Kenneth Leech, former co-chief investment officer at Western Asset Management Co., pleaded guilty in Manhattan federal court on June 12 to obstructing a Securities and Exchange Commission investigation. The charge stems from false testimony provided during a probe into a trade allocation scheme that allegedly funneled over $600 million in profits to preferred client portfolios.
The guilty plea arrived just three days before a scheduled criminal fraud trial. Leech admitted he lied to the SEC under oath on March 6, 2024, regarding his trade allocation practices.
Between January 2021 and October 2023, Leech allegedly monitored intraday trade performance before assigning winners to his "Macro Opportunities" portfolios and losses to "Core" and "Core Plus" accounts. This cherry-picking strategy reportedly directed more than $600 million in gains to favored clients while shifting comparable losses to others.
Western Asset Management, which oversees approximately $229 billion in assets, agreed to pay a $100 million civil penalty to the SEC on June 5 to settle related charges. The firm did not admit wrongdoing. The Department of Justice declined to pursue criminal charges against the company itself.
Leech, 71, now faces sentencing that could end his career in fixed-income management with prison time. His admission of obstruction provides a strong foundation for potential civil lawsuits from investors in the disadvantaged portfolios who absorbed misdirected losses.