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The US Department of Justice is dropping most of its charges against S. Kenneth Leech II, the former co-chief investment officer of Western Asset Management Company, in a case that has already cost the firm more than $150 billion in client outflows.
Leech was originally indicted in November 2024 on multiple counts of securities fraud tied to what prosecutors described as a years-long “cherry-picking” scheme.
The scheme that triggered the collapse
Prosecutors alleged Leech did between January 2021 and October 2023. Over that period, the scheme reportedly funneled more than $600 million in gains toward preferred portfolios. Non-favored clients absorbed a roughly equal amount in losses.
The DOJ’s Southern District of New York unsealed its indictment against Leech on November 25, 2024, charging him with multiple counts of fraud. Leech had already been placed on leave from Western Asset back in August 2024, before the formal charges landed.
The fallout for Western Asset
Western Asset Management, a subsidiary of Franklin Templeton, experienced more than $150 billion in long-term net outflows after the charges against Leech became public.
The DOJ notified Western Asset in December 2025 that it would not pursue criminal charges against the firm itself. In June 2026, the Securities and Exchange Commission reached a settlement with the company requiring a $100 million civil penalty. Western Asset agreed to the settlement without admitting wrongdoing. The SEC’s case centered on the firm’s failure to adequately supervise Leech’s trading activity and its negligence in preventing the misconduct from continuing unchecked for years.
Also in June 2026, Leech entered a guilty plea to obstruction charges, just before a trial on the original fraud allegations was set to begin.
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