Bipartisan interest surfaces for scrutiny of Kansas bank charter issued to Beneficient

Rep. Rick Hoheisel, a Republican from Wichita and chair of a House-Senate oversight committee, says indictment of the former CEO of Texas-based Beneficient is sufficient cause to evaluate the state's issuance of a bank charter to Beneficient in 2021. The idea of an inquiry has bipartisan support. (Photo by Thad Allton for Kansas Reflector)

TOPEKA — Bipartisan support exists in the Kansas Legislature to scrutinize a state bank charter issued to a company whose founder has been indicted and accused of syphoning millions of dollars from a now-bankrupt business to finance his opulent lifestyle.

Rep. Nick Hoheisel, a Republican from Wichita, said the Legislature should examine results of state law that guaranteed a charter in 2021 for Texas-based Beneficient, an alternative investment company relying on the banking credential to attract wealthy clients to its business of exchanging cash or stock for illiquid assets.

“Frankly, my committee will be looking at the TEFFI Act as we get into session,” Hoheisel said. “We will be taking a look at this whole thing.”

Hoheisel serves as chair of the House Financial Institutions and Pensions Committee, as well as the joint House and Senate oversight committee responsible for supervision of the TEFFI Act. The law opened the door to Beneficent’s bank charter.

He said he wasn’t eager to pull the plug on Beneficient, because he wanted to offer the company’s executives “an opportunity to get this right.” The 2026 Legislature convenes in January.

Official exploration of Beneficient didn’t gain bipartisan traction until a federal indictment against Beneficient founder Brad Heppner for alleged securities and wire fraud. He was arrested in early November after a grand jury approved a five-count indictment alleging approximately $300 million had been transferred from GWG Holdings to Beneficient and that Heppner subsequently funneled more than $150 million of that total to a shell company he secretly controlled. Heppner was chairman of Beneficient and GWG Holdings from 2019 to 2021.

The FBI said Heppner “allegedly falsified documents, made misleading statements to investors and auditors, and obstructed an investigation by regulatory authorities.” He faces a maximum sentence of 20 years in prison.

The indictment says Heppner purportedly spent $40 million on his Dallas home, $10 million for upkeep at the mansion and an East Texas ranch, $20 million to pay tax liabilities, $10 million for personal credit card debt and private air travel expenses, and $500,000 on jewelry.

In wake of the indictment, Democratic Rep. Rui Xu of Westwood said it was time the Legislature considered ending the state’s alliance with Beneficient by revoking the state bank charter.

The charter was authorized in April 2021 as a pilot project. The Legislature adopted a bill in 2022 requiring the charter be made permanent retroactive to December 2021. That bill was championed by Senate President Ty Masterson, R-Wichita, and signed into law by Democratic Gov. Laura Kelly.

“All this stemmed from a poison seed, if you will. We just kept trying to water and water it,” Xu said. “Just from its inception this has smelled a little funny and continues to smell a little funny. This is not a thing, I think, Kansans want the state to be involved with.”

Sen. Brenda Dietrich, R-Topeka, said legislation ought to be introduced in the House and Senate to forbid state agencies from accepting receivership of any portion of Beneficient if the company filed for bankruptcy or was declared insolvent.

“I think we need to protect our state, protect our constituents,” Deitrich said. “That just makes sense.”

The TEFFI law was controversial because Kansas Bank Commissioner David Herndon opposed the unique arrangement with Beneficient, complained the Legislature placed unreasonable limits on state regulation of Beneficient and its subsidiaries. He also expressed frustration the Legislature wouldn’t consider revocation of Beneficient’s charter. Herndon’s pleas generally fell on deaf ears at the Statehouse.

To gain traction for legislation tied to Beneficient’s bank charter, the company’s allies donated thousands of dollars to Republican and Democratic politicians and directed cash to partisan political action committees in Kansas. The original bank charter bill unanimously passed by the Senate and was endorsed 103-20 in the House.

Lobbying led by Heppner, until he resigned from Beneficient in summer of 2025, included promises the partnership between the state and Beneficient would create an economic windfall for Kansas and trigger a surge in business development in rural Kansas.

In the past several years, questions were raised about Heppner, or others associated with Beneficient, possibly engaging in financial misconduct. Trustees working on behalf of investors in GWG Holdings, which filed for bankruptcy in 2022, pursued lawsuits to claw back millions of dollars drained from GWG Holdings. In March, Beneficient’s executives and officers settled claims with GWG Holdings for $50.5 million. In addition, GWG Holdings’ litigation led to settlements of $30 million with a law firm and $8.5 million with an accounting firm.

Sen. Stephen Owens, a Hesston Republican who relentlessly championed the public-private partnership with Beneficient, said at one point the state’s association with Beneficient would enable $1 billion in global investment to flow through Kansas within a decade.

Owens said it would be folly to withdraw Beneficient’s bank charter by repealing the TEFFI Act, which stands for Technology-Enabled Fiduciary Financial Institutions Act.

“I absolutely reject this notion,” he said. “I reject the idea that right now is the time to repeal the TEFFI Act.”

He said legislation giving the bank commissioner the power to revoke Beneficient’s charter should include an appeal process to the Legislature.

Owens said he was frustrated the Kansas bank commissioner hadn’t been more supportive of the Beneficient venture. He complained the commissioner declined to develop regulations that might have encouraged other financial companies to locate in Kansas.

“It is my opinion that the office of state bank commissioner is hostile towards this act as a whole,” Owens said.