Former GWG Holdings Chairman Charged in $150M Fraud Scheme
Federal prosecutors have announced the unsealing of an indictment charging Bradley Heppner, the former chairman of GWG Holdings Inc., with misappropriating more than $150 million from GWG, which raised capital primarily through L bonds sold to retail investors –predominantly retirees seeking income.
In total, about 40 broker-dealers sold close to $1.6 billion in GWG L bonds, so-called because they were backed by life settlements, before the firm declared bankruptcy in 2022, leaving investors facing steep losses. GWG bond investors have incurred $1 billion in losses, according to the U.S. Department of Justice.
The latest charges, which include securities fraud, wire fraud, false statements to auditors and falsification of records – each of which carries a maximum sentence of 20 years in prison – stem from an alleged scheme by Heppner and others to fraudulently extract funds from GWG Holdings. Heppner allegedly controlled a shell company, Highland Consolidated Limited Partnership, also known as HCLP, which he created to obtain a $141 million debt payout for himself from Beneficient, a financial services company he founded and controlled.
U.S. attorney for the Southern District of New York, Jay Clayton, stated that Heppner “abused his role as a public company executive to loot the company and to funnel money into his own pockets.”
Between 2018 and 2021, Heppner made false and misleading statements to a special committee of GWG’s board to induce them to authorize investments by GWG in Beneficient, in part to pay off the debt Beneficient purportedly owed to HCLP. When the special committee inquired about who controlled HCLP, Heppner represented that HCLP was independent, disclaimed influence over it, and denied that he would personally receive the payments on the purported debt. Those representations were false and misleading. Heppner allegedly used the funds he received from GWG for personal expenses, including to fund his lifestyle and to renovate his Dallas mansion and improve his East Texas ranch.
In addition, in or about 2019, Heppner allegedly made false and misleading statements and prepared false documents to deceive Beneficient’s auditors in connection with the preparation of Beneficient’s and GWG’s audit.
In June 2021, Heppner resigned from his position on GWG’s board and by the end of 2021, he had separated Beneficient from GWG. Thereafter, GWG filed for Chapter 11 bankruptcy, unable to satisfy the more than $1 billion in obligations to tens of thousands of retail bondholders.
Christopher G. Raia, assistant director in charge of the Federal Bureau of Investigation’s New York field office, confirmed that the scheme caused GWG’s subsequent bankruptcy, resulting in catastrophic losses for investors. Raia emphasized that the FBI “will continue to hold accountable any individual who defrauds investors for their own gain.”
Heppner, age 59, was arrested in Dallas, Texas, and is expected to face trial in the Southern District of New York before U.S. District Judge Jed S. Rakoff. He is also charged with conspiracy to commit securities fraud and wire fraud, which carries a maximum sentence of five years in prison.
Over the summer, a federal judge approved a total of $91.3 million in settlement funds from various executives and professional firms involved in the bankruptcy of GWG Holdings Inc. U.S. bankruptcy Judge Christopher Lopez’s ruling in Houston paved the way for the distribution of the recovery funds to creditors of the firm, which filed for Chapter 11 bankruptcy protection in 2022.
The largest portion of the newly approved settlements includes $50.5 million from GWG’s former directors and officers, an agreement that was previously reported by AltsWire.
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