New tool for rich investors promised benefits for rural Kansas. Here’s what’s happened
When the Kansas Legislature last spring approved a bill allowing Dallas-based Beneficient to set up a new type of financial institution in the state, most lawmakers greeted the idea warmly.
Kansas would be on the ground floor of a new innovation in the world of finance, and fees on the new industry would generate millions to pay for projects in rural communities, supporters said.
A year later, key leaders of Beneficient — including the CEO — face allegations in a federal lawsuit that they misled investors at a separate company, GWG Holdings. Until November, Beneficient was a subsidiary of GWGH.
But Kansas is already benefiting from Beneficient’s presence, the company says.
Beneficient says the state is already receiving revenue from the operation, called a Technology Enabled Fiduciary Financial Institution. The TEFFI allows wealthy investors to borrow against assets that are difficult to convert into cash — things like hedge funds.
The company said in January the TEFFI had generated $15 million so far for the state, with $12.3 million going toward projects and $2.7 million to the Kansas Department of Commerce.
Hesston, a city of about 3,500 north of Wichita, is the first recipient of the funding. Beneficient CEO Brad Heppner is a Hesston native and the drive to set up a TEFFI in Kansas has its roots in the city.
Heppner approached his high school classmate, Hesston Mayor David Kauffman, in September 2020, then brought the idea to Rep. Stephen Owens, a Hesston Republican.
Owens became one of the bill’s most vocal proponents. The Legislature approved the program and established a committee to oversee it in just one session — a quick timeline for a Legislature that can spend years on major changes to policy.
The vote was 103-20 in the House and 39-0 in the Senate.
The state law authorizes a 2.5% fee on each TEFFI investment, with the revenue directed toward rural communities. Owens has characterized the project as a no-lose situation for Kansas with the majority of the risk falling on Beneficient.
“Anytime you have something like this it often takes one leader in the industry that is willing to come in and take the risk and do the work,” he said last year.
Beneficient has opened an office in Hesston and is working with a 13-member board — which includes local civic and business leaders and members from Beneficient — to determine where to send the $12.3 million allocated for community reinvestment. Owens said in early March excitement was starting to build for a new grocery store.
The $12.3 million in community investment can support any Kansas Economic Growth Zone or Kansas college or university. Beneficent established a Kansas based escrow and a charitable foundation to distribute the funds. It’s not intended to replace existing funding sources for projects but instead fund new programs.
“As a small town it’s very important to have some things culturally, it’s important to have spaces to meet, places to shop,” Kauffman said in December. “Since we’ve lost a few things it would be nice to regain those.
“This money is going somewhere, it’s gonna go to South Dakota or Texas or somewhere else if it doesn’t go to Kansas.”
Among Owens and other TEFFI supporters, the lawsuit hasn’t caused alarm. Owens remained unconcerned after learning of the suit.
“Anybody can sue anything for any reason, that doesn’t mean there’s validation or reason to it. I’m not overly concerned; we’ll let the court sort it out,” Owens said.
“The legislation we passed here has zero impact on the taxpayer. It has zero impact on the citizens. It’s not like we’ve given them any incentives or put any taxpayer money at risk by passing that legislation.”
A few TEFFI skeptics have raised concerns, however.
The promises that they were making the Legislature in order to get the initial legislation and the promises they continue to make … they appear to be at a scale that is not commensurate with what you would expect,” Rep. John Carmichael, a Wichita Democrat, said.
This story was originally published March 17, 2022 at 4:30 PM with the headline "New tool for rich investors promised benefits for rural Kansas. Here’s what’s happened."
