TOPEKA — The Kansas House offered preliminary support Tuesday for a bill forbidding any state agency from serving as receiver of the Texas-based business granted a state bank charter five years ago but undermined by financial scandals prompting indictment of the company’s former CEO.
The Kansas Legislature ordered issuance in 2021 of a Kansas charter to Beneficient, a company devoted to working with wealthy clients to create liquidity for assets not readily traded or transferred. Beneficient secured bipartisan support from the Legislature when it moved into Kansas.
The state’s bank commissioner opposed the charter because he wasn’t convinced state law allowed proper oversight. Commissioner David Herndon consistently voiced concern about Beneficient’s viability.
In the past five years, Beneficient struggled to gain traction with its business model, failed to fulfill some economic development promises and was staggered when former CEO Brad Heppner was arrested on a federal indictment. The U.S. Department of Justice alleging he looted a different company and funneled more than $150 million into a shell company he secretly controlled.
The FBI said Heppner “allegedly falsified documents, made misleading statements to investors and auditors, and obstructed an investigation by regulatory authorities.”
In response, the House and Senate developed Senate Bill 300 to block the Office of the State Bank Commissioner from being named receiver of Beneficient if the company filed for bankruptcy or was declared insolvent.
Rep. Nick Hoheisel, a Wichita Republican and chairman of the House’s financial institutions committee, urged House colleagues to support the bill so the state would be better shielded from financial problems if Beneficient collapsed.
“It’s a simple bill,” he said. “It would just prohibit the Office of State Bank Commissioner or any other state agency from becoming a receiver.”
Final action could occur Wednesday in the House, but the bill wouldn’t be forwarded to Gov. Laura Kelly until the Senate concurred with a House amendment.
Rep. Rui Xu, a Lenexa Democrat on the House financial institution committee, said he supported the bill. He said the legislation was evidence that the state should take a hard look at possible mistakes made when Beneficient acquired the state bank charter.
When Beneficient was awarded the charter, company executives promised to invest in rural Kansas economic development. Dozens of grants have been issued to small Kansas communities through the state Department of Commerce. A pledge to revitalize Hesston, where Heppner grew up, has been partially realized. However, Heppner’s objective of building a grocery store in the city hasn’t been accomplished.
“The promises that were made when we first passed the bill … have not materialized,” Xu said. “The grocery store is not there, still.”
He said Beneficient was the state’s lone TEFFI, which is short for technology-enabled fiduciary financial institution.
“We were promised several companies wanted to come in to establish TEFFIs,” Xu said. “That has not materialized.”