Former star bond investor Ken Leech pleads guilty to obstructing probe

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Ken Leech, former star bond investor at Franklin Templeton’s Western Asset Management, pleaded guilty to obstructing an investigation into alleged “cherry picking” of trades for favoured portfolios, avoiding a trial that was due to start on Monday.

Leech, who was previously co-chief investment officer at Western, appeared in federal court in Manhattan to enter the plea on Friday morning. Under an agreement with the US Justice Department, the remainder of the charges accusing him of fraud will be dropped.

The former fund manager was charged by US prosecutors with criminal fraud in November 2024 for allegedly orchestrating a $600mn “cherry-picking” scheme that improperly allocated trades to particular portfolios at Western Asset Management. His trial had been scheduled to begin on June 15.

The obstruction charge, stemming from false statements he made to investigators in a related probe by the US Securities and Exchange Commission, has a maximum sentence of five years in prison. But under Leech’s plea agreement, prosecutors have agreed to seek a range of six to 12 months. The sentence will be decided by Judge Gregory Woods at a hearing scheduled for September 21.

“I knew that I was giving false and misleading testimony about my trade allocation process, and that giving that testimony was wrong,” Leech told the judge on Friday.

Western last week agreed to pay a $100mn civil penalty to Wall Street’s securities watchdog to resolve a probe into Leech.

The SEC said in its filing announcing the settlement last Friday that Western, which had about $229bn in assets under management as of March 2026, had “failed to take reasonable steps to detect and prevent this conduct by its former co-CIO” and was “aware” his trading and allocation practices “diverged from those of other portfolio managers”.

Western has posted more than $150bn of long-term net outflows since the watchdog charged Western’s former co-chief investment officer in 2024.

Franklin Templeton’s second-quarter numbers, posted in late April, showed long-term net inflows of $17bn across public and private markets, inclusive of a $4.1bn outflow from Western.

A spokesperson for Franklin Templeton declined to comment.