Ken Leech, the former co-chief investment officer at Western Asset Management, pleaded guilty on Friday to obstructing an investigation into alleged trade manipulation. The plea spares him a criminal trial set to begin Monday on charges tied to a $600mn cherry-picking scheme that allegedly diverted profitable trades to favored portfolios while sidelining less advantageous ones for other investors.

Leech admitted to making false statements during a related SEC probe, acknowledging his testimony about the trade allocation process was false and misleading. The obstruction count carries a maximum five-year sentence, though prosecutors agreed to recommend six to twelve months under the plea deal. Judge Gregory Woods will determine his sentence at a September 21 hearing.

Western Asset Management, which had $229bn in assets under management as of March 2026, agreed last week to pay a $100mn civil penalty to resolve the SEC investigation. The regulator found the firm failed to detect Leech's conduct and knew his practices diverged from other portfolio managers.

The scandal has triggered massive client departures, with Western recording over $150bn in long-term net outflows since Leech was charged in 2024. Despite Franklin Templeton's overall $17bn second-quarter inflow, the Western unit continues hemorrhaging assets, including a $4.1bn outflow in the latest period, demonstrating how executive misconduct can devastate institutional reputation years after departure.

Leech's guilty plea marks a rare criminal conviction of a senior bond fund executive, sending a stark warning about personal accountability in asset management.