The bankruptcy trustee appointed to recover funds for creditors in the GWG Holdings bankruptcy case has sued Holland & Knight for nearly $150 million for “knowing participation in a fraudulent looting scheme and associated criminal enterprise” that included Dallas-based financial services firm Beneficient and its founder and CEO Bradley Heppner.
In a 156-page complaint filed Friday in the U.S. Bankruptcy Court in Houston, court-appointed trustee Michael I. Goldberg accuses longtime outside counsel Holland & Knight and one of its Dallas law partners, Bill Banowsky, of colluding with Heppner to “fraudulently induce” GWG to invest the $148.4 million to help BEN “stave off collapse” by repaying a senior lender.
That “senior lender”, according to the trustee’s complaint, was “a front for Heppner” and that the money instead “flowed in-and-out of bank accounts of various Heppner-controlled intermediaries into an entity that had for two decades functioned as Heppner’s personal slush fund.”
The lawsuit, filed in the Southern District of Texas as part of the GWG Holdings bankruptcy before Judge Marvin Isgur, states that Banowsky “knowingly played a pivotal role in concealing Heppner’s relationship” with the senior lender, Highland Consolidated, and that the lawyer “intentionally and fraudulently disguised Heppner’s relationship with HCLP in order to “perpetrate an accounting fraud.”
Heppner, Banowsky and others “conspired to fraudulently backdate several organizational documents” that were intended to “falsely misrepresent” Heppner’s role in or control over HCLP as part of communications with the boards of directors for BEN and GWG, according to the complaint.
While this complaint focuses on Holland & Knight, a prior lawsuit filed by the GWG trustee in April 2024 accused BEN, Heppner and other executives of fraud and conspiracy. And in September 2024, the trustee sued Foley & Lardner, the law firm GWG hired to advise the special committee guiding GWG’s partnership with BEN, for legal malpractice and breach of fiduciary duty. On Feb. 26, Judge Isgur ordered arbitration in that dispute.
GWG and BEN went into business together in 2017 and 2018, when GWG invested more than $150 million into BEN’s operations in exchange for an equity stake.
In a statement posted on its website in April 2024, BEN officials denounced the litigation against the company and its leaders.
“The Litigation Trustee crafted a deliberately selective reading of complex and permissible business transactions, negotiated at arm’s length that spanned many years as GWG Holdings sought to implement its disclosed business strategy to diversify away from its concentrated investment in life insurance policies,” BEN stated. “As it extensively laid out in various GWG Holdings bankruptcy filings, Beneficient has robust defenses to these claims. Beneficient looks forward to dismantling the Litigation Trustee’s allegations in court and providing a clear, factual and complete response to the complaint’s narrative.”
The trustee’s lawsuit details Banowsky’s role in the alleged fraud that led GWG Holdings, a Dallas-based financial services firm that sells bonds backed by life insurance policies, to file for Chapter 11 bankruptcy protection in 2022.
“In addition to knowingly participating in the fraudulent backdating of documents, BEN’s accounting fraud, and making related misrepresentations to GWG, Banowsky also conspired with Heppner and knowingly furthered the fraudulent scheme by serving as HCLP’s mouthpiece and attack dog,” Goldberg alleged in the complaint. “Over the course of a two-year period from March 2019 to March 2021, Heppner repeatedly turned to Banowsky to make threats — purportedly on behalf of HCLP — to pressure GWG into approving transactions with BEN on terms that were unfavorable to GWG.”
“By threatening that HCLP would declare a default and foreclose on BEN and, thereby, destroy GWG’s pre-existing investments in BEN, Banowsky — in cahoots with Heppner — effectively browbeat GWG’s decision-makers into approving transactions with BEN on terms demanded by Heppner,” the trustee claims.
Goldberg, who is the bankruptcy practice co-chair at the law firm Akerman, stated that the “negotiations between GWG and BEN amounted to hostage negotiations, with HCLP holding a gun to BEN’s head and threatening to pull the trigger if GWG did not cough up tens of millions of dollars for BEN to pay down its supposed debts to HCLP.”
The trustee argues that Heppner, as BEN’s founder and largest equity holder, “never could have credibly threated to destroy BEN if GWG failed to pay up.”
“But with Banowsky making the threats (i.e., holding the gun) and falsely portraying HCLP as a hard-bargaining third party, the danger appeared credible, and GWG’s decision-makers ultimately caved,” Goldberg alleges.
Efforts to obtain comment from Holland & Knight were unsuccessful.
Goldberg, the trustee, is represented by Austin lawyers William Reid and Nathaniel Palmer of Reid Collins, which also represents Elon Musk in various litigation matters.
Court records show that Holland & Knight is represented by Houston trial lawyer Rusty Hardin.
The case is In Re GWG Holdings, Michael I. Goldberg, as Trustee of the GWG Litigation Trust v. Holland & Knight and William Banowsky, Case No. 22-90032.