Investment Losses Bring Suit against Government; Federal Employees Argue That Agencies Ignored Signs in Scheme

Article excerpt

Byline: Steve Patterson

Attorneys for dozens of federal employees are suing the federal government over retirement investments that were lost to a Jacksonville Ponzi scheme operator the government contracted to run retirement seminars.

They're seeking $120 million - far more than the $34 million that investigators in 2010 said Kenneth Wayne McLeod ripped off from investors who used his companies, Federal Employee Benefits Group and F&S Asset Management Group.

About three-fourths of the money sought was for "non-economic" damages, such as stress and anxiety Ponzi victims would have faced.

McLeod, who specialized in handling government employees' retirement savings, killed himself as regulators were questioning his business operations.

Investigators later said they had found about 260 investors nationwide who had been cheated.

The suit argues government agencies ignored obvious danger signs - and sometimes their own rules - when they picked McLeod to handle seminars for agencies ranging from the Postal Service to the Drug Enforcement Administration.

"Even a cursory inquiry into McLeod's qualifications and history would have revealed his troubled past," argued the suit, which was filed Tuesday in federal court in Jacksonville. McLeod had declared bankruptcy as a young man, claimed an advanced business degree he didn't have and had an extended record of tax debts, the suit said.

The suit said federal rules specifically bar companies that run retirement seminars from offering employees individual advice, but that McLeod had people in his seminars fill out questionnaires and used those to shape recommendations. …

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