alternative assets firm that buys and sells illiquid investments. GWG raised money by selling bonds backed by life insurance policies called L bonds; L bond investors have incurred $1 billion in losses, according to the Department of Justice.
According to the Kansas Reflector article, Interim Beneficient CEO James Silk joined Derek Fletcher, the company’s president and chief fiduciary officer, at a House and Senate committee hearing in the Kansas Statehouse in Topeka yesterday, two days after the arrest of former chair, CEO and founder Heppner.
Silk referred to the federal charges as “the elephant in the room” at the hearing and added that a Beneficient auditing committee discovered evidence Heppner engaged in fraud during his leadership of the company.
“What that internal investigation determined was consistent with … what was set out in the indictment,” Silk told legislators, according to the article. “While the indictment is upsetting to all of us and serving a legitimate red flag for any organization, … we are aligned with the U.S. government about identifying, remedying and moving forward on this. You don’t have to be a Venezuelan drug cartel boat driver to know that you want to be on the U.S. government side of that.”
Heppner resigned from Beneficient earlier this year.
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.
Heppner controlled Beneficient Company Group and it and GWG became intertwined and related when GWG in 2018 purchased a stake in Beneficient.
With the two companies linked, Heppner became chairman of both in 2019.
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