Consulting Firm Charged with Ponzi Scheme

A Jacksonville, Florida, retirement-benefits consulting firm is facing charges it defrauded government employees through an alleged Ponzi scheme, according to the Securities and Exchange Commission.

Dow Jones Newswires reports the SEC charged the estate of recently deceased Kenneth Wayne McLeod, his benefits consulting firm, Federal Employee Benefits Group Inc., and his registered investment adviser, F&S Asset Management Group Inc., with fraudulently soliciting government employees to invest in government-bond funds that didn’t exist. According the SEC’s complaint, McLeod allegedly lured many of his investors through retirement-benefits seminars he gave at government agencies nationwide.   

He raised at least $34 million since 1988 from an estimated 260 investors, but he never purchased any bonds, the SEC said. Instead, he used the investors’ retirement savings to conduct a Ponzi scheme, to pay himself, and to pay for lavish entertainment, including annual trips to the Super Bowl for himself and 40 friends, according to the news report.   

The SEC claims McLeod told investors that their principal would be locked up for various periods of up to eight years, supposedly due to the long-term nature of the fund’s underlying bonds. He also issued some investors false FEBG Bond Fund account statements, which showed fake interest earnings, and gave investors the option to reinvest their quarterly interest earnings rather than receive distributions, which many investors did.   

Based on McLeod’s misrepresentations, some investors rolled over their retirement and savings accounts into the bond fund or invested their inheritances and their children’s tuition savings, the SEC said.   

In addition to emergency relief, the agency is seeking disgorgement against all defendants, as well as money penalties and preliminary and permanent injunctions against FEBG and F&S Asset Management.   

Dow Jones’ attempts to reach FEBG, F&S Asset Management and McLeod’s estate were unsuccessful.