The bankruptcy trustee of the GWG Litigation Trust has filed a 156-page lawsuit against law firm Holland & Knight LLP and attorney William “Bill” Banowsky, alleging a complex fraudulent scheme that cost GWG Holdings Inc. more than $100 million.
Michael L. Goldberg, the GWG Litigation trustee, is seeking at least $148.4 million, including treble damages, pre- and post-judgment interest, attorney fees and a jury trial for all claims.
Neither Holland & Knight nor its law partner Banowsky immediately responded to requests for comment.
The trustee’s complaint accuses Holland & Knight and Banowsky of participating in a criminal enterprise with Bradley K. Heppner, the company’s former board chairman, to defraud the organization between 2019 and 2020.
“Heppner-controlled intermediaries into an entity that had for two decades functioned as Heppner’s personal slush fund,
Highland Consolidated LP,” alleged the lawsuit. “From there, the funds flowed into Heppner-affiliated trusts and entities for his and his family’s personal gain, directly contrary to representations Defendants made to GWG’s decision-makers that Heppner could not control HCLP and would not benefit from GWG’s advances.”
Court documents claim attorney Banowsky knowingly concealed Heppner’s relationship with Highland Consolidated during a critical period, which allegedly enabled the fraudulent activities. The lawsuit also alleges Banowsky “intentionally and fraudulently disguised” Heppner’s connections in ways that deviated from standard legal professional conduct.
One example from the lawsuit where Banowsky allegedly “intentionally and fraudulently disguised” Heppner’s connections is detailed in the February 2019 Litigation Opinion. In this document, Banowsky allegedly falsely represented that Keith Martens, not Heppner, ultimately controlled Highland Consolidated Nominees LLC.
This statement was incorrect and materially misleading because, at the time, Heppner was actually the manager of HCI, not Martens, the suit claims.
HCI, or Highland Consolidated Investments is a Texas limited liability company formed in December 1996 by Bradley K. Heppner, Marcy Heppner Thiesen, and Jeffrey K. Hinkle in his capacity as Trustee of the Bradley K. Heppner 1996 Family Trust. HCI initially managed Highland Consolidated, L.P., and later served as its general partner. HCI played a role in the control structure of HCLP Nominees, LLC (HCLP), as it was involved in the management and organizational hierarchy of the entities related to HCLP.
Additionally, Martens was allegedly a close friend of Heppner and took marching orders from him, indicating that Heppner still had de facto control over HCLP, according to allegations. This alleged fraudulent misrepresentation was part of a broader scheme to conceal Heppner’s control over HCLP and related entities, thereby misleading GWG and its Special Committee into believing that HCLP was an independent third-party lender.
The lawsuit claims multiple counts of misconduct, including alleged violations of the Racketeer Influenced and Corrupt Organizations Act or RICO, conspiracy, civil conspiracy, fraud, negligent misrepresentation and aiding and abetting breaches of fiduciary duty.