Key facts
- Kenneth Leech, former co-chief investment officer at Western Asset Management Co, pleaded guilty to obstructing an SEC proceeding.
- The plea averts a trial on fraud charges related to an alleged "cherry-picking" scheme.
- Leech is accused of lying during sworn SEC testimony regarding trade allocation.
- Western Asset Management Co agreed to pay a $100 million civil penalty to resolve related SEC charges.
- Leech faces a recommended six to 12 months in prison.
- Sentencing is expected in September.
Kenneth Leech, a former star bond manager at Western Asset Management Co (Wamco), has pleaded guilty to obstructing a U.S. Securities and Exchange Commission (SEC) investigation into alleged "cherry-picking." The scheme involved assigning profitable trades to favored investors and losing trades to others, aiming to boost company revenue and Leech's compensation.
Leech admitted to one count of obstructing an SEC proceeding, avoiding a trial on four fraud charges. Prosecutors accused him of lying during sworn testimony in March 2024 when asked if he had an allocation in mind when placing trades. He allegedly waited to see how trades performed on their first day before retroactively allocating them, particularly focusing on supporting "Macro Opportunities" portfolios after they incurred losses.
As part of a separate settlement, Wamco agreed to pay a $100 million civil penalty to resolve SEC civil charges for failing to properly supervise Leech. The asset manager, part of Franklin Resources, did not admit wrongdoing. Leech, who was indicted in November 2024 after being placed on leave, faces a recommended prison sentence of six to 12 months, with sentencing expected in September. Wamco experienced significant asset outflows following the public disclosure of the probes.