Lawyers who spoke to The Texas Lawbook this week said that the complaint filed in February by the Reid Collins & Tsai-represented bankruptcy trustee for GWG Holdings was the Department of Justice’s roadmap to bring criminal proceedings against Bradley Heppner, the former chief executive officer of Beneficient.
The indictment was filed in the Southern District of New York Oct. 28 and was unsealed Tuesday. Heppner is facing five charges: securities fraud, wire fraud, conspiracy to commit securities fraud and wire fraud, making false statements to auditors and falsifying records in a federal investigation.
Quinn Emanuel Urquhart & Sullivan lawyers in the firm’s Washington, D.C., office have been retained to represent Heppner in the proceedings. Earlier this week, authorities executed a search warrant at his home, blocking off the entire street while they combed through his belongings.
“Bradley Heppner, the defendant, engaged in a fraudulent scheme to loot more than $150 million from GWG Holdings, Inc., a publicly traded company for which he served as a chairman,” the 17-page indictment reads. “Heppner accomplished his scheme by extracting GWG’s funds through a series of misrepresentations about, and self-serving transactions with, Highland Consolidated Limited Partners. Though Heppner repeatedly described HCLP as an independent entity, it was, in fact, a shell company controlled by Heppner and operated for his benefit.”
The indictment mirrors claims lodged by court-appointed trustee Michael I. Goldberg in an adversary proceeding in the GWG bankruptcy. In that 156-page complaint, filed against the law firm Holland & Knight and partner Bill Banowsky, Goldberg’s lawyers with Reed Collins & Tsai told the court that the firm and its lawyer “knowingly played a pivotal role in concealing Heppner’s relationship” with the senior lender, Highland Consolidated.
The complaint accuses the firm of knowingly participating “in a fraudulent looting scheme and associated criminal enterprise” by colluding with Heppner to “fraudulently induce” GWG to invest $148.4 million to help Beneficient “stave off collapse” by repaying a senior lender that was actually “a front for Heppner.”
In an interview with The Lawbook Thursday, William T. Reid IV of Reid Collins & Tsai, who represents Goldberg and is a former federal prosecutor, said in reading the indictment “it’s clear that the government spoke to a lot of people” and that more charges against others involved could follow.
“Usually, the way it works is you get the lower level people first, then the middle level people, then… the top person,” he said. “All right, so they indicted Brad Heppner. He is the top guy in the GWG story. So I don’t know that it makes sense that they would have new charges … but it’s possible that they already have people that were lower, or middle, or whatever, who cooperated, and maybe will, in connection with their cooperation, later plead guilty.”
Tom Melsheimer, a partner at Winston & Strawn and a former federal prosecutor, was among the lawyers who spoke to The Lawbook and said the conspiracy charge against Heppner is an indication that either some targets of the investigation have cut deals with federal prosecutors or that more charges may still be brought.
“There are lots of possible targets in a prosecution like this because you cannot make a case without insider cooperation,” he said.
Sarah Douglas, a former federal prosecutor in the Northern District of Texas and who joined Dykema two months ago, said the conspiracy charge in the indictment shows that the government believes that at least one or more people were “willingly participating” in the fraud but may be cooperating.
Those individuals may be charged later or may never be charged, she said.
“The question at the end of the day is, how beneficial are they to the government’s case?” Douglas said. “That will determine what kind of agreement they get. But it is always good for the government to have someone on the inside.”
And the fact that Heppner was indicted by a grand jury in the Southern District of New York rather than the Northern District of Texas “is bad news for the defendant,” Melsheimer said.
“The one thing that has not changed in this current Justice Department is that the Southern District of New York still has the financial expertise and that it remains most autonomous in how it brings financial prosecutions,” he said.
As for the ongoing proceedings in the GWG bankruptcy case, Reid said while the criminal indictment doesn’t hurt, “it certainly doesn’t help.”
In June, Holland & Knight and Banowsky moved to toss the trustee’s claims against them, telling the court the “threadbare complaint should be dismissed.” Holland & Knight and Banowsky argued the trustee had obscured “the facts upon which it must rely for wrongdoing against defendants in this case.”
“The trustee brought claims elsewhere against the ‘mastermind’ of wrongdoing — Brad Heppner — urging breach of fiduciary duty and fraudulent transfer in a distinct adversary proceeding, the settlement of which is now before the court,” the motion reads. “The Trustee also sues elsewhere GWG’s own contracting counterparts, appointed fiduciaries, and retained professionals for common-law breaches. All of these suits, including the tentatively settled, seek to recover on GWG’s behalf every dollar of actual damage sought from defendants here.”
“But the trustee reserved its nuclear weapon, RICO, for a downstream lawyer who wrote a legal opinion neither to nor on behalf of GWG.”
The motion to dismiss characterizes the trustee’s complaint against Holland & Knight and Banowsky as a “fact-less rendition” that paints Banowsky as “the corrupt lynchpin to a web of lies that predated him” and as “Heppner’s cloak to conceal control and dagger to extract millions.”
“The facts actually pled show Banowksy did what lawyers do: wrote an opinion letter, negotiated a loan modification, and answered the clarification call of legal counterpart.”
In April 2024, Goldberg filed suit against Beneficient, Heppner and other executives, accusing them of fraud and conspiracy. And in September 2024, he targeted Foley & Lardner in another lawsuit, alleging the firm GWG hired to advise a special committee guiding the company’s partnership with Beneficient had committed legal malpractice and breach of fiduciary duty. Judge Isgur sent that case to arbitration in February.
In October, the trustee asked Bankruptcy Judge Marvin Isgur to approve a settlement with Beneficient that would clear the way for the parties to jointly go after Heppner. The proposed settlement with Beneficient comes in the wake of the company’s disclosures of “startling developments” the trustee said bolsters his own claims against Heppner.
The trustee told the court that Beneficient disclosed in a Form 8-K in June that Heppner resigned his positions with the company after refusing to participate in an interview about “his knowledge of certain documents and information concerning Mr. Heppner’s relationship to a related entity provided to the Company’s auditors in 2019.”
And in August, a second Form 8-K revealed that Beneficient had uncovered “credible evidence that Mr. Heppner participated in fabricating and delivering fake documents to the company regarding his and others relationships to HCLP.” HCLP Nominees is Beneficient’s “purported senior lender and a remaining defendant in the [directors and officers] adversary proceeding.”
In the filing, Beneficient also stated it was “considering all options,” including litigation against Heppner, HCLP and any direct or indirect controllers of HCLP. The trustee told the court those disclosures “directly align” with allegations he has already lodged, “including that Heppner and others concealed his relationship with HCLP so that Heppner could funnel over $140 million of GWG funds to trusts and entities affiliated with Heppner.”
There has not been a ruling on the motion to approve the settlement, and this week, Chief U.S. District Judge Alia Moses granted a motion to recuse Judge Isgur from the case that also has connections to the scandal involving former bankruptcy judge David Jones, Elizabeth Freeman and Jackson Walker.
Haynes Boone partner Kit Addelman is representing Beneficient, and she said the company has been cooperating with the investigation in New York.
“Beneficent parted ways with Mr. Heppner earlier this year, immediately after learning facts related to his fraud on the company and others,” Addelman told The Lawbook. “Beneficient will continue to explore its own claims against Mr. Heppner and will continue to cooperate with the government’s investigation of him.”
Freeman filed notice she was resigning as the GWG wind down trustee two days later.
The case has been assigned to U.S. District Judge Jed S. Rakoff.
The federal government is represented by Daniel Nessim and Alexandra Rothman of the Department of Justice.
The criminal case number is 1:25-cr-00503. The bankruptcy case number is 22-90032.