The fund manager charged in an alleged cherry-picking scheme — that allegedly involved allocating US$600 million worth of profitable trades to favoured accounts, while sending corresponding losses to other accounts — resolved the criminal case against him by pleading guilty to a charge of obstructing justice.
Earlier in June, fund management firm Western Asset Management Company LLC (WAMCO) agreed to pay US$100 million in a settlement with the U.S. Securities and Exchange Commission (SEC) to settle allegations that it failed to supervise its former co-chief investment officer, Stephen Kenneth Leech II.
The SEC alleged that, between January 2021 and October 2023, Leech engaged in cherry-picking by delaying the allocation of his trades so that winning trades could be directed to certain accounts, and losing trades could be allocated to others.
Alongside the SEC’s allegations, Leech also faced a parallel criminal case in the Southern District of New York (SDNY) that included charges of securities fraud, investment advisor fraud, commodities fraud, commodity trading advisor fraud and making false statements.
On Friday, the U.S. attorney’s office for the SDNY announced that Leech — who originally pleaded not guilty to all the charges — has now pleaded guilty to obstruction for making false statements to the SEC during its investigation into the alleged scheme.
He is now scheduled to be sentenced on Sept. 21.
The firm settled the SEC’s case without admitting the allegations.