Ken Leech Charged in $600 Million Trade Allocation Fraud | Image Source: Cloudfront.net
NEW YORK, November 25, 2024 – Federal Prosecutors and the Securities and Change Commission (SEC) accused Kenneth Leech, a former investment agent co-leading the Western Asset Management Company (WAMCO), of orchestrating a $600 million fraudulent allocation program. Leech, 70, is accused of having favoured certain customer portfolios over others by selective allocation of profitable stores, a practice known as “carrier-picking”. ‘
Between January 2021 and October 2023, Leech reportedly assigned stores after observing his performance, directing profits to the WAMCO Macro Opportunities Fund while attributing losses to Core and Core Plus portfolios. This manipulation would have resulted in net gains of $600 million on the first day for the preferred accounts and equivalent losses for the others. Sanjay Wadhwa, Acting Director of ESA’s Implementation Division, described this behaviour as “a shocking betrayal of his fiduciary obligations to his clients. ’
Leech’s lawyer, Jonathan Sack, denied the charges, claiming that Leech “has had a flawless record for nearly 50 years as a merchant and portfolio manager” and plans to “defend vigorously.” Sack pointed out that the accusations “ignor key facts, including the fundamental differences between the different fixed income strategies and the inadequacy of the first… ‘
WAMCO, a subsidiary of Franklin Templeton since its acquisition of Legg Mason in 2020, has been greatly affected by revelations. Since the survey became public, investors have withdrawn approximately $55 billion, or about 15% of WAMCO’s assets under administration. Franklin Templeton reported his first quarterly loss since… attributed part of the recession to a rating of nearly $400 million related to the anticipated lower profit of WAM…
In response to the charges, Franklin Templeton stated that the allegations concerned an individual’s previous trade… and did not involve other investment managers within the company. WAMCO is committed to cooperating fully with government investigations and has implemented better trade policies and practices after…
The case highlights the crucial importance of trust and ethical conduct in investment management. The result of these procedures is likely to have a significant impact on industrial practices and regulatory oversight, particularly with respect to business attribution and customer favouritism.
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