Report: DEA Failed To Act On Phony Financial Planner

WASHINGTON — For years, the Drug Enforcement Administration failed to act on warnings related to the conduct of a Florida money manager who used his agency contract to improperly solicit dozens of employees and diverted millions in their retirement savings to fuel a lavish lifestyle and Ponzi scheme, a Justice Department review found.

Kenneth "Wayne'' McLeod, according to a 91-page review by the Justice Department's inspector general, took in at least $15 million in investments from DEA employees or those who had some link to the agency during nearly two decades. He committed suicide four years ago while being pursued by investigators with the Securities and Exchange Commission.

McLeod conducted at least 130 retirement and financial planning seminars for the DEA, though he had little or no formal training and embellished his educational background, claiming that he held a law degree and was a graduate of the University of Pennsylvania's prestigious Wharton School.

"We found no evidence that any of these claims were true,'' the inspector general's report said.

Despite the gaping holes in his personal resume, McLeod won nearly unlimited access to an eager pool of prospective private clients whose favor he curried by donating more than $200,000 to an agency fund benefiting survivors of DEA agents and showering some investors with trips to the Super Bowl, tax preparation services, subsidized mortgages and other gifts.

Some of the seven DEA employees who accepted Super Bowl invitations also were treated to free air travel to the game sites, lodging and other transportation-related benefits worth thousands of dollars.

"We were particularly concerned by the conduct of two DEA employees who accepted gifts from McLeod even though they were involved to some extent in assisting him to obtain speaking engagements with the DEA,'' the report concluded.

In a written response to the inspector general, the DEA declined to address the alleged misconduct, indicating that an investigation is continuing.

"The DEA will consider the evidence compiled by the (inspector general),'' acting Deputy Chief Inspector Michael Dixon said. "Upon completion of the DEA's investigation, the DEA will consider disciplinary action if warranted.''

Dixon, however, said the agency was implementing the inspector general's recommendations aimed at improving the vetting of financial instructors and establish guidelines for future financial planning seminars.

DEA Administrator Michele Leonhart told Justice investigators that in previous positions with the agency she encountered McLeod, who in 1998 provided a financial analysis involving her benefits. Though she described McLeod as the "best teacher of the retirement system,'' she also characterized him as a "used car salesman'' and was put off by the money manager's penchant for name-dropping.

"She said that as a result, she never became a client,'' the report stated.

One agent who invested nearly $300,000 in McLeod's fund said that he and other colleagues chose to "ignore'' occasional questions about how McLeod was able to promise large investment returns and how the money was being managed.

"You would say to yourself, 'How could he rip DEA off?' '' the agent told Justice investigators. "We'd kill him … Who would have the brass to do it to law enforcement. And at the back of your mind, there's a little voice that goes off and we chose to ignore it because you saw bosses who were involved and things like that.''