‘Elephant in the room’: Beneficient executives respond to former CEO’s fraud indictment

Beneficient executives and attorneys, from left, Alan Deines, Derek Fletcher, James Silk and Jeff King, prepare for a Kansas Legislature committee hearing Nov. 6, 2025, on the company holding a unique bank charger amid indictment of the firm's founder for alleged fraud. (Photo by Tim Carpenter/Kansas Reflector)

TOPEKA — Beneficient executives and attorneys pleaded Thursday for patience and understanding from the Kansas Legislature after indictment of the firm’s founder, who used spectacular predictions of wealth creation to charm state legislators into awarding the company a special bank charter.

Interim Beneficient CEO James Silk joined Derek Fletcher, company’s president and chief fiduciary officer, at a House and Senate committee hearing in the Statehouse two days after the arrest of former CEO and founder Brad Heppner.

Silk delved into the indictment controversy, which he referred to as “the elephant in the room.” He said 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. “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.”

The indictment unsealed in New York City asserted Heppner enriched himself by illegally siphoning about $150 million from GWG Holdings, which was at a time linked to Beneficient. Heppner led both companies and allegedly controlled a shell company where he purportedly moved large amounts of cash for personal use on property, travel and other expenditures. GWG Holdings was forced into bankruptcy, which cost 15,000 investors about $1 billion.

The U.S. Department of Justice contended Heppner engaged in securities fraud, wire fraud, made false statements, falsified records and engaged in a conspiracy to commit fraud. He was arrested Tuesday in Dallas.

Silk said that, unlike Heppner, he wouldn’t try to bedazzle legislators by claiming Beneficient was on the verge of of expanding its business in Kansas and making people very rich. He said Beneficient had a few transactions in the pipeline, but it would be folly to claim the company was on the cusp of deals worth hundreds of millions of dollars.

“It’s fair to say that we have, in the past, overpromised and underdelivered,” he said. “We’re not about chasing stock price. We want to build fundamental value.”

Fletcher said Beneficient was headed in the right direction but would need time to reshape the company into something worthy of trust from investors and regulators.

“We understand the seriousness of the moment and the circumstances that have arisen, and we’re committed to moving forward with integrity,” Fletcher said. “The news over the last few months, and particularly the last 48 hours, has been disappointing, troubling and, quite frankly, for me, one of sadness.”

Heppner was the key Beneficient contact as Republicans and Democrats were showered with campaign donations and the Legislature passed a bill in 2022 that guaranteed Beneficient a bank charter like no other in Kansas. Heppner remained a presence at House and Senate committees with oversight of financial institutions before forced out of Beneficient in June.

The state passed a law enabling Beneficient to engage in alternative asset deals in exchange for financially supporting economic development activities in rural Kansas. The agenda included construction of a grocery store in Hesston, a city in Kansas where Heppner grew up. So far, Beneficient officials said, $9 million was set aside for Kansas economic development. Work on the grocery store has been slow, but a Hesston foundation devoted to the project said Heppner’s resignation led to a reappraisal of the plan that could make it more likely the project was built.

The state law crafted to serve Beneficient’s interests prevented the Kansas Office of State Bank Commissioner, or OSBC, from regulating the entity as it would a traditional bank or trust. The Dallas-based firm has specialized in exchange of cash or stock for illiquid assets held by large investors. The company sought the bank charter to give it leverage in the marketplace.

David Herndon, the state bank commissioner, also addressed the Joint Fiduciary Financial Institutions Committee. He opposed awarding Beneficient a charter. For years, he urged the Legislature to strengthen regulatory oversight of the company or repeal the statute entirely. In Herndon’s view, Beneficient could conduct its alternative asset business without the charter. Beneficient executives disagreed with that conclusion.

Herndon said concerns about Beneficient included financial stress on the company, tardy filings with the U.S. Securities and Exchange Commission, the company’s low stock price, claims that employees weren’t being paid, the low number of Beneficient transactions, the company founder’s abrupt exodus and the subsequent indictment. A financial examination by bank regulators revealed violations by Beneficient, he said.

“Significant and repeated violations of the Kansas statutes and regulations have been cited,” Herndon said. “Due to the volume of these violations, OSBC has proposed issuance of a formal corrective action.”

Sen. Stephen Owens, a Republican from Hesston, asked Herndon why regulations hadn’t been issued by the state to guide the business model adopted by Beneficient. Herndon said OSBC didn’t have authority to adopt those rules.

Owens criticized Herndon for questioning the state’s ability to provide meaningful regulatory oversight of Beneficient.

“There is such strong opposition, yet zero evidence … that there’s been any harm to the Kansas taxpayer,” the senator said. “While the business certainly hasn’t gone in the way that I think anybody has expected, I continue to reiterate the fact that there is no risk and no harm has come to the Kansas taxpayer for the passing of this (Beneficient) legislation and allowing an industry to get a foothold.”

Rep. Nick Hoheisel, R-Wichita, said allegations against Heppner contained in the indictment were disappointing. It was important to remind Kansans that Heppner was no longer part of Beneficient, he said.

“It’s a new day for the company,” Hoheisel said. “We need to figure out was Beneficient … built on those lies that Mr. Heppner described here? Or, is it an actual business model that can succeed? That’s what we’re going to get to the bottom of.”