Kansas government caters to the rich. Economic development should work for us all. – Kansas Reflector

In years to come the case of Brad Heppner and his cynical notion of a “pawn shop for the rich” may come to epitomize the avaricious bipartisan recklessness with which our Kansas politicians have catered to the powerful at the expense of everyone else.

Now that the Securities and Exchange Commission is breathing hard down Heppner’s neck, according to recent reporting by the Wall Street Journal, there may finally be a reckoning for the Kansas experiment in alternative banking. But it won’t stop the moral weakness and intellectual stupor of politicians who give such schemes the blessing of legislation.

From Heppner’s “alternative assets” lending company Beneficient to the adoption of statewide sports betting to the secret deal for a Panasonic battery plant at De Soto, our lawmakers and state officials have catered to influence. The magic phrase in the Kansas Statehouse is “economic development” and it opens every door. This has resulted in a kind of economic Darwinism in which only the richest and best-connected survive while the vulnerable are left to the beasts.

Our legislators can’t agree to defend our trans kids or expand Medicaid or embrace scientifically proven medical advice, but they will go to extraordinary lengths to serve the rapacious monied. Old-fashioned ideas like social justice or economic equality or basic human rights gain no traction in the marbled halls in Topeka, but let a self-styled rainmaker come knocking and our elected officials on both sides of the aisle will fall all over themselves trying to please.

A new law for an untried model

The Legislature literally rewrote banking laws to allow Heppner’s company, Beneficient, to open shop in his hometown of Hesston. The firm loans money on traditionally illiquid assets, such as a hedge fund or an expensive antique instrument, to individuals with a typical net worth of at least $5 million. This was authorized by the 2021 TEFFI Act, passed by a near-unanimous vote. TEFFI is a silly acronym that stands for “technology-enabled fiduciary financial institution,” which sounds important but is essentially without meaning. What financial institution today doesn’t use technology?

From the start, the Kansas bank commissioner had concerns over the charter for Beneficient and the lack of regulation in the act. But the promise of rural economic development grants, funded by a percentage of the TEFFI transactions, was too good to pass up. What risk could there be to Kansans when most of Beneficient’s customers would be well-heeled out-of-staters?

Heppner even told a story about how his mother, who still lives in Hesston, had appealed to him to bring a grocery store to town, because that last one had closed a few years before. Heppner vowed to bring a grocery store back through the economic development money his vision would generate.

But reporting by the Wall Street Journal underscores concerns over a $2 billion default of a former Heppner-helmed company, some allegedly faulty accounting, and a stock price that has plummeted 85% since Beneficient merged with another firm and went public a few weeks ago.

Creditors of a failed past company, GWG Holdings, alleged in federal bankruptcy filings that Heppner was engaged in a “classic Ponzi scheme” to suck $350 million from the sale of bonds held by GWG to bankroll Beneficient. Attorneys for Beneficient denied the allegation.