By Adam Strunk
In January, Beneficient announced $15 million in asset contributions under the TEFFI Act, passed in 2021 to benefit rural Kansas, namely the Hesston community.
This week, Beneficient provided more information on what those contributions look like and stated that the money would be distributed to the state and charitable foundations as soon as accounts are created to take it.
“Over the past several weeks, we have been collaborating with the Department of Commerce and with charitable foundations, as they create appropriate accounts to receive this funding,” Beneficient (BEN) President and Chief Fiduciary Officer Derek Fletcher stated. He added that all parties involved are working to make sure the TEFFI program was implemented appropriately. “Once these accounts have been finalized, the funds will be promptly distributed.”
Currently, the Hesston City Council spent $25,000 to conduct an engineering study for a possible $24 million downtown development. Those plans factor the TEFFI money heavily, around $8 million, according to a discussion of the plans at the meeting.
According to past reporting, the development would encompass Heritage Park and expand past it. Under the proposal, it would establish a grocery store, city facilities, and other amenities such as a proposed non-denominational chapel. There would be a museum and a hotel, to name a few.
As per discussion of the possible development at a February meeting, the city would throw in its own funding to the project. That number would be $4 million. Hesston applied for $12 million in federal stimulus grants distributed through the State of Kansas to pay for the project, as well. The state is expected to announce if that request will be granted soon.
The proposed plan was the vision of Beneficient founder and CEO Brad Heppner, who grew up in Hesston and encouraged the city to look at the ambitious project he presented and apply for the state grant at a February city council meeting.
In March, the Wichita Eagle and Kansas City Star reported on a federal lawsuit naming GWG Holdings, Inc., a related company, as well as some members of the Beneficient Board of Directors as defendants.
Following community questions, Harvey County Now reached out to Fletcher, Hesston Mayor David Kauffman, and State Representative Stephen Owens. All said the existing TEFFI funds were secure for Hesston to plan on developing.
On April 4, the Kansas Department of Commerce confirmed it was working with Beneficient to establish accounts.
Both parties are working together to create accounts to place the existing $15 million in contributions generated by the TEFFI Act passed last May.
Heppner said the work began after the issuance of a trust company charter for Beneficient by the Office of the State Banking Commissioner at the end of 2021.
He said that all parties were trying to get accounts set up as quickly as possible.
“Due to the unique and innovated nature of this program, BEN and the team at Commerce are also focused on structuring the accounts and the administrative process correctly,” he said.
Heppner said the setup process would make the accounts suitable for current and future funding and that the process also has to be structured with statutory requirements, IRS regulations, and fiduciary principles.
Heppner said that he expected the process to be completed very soon, and in the meantime, the funds would be held in segregated bank and trust accounts overseen by an independent trustee.
Inside the trust
Fletcher provided a document that gave a breakdown of the $15 million held in a trust called the Kansas TEFFI Economic Growth Trust, established by an independent trustee.
The document stated a deposit of $2.7 million in cash is being held at Merrill Lynch for the benefit of the Kansas Department of Commerce. JPMorgan holds two deposits, $2 million for the benefit of the Heartland Fund and $700,000 for the Heartland Foundation.
The Heartland Foundation, from prior reporting, consists of a board of 13 members, including community members such as Hesston Mayor David Kauffman, representatives from Hesston organizations, as well as three members from Beneficient.
The Heartland Fund is still in the process of being created and would be nestled under the Central Kansas Community Foundation as a donor-advised fund.
“The balance of the $15 million in initial funding is presently in the form of earning investment assets as provided for under the TEFFI Act and is held in trust under the direction of the Independent Trustee,” the document stated. “Those assets will monetize to cash over time while producing returns that are expected to be attractive.”
The documentation provided by Beneficient lists that trustee as John A. Stahl.
Fletcher said that John A. Stahl is independent of Beneficient, GWG Holdings and the State of Kansas. He said he owns no shares or interest in either company.
“During 2019, BEN’s customers were in need of an independent trustee to oversee their alternative asset trusts, and Dr. Stahl was identified as a qualified candidate during the recruitment process,” Fletcher stated. “Prior to his appointment as an independent trustee, Dr. Stahl had no prior business dealings with Beneficient, its founders, affiliates or any of its employees.”
Where does this go from here
David Herndon, State Bank Commissioner of Kansas, said under the TEFFI Act, funds will have to pass through the Department of Commerce.
He said he was outside of any agreements made between Beneficient and the Department of Commerce and that his office was charged with overseeing the process and making sure state law is followed.
“It’s outside of my purview to trace the funds through the Department of Commerce,” he said.
He also said that his office would overview transactions that were made under the law, once a book of business was provided to him.
“We have not done an examination, but it would be too early,” he explained. “They’ve only had the transactional service since January.”
As for Hesston’s proposed project, the state is expected to announce the awards of federal stimulus dollars in the form of economic development grants in the next few weeks.
The announcement was originally set for late March. City Administrator Gary Emry said the announcement has since been delayed after the state received more than 5,000 applicants for such grants.
Should the city continue moving forward on the project, it would then need to access the TEFFI funds.