Former Chief Investment Officer Pleads Guilty

Deputy United States Attorney for the Southern District of New York, Sean S. Buckley, announced today that S. KENNETH LEECH II, the former Chief Investment Officer of Western Asset Management Company ("WAMCO"), pled guilty to obstructing justice by giving false and misleading testimony to the United States Securities and Exchange Commission ("SEC") in connection with an investigation into LEECH's fraudulent scheme to favor certain clients at the expense of others. LEECH pled guilty today before U.S. District Judge Gregory H. Woods.

"Leech willfully and intentionally gave false and misleading testimony to the SEC in an effort to obstruct an investigation into his fraudulent scheme to favor certain clients at the expense of others," said Deputy U.S. Attorney Sean S. Buckley. "Investment managers, like Leech, are entrusted by the SEC and the public at large to comply with their duty to be honest to regulators and fair to their clients. Today's plea reflects the commitment of this Office and its law enforcement partners to protecting everyday investors-in New York City and abroad-from investment advisers who violate their legal commitments and seek to deceive clients for their gain or the gain of others."

As alleged in the Indictment, Superseding Information, and other public filings in this case:

Between 2021 and October 2023, LEECH committed fraud and abused the trust placed in him by clients of the investment-management firm WAMCO. LEECH engaged in a criminal scheme commonly known as cherry-picking to compensate for losses in his marquee investment strategy by assigning trades that performed well during their first day into client accounts associated with that investment strategy, and assigning trades that performed poorly over their first day into the accounts of other clients, who were not aware that LEECH was causing them losses to favor others. LEECH's victims included institutional and retail investors who entrusted LEECH to manage their savings and pension plans. Over the course of his criminal scheme, LEECH allocated trades with net first-day gains of at least approximately $600 million to his favored strategy and clients, and allocated trades with net first-day losses of at least approximately $600 million to strategies and clients to whom he owed an equal fiduciary duty.

In an effort to obstruct the investigation of that fraudulent scheme, LEECH testified before the SEC that he knew where he planned to allocate trades at the time he placed them. The facts showed differently. LEECH owed a fiduciary duty to all of his clients. But between 2021 and October 2023, LEECH improperly engaged in a scheme to delay his trades in order to allocate them in a manner that benefitted some of his clients, to the detriment of others. LEECH's scheme defrauded clients for whom he was serving a registered financial advisor.

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LEECH, 72, of Pasadena, California, pled guilty to one count of obstructing justice, which carries a maximum sentence of five years in prison.

The maximum potential sentence in this case is prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. LEECH is scheduled to be sentenced on September 21, 2026.

Mr. Buckley praised the outstanding work of the Federal Bureau of Investigation. Mr. Buckley also expressed appreciation for the assistance of the U.S. Securities and Exchange Commission.

This case is being handled by the Office's Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Thomas S. Burnett and Peter J. Davis and Special Assistant U.S. Attorney Lindsey Keenan are in charge of the prosecution.