Kansas lawmaker calls for end to financial program catering to wealthy investors
A Kansas senator is calling for the repeal of a new financial system the Legislature established last year, calling it a “pay-to-play scheme.”
Senator Tom Holland, a Baldwin Democrat, sent a letter to the Kansas Office of the State Bank Commission, Kansas Bureau of Investigation and Kansas Securities Commission last week asking for the immediate suspension and investigation of Beneficient, the company that proposed the program, called a TEFFI or Technology Enabled Fiduciary Financial Systems.
“I believe the Beneficient TEFFI Legislation is a Beneficient directed, Kansas Legislature created, financial services pay-to-play scheme,” Holland said.
Holland cited reporting in The Kansas City Star detailing a class action lawsuit alleging that Beneficient’s CEO, Brad Heppner, defrauded investors at the organization’s former parent company, GWGH Holdings.
The TEFFI allows wealthy individuals to borrow against assets that are difficult to immediately liquidate, such as trusts or hedge funds. Proponents say this kind of financing was often previously available only to large institutions. One trust expert said traditional trust law doesn’t allow these kinds of loans because they are difficult to regulate in a way that ensures companies are acting in the best interest of beneficiaries.
Beneficient came to the Kansas Legislature last year asking to set up a first-of-its-kind program establishing TEFFI in the state. Revenues generated by the venture would go to rural communities.
The company and its employees donated more than $50,000 to gubernatorial and legislative campaigns and agreed to pay the $1 million needed for the Office of the State Bank Commissioner to write regulations.
Beneficient then played a major role writing the regulations under which it would operate.
In a news conference Tuesday, Holland said he believed the Legislature effectively stymied the bank commission’s ability to truly vet the company before allowing it do business in Kansas.
“Mr. Heppner has been working the refs (the board of bank comissioners) through the Legislature,” Holland said.
Repeal of the program would require a Legislative vote, something that is unlikely as the program gained nearly unanimous support among lawmakers.
Rep. Stephen Owens, a Heston Republican and lead proponent of the program, said he saw no reason for Kansas to stop TEFFIs.
“This legislation has no bearing on the taxpayer of Kansas, it has costed the state nothing,” Owens said. “I remain 100% convinced that the state of Kansas has put the appropriate safeguards in place to ensure that this industry is successful. If this industry is not successful it will be based on its own merits.”
This story was originally published March 29, 2022 at 4:17 PM with the headline "Kansas lawmaker calls for end to financial program catering to wealthy investors."
