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982-6317

VI. RELATED/RE-FILEDCASE(S). DOCKET NUMBER(See instructionssecond page):

a) Re-filed Case 0 YES 7J NOJUDGE

b) Related Cases OYES ~ N O

VII. CAUSE OF ACTIONCite the U.S. Civil Statute under which you are filing and Write a Brief Statement of Cause (Do not cite jurisdictional statutes unlessdiversity):15 U.S.C. 77o(a), IS U.S.C.78j(b), 17 C.F.R. 240.10b-5, 15 U.S.C. 80b-6(1) and (2). Violations offederasecurities lawsLENGTH OF TRIAL via days estimated (for both sides to tr y entire case)

' l S 4 4 (Rev.2/08) CIVIL COVER SHEET.- . , . . ~ g l . 'F j 8'TheJS 44 civil coversheet and the infonnation contained herein neithen lace nor plement the filing an . e" I"n .' . . : q ~ e d ; ' ,exceptasprovby loca.1 rules of court. This form, approved bythe Judicial Conferenceo?:he n i t e d ~ ~ J e s j , ! . , S. .. ~ e I ! l . , ~ . !.red . ..~ ~ ~ . _ ~ ( ) r ~ ~ e _ . P U l P o s e of tnitaH e ~ ..c. ""f.p.or-a-.-......the CIVIl docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FOR/.l.) e S . ~ ~ 9 . W : Jg ~ ; ~ u q ~ ~ i , J n ! l l ' ! ; a l ~ ' ~ f ~ e " f I ' .I . (a ) PLAINTIFFS DEFENDANTS - QCAJnSECURlTIES AND EXCHANGE COMMISSION ESTATE OF KENNETH WAYNE MCCLEOD, F l ~ ~ f I t J 1 MANAGMENT GROUP, INC., and FEDERAL EMPLOYEE

(b ) Countyof Residence of First Listed Plaintiff \ County of Residence of First Listed Defendant Duval, "l"A.-DJUAl.___________ ..:.(E_X_C_E_PT_IN_U_._S_. P_L_A_I_N_T_I_F_F_C_A_S_E_S.,;) -1 (IN U.S. PLAINTIFF CASES ONLY! ..L ~ ~ (c) Attomey's (Finn Name, Address, and Telephone Numher) NOTE: IN LAND CONDEMN CA TlON OF THE TR

LAND INVOLVED.C. Ian Anderson, Senior Trial Counsel, Securities and ExchangeCommission, 801 Brickell Ave., Suite 1800, Miami, FL 33131 (305) Attorneys (If Known)

(d) Check County Where Action Arose: ~ M I A M I . D A D E 0 MONROE 0 BROWARD 0 PALM BEACH 0 MARTIN 0 S ECHOBEELANDS

.IJ I Original o 2 Removed from 0 3 Re-fiIed- o 4 Reinstated or o 5 another district o 6 Multidistrict o 7 MagistrateProceeding State Court (see VI below) Reopened Litigation(specify) Judgment

II . BASIS OF JURISDICTION (Place an "X " in One B o' Only)la I U.S. Government

Plaintiff

CJ 2 U.S. GovernmentDefendant

IV NATURE OF SUIT (Place an "X " in One Box Onlv)CONTRACT TORTS

0 110 Insurance PERSONAL INJURY0 120 Marine a 3 J0 Airplane0 130 Miller Act a 31 S Airplane Product

Liability140 Negotiable Instrument o 320 Assault, Libel &ISO Recovery of OverpaymentSlander Enforcement of Judgment

0 151 Medicare Act o 330 Federal Employers'0 152 Recovery of Defaulted Liab1litya 340 Marineludent Loans o 345 Marine ProductExcl. Veterans)

Liability 153 Recovery of Overpayment o 350 Motor VehiclefVetcran's Benefits o 3SS Motor Vehicle 160 Stockholders' SuitsProduct Liability190 0 lher Contract

0 195 Contract Product Liability a 360 Other Personal0 196 Franchise Injury

.CIVIL RIGHTSEAL' PROPERTY . o 441 Voting210 Land Condemnation 00 220 Foreclosure a 442 Employment0 230 Rent Lease & Ejectment a 443 HousinglAccommodations 240 Torts to' Land 00 245 Tort Product Liability a 444 Welfare 0

0445 Amer. w/Disabililies0 290 All Other Real Property 0Employment0446 Amer. w/Oisabilities 0Othero 440 Other Civil Rights 0

V. ORIGIN (Place an "X " in One Box Only)

a 3 Federal Question(U.S. Government Not a Parly)

a 4 Diversity(Indicate Citizenship of Parties in Item III)

Citizen or Subject of a oForei n Count

000

PERSONAL PROPERTY0 370 Other Fraud 00 371 Truth in Lending0 380 Other Personal 0

Property Damage0 385 Property Damage 0

Product Liability 0P.RISONER PETITIONS 0510 M otions to Vacate 0

Sentence 0Habeas Corpus:530 General535 Death PenaUy540 Mandamus & Other 0550 Civil Rights 0555 Prison Condition 0

FORFEITURE/PENALTYPERSONAL INJURY 0

362 Personal Injury 0Med. Malpra.ctice 0

365 Personal Injury Product Liability 0

368 Asbestos Personal 0Injury Product 0Liability 0

III. CITIZENSHIP OF PRINCI Box for Pla(For Diversity Cases Only) Defendant)

PT F DE F PT F DECitizen of This State 0 I 0 I Incorporated or Principal Place o 4 04Citizen of Another State 0

61 0 Agriculture620 Other Food & Drug62 5 Drug Related Seizure

of Property 21 USC 88163 0 Liquor Laws64 0 R.R. & Truck650 Airline Regs.660 Occupational

Safety/Health690 Other

LABOR. ,710 Fair Labor Standards

Act720 Labor/Mgmt. Relations730 Labor/Mgmt.Reporling

& Disclosure Act740 Railway Labor Act790 Other Labor Litigation791 Empl. Ret. Inc. SecuritAct

462 NaturalizationApplication463 Habeas Corpus-AlienDetainee465 Other ImmigrationActions

Transferred from

of Business In This Stateo 2 Incorporated and Principal Place o o

of Business In Another Stateo Foreign Nation

.... BANKRUPTCY0 422 Appeal 28 USC 1580 423 Withdrawal

28USCI57. PROPERTY RIGHTS

0 820 Copyrights0 83 0 Patent0 840 Trademark

SOCIAL SECURITY0 861 HIA (1395lT)0 862 Black Lung (923)0 863 DIWC/DIWW (405(g0 864 SSlD Title XVI0 865 RSI (405(g

FEDERAL TAX SUITS0 870 T..es (U.S. PlaintilTor Defendant)0 871 IRS-Third Party26 USC 7609

o o

000000000If

00000000

0

Appeal to DisJudge from

OTHER STATUTES400 State Reapportionment410 Antitrust430 Banks and Bank,ng450 Commerce460 Deportation470 Racketeer Influenced a

Corrupt Organizations480 Consumer Credit490 Cable/Sat TV810 Selcctive Service850 Securities/CommoditiesExchange875 Customer Challenge

12 USC 3410890 Other Statutory Actions891 Agricultural Acts892 Economic Stabilization893 Environmental Matters894 Energy Allocation Act895 Freedom of Information

900 Appeal of Fee DeterminUnder Equal Access to Jus

950 Constitutionality of StaStatutes

VIII. REQUESTED IN o CHECK IF THIS IS A CLASS ACTION DEMAND $ . L f i .V .c 1. t::.1. CHECK YES only if demanded in complaint:COMPLAINT: UNDER F.R.C.P. 23 In j Perm. & Penal t P ~ DEMAND: 0 Yes ~ No

ABOVE INFORMATION IS TRUE & CORRECT TO S I G N ~ O F A T THE BEST OF MY KNOWLEDGEFOR OFFICE USE ONLY

AMOUNT RECEIPT # IFP

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UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF FLORIDA

CASE NO.:SECURITIES AND EXCHANGE COMMISSION,

) ,,' I!9!i'lI 'lil . "4 , i1 Ur",. ~ t " 1 t l 2 O. I ' ; ' l ~ " -8) , . ~ .Plaintiff, " "v. ). CIVfv10RENO) UNDER SEALESTATE OF KENNETH WAYNE MCLEOD, )F&S ASSET MANAGEMENT GROUP, INC. and )FEDERAL EMPLOYEE BENEFITS GROUP, INC., ))Defendants. ))

EMERGENCY COMPLAINT

I T O ~ .FllEDby _ D.C.

JUN 24 2010'STEVEN M LARIMeCLERK U. S, DIST. S. D. of FLA. - MIAMI'

Plaintiff Securities and Exchange Commission alleges as follows:1. For at least the past two decades, Kenneth Wayne McLeod solicited clients of his

registered investment adviser, most of whom were retired federal and state governmentemployees, and other active and retired government employees to ' invest in a purported bondfund invested in long-term government securities. McLeod offered his clients guaranteed, tax':'free returns of eight to ten percent annually in the fund.

2. In reality, the purported bond fund, which McLeod called the FEBG Bond Fund,did' not exist. The investment was a Ponzi scheme, through which McLeod appears to haveraised funds from approximately 260 investors, nationwide. He raised at least $34 million fromthe more than 139 investors who are still currently invested.

3. McLeod attracted many of his clients through retirement planning seminars acrossthe country that various federal and state' agencies paid him to conduct. McLeod used thesepresentations to build relationships with the government employees and then solicit them whenthey retired to roll over their retirement accounts for him to manage through his wholly-owned

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registered investment adviser, F&S Asset Management Group, Inc. ("FSAMG"). FSAMG hasapproximately $43 million under management for 1,147 clients, most of whom are retiredgovernment employees.

4. McLeod also solicited these clients and other active and retired governmentemployees to invest in the purported FEBG Bond Fund. Although McLeod described the fund toinvestors in various ways, he primarily emphasized that long-term government securities wouldguarantee the principal. McLeod told at least one investor it was a special fund for "family andfriends, and families of the fallen agents." He sent investors correspondence regarding theirinvestment, including promissory notes and FEBG Bond Fund account statements.

5. In reality, there was no FEBG Bond Fund, McLeod never invested his clients'money in government securities, and the money was never generating tax-free returns of eight toten percent annually. McLeod simply used new investor funds to pay prior investors interest andprincipal, and to provide funds to himself and his companies. Between 2005 and June 2010alone, McLeod spent more than $1 million on promotional expenses to bolster his image in thecommunity, including paying for stadium box seats and an annual trip for him and forty friendsto the Super Bowl.

6. As result of this conduct, McLeod, FSAMG, and the Federal Employee BenefitsGroup, Inc. ("FEBG"), the wholly-owned corporation McLeod used to conduct his retirementseminars, violated Section 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.c.770(a); Section 1O(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C.78j(b), and Rule 10b-5, 17 C.F.R. 240.lOb-5, thereunder; and McLeod and FSAMG alsoviolated Sections 206(1) and (2) of the Investment Advisers Act of 1940 ("Advisers Act"), 15U.S.C. 80b-6(1) and (2).

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7. Following McLeod's sudden death on June 22, 2010, it is unclear who, if anyone,is in control of FEBG and FSAMG. To prevent the dissipation of investor funds and to ensurean orderly and equitable distribution of any remaining assets, the Commission separately seeksemergency relief, including an asset freeze and the appointment of a Receiver.

DEFENDANTS8. McLeod, who was 48 at the time of his death, was a resident of Jacksonville,

Florida. McLeod was the president, CEO, and chief compliance officer of FSAMG, and thepresident ofSEBG.

9. FSAMG IS a Florida corporation with its principal place of business inJacksonville, Florida. FSAMG has been a registered investment adviser since January 2008. Itpurports to provide "all Federal and State employees with investment strategies that will assist inmeeting their financial goals." Most, if not all, of FSAMG's clients are current and formerfederal and state government employees, the majority of which are current and former lawenforcement agents.

10. FEBG is a Florida corporation with its principal place ofbusiness in Jacksonville,Florida. FEBG purports to be a financial services and benefits consulting firm focused onfederal retirement options, including the Thrift Savings Plan ("TSP"). Through FEBG, McLeodconducted retirement planning seminars for various federal agencies.

JURISDICTION AND VENUE11. The Court has jurisdiction over this action pursuant to Sections 20(b), 20(d), and

22(a) of the Securities Act, 15 U.S.c. 77t, 77t(d), and 77v(a); Sections 21 (d), 21(e), and 27 ofthe Exchange Act, 15 U.S.c. 78u(d), 78u(e), and 78aa; and Section 214 of the Advisers Act,15 U.S.c. 80b-14.

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12. This Court has personal jurisdiction over Defendants and venue is proper in theSouthern District of Florida because many of the Defendants' acts and transactions constitutingthe violations of the Securities Act, the Exchange Act, and the Advisers Act occurred in theSouthern District ofFlorida. At least twelve of the investors in the purported FEBG Bond Fund,together representing $9.6 million of the at least $34 million McLeod raised, are located in theSouthern District of Florida. McLeod solicited the investors located here, and regularlycorresponded with them while they were located in this District.

13. Defendants, directly and indirectly, have made use of the means andinstrumentalities of interstate commerce, the means and instruments of transportation andcommunication in interstate commerce, and the mails, in connection with the acts, practices, andcourses ofbusiness set forth in this Complaint.

FACTUALALLEGATIONS

A. Background14. For more than 20 years, McLeod traveled to various government agencies to

conduct FEBG employee benefits counseling and planning seminars. These governmentagencies paid FEBG up to $15,000 each for these seminars. FEBG held itself out as a "financialservices and benefits consulting firm focused on Federal retirement options" and "dedicated tothe complex issues surrounding special group employees, including Law Enforcement Officers,Firefighters and Air Traffic Controllers."

15. FEBG also provided personalized benefits analyses specific to governmentemployees' retirement plans and their financial portfolios. McLeod provided seminar attendeeswith a questionnaire, which inquired about their salary, retirement plan, and savings account

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allocations, among other things. Government employees could return their completedquestionnaire to FEBG for an individually customized projection oftheir retirement income.

16. In addition, FEBG provided recommended allocations among TSP retirementaccount funds and makes changes in the account for employees who provided their TSP systemusername and password. For customers wanting additional guidance for things such as leavingfederal for private employment, FEBG charged $300 to conduct a more comprehensive benefitrevIew.

17. FEBG customers could also choose to become clients of FSAMG and haveMcLeod manage their money. FSAMG has other clients as well, although most are FEBGcustomers.

18. FSAMG presently has approximately $43 million in assets under management, allofwhich are held in custodian accounts at another firm. These funds are almost entirely investedin mutual funds. FSAMG charges its clients a 1% management fee and issues accountstatements to its clients based on figures provided by the custodial firm.B. The PODzi Scheme

19. In addition to the traditional investments McLeod offered through FSAMG, heoffered many investors the opportunity to participate in the purportedly tax-free FEBGBondFund. McLeod also referred to this fund on different occasions as the FEBG Special Fund or theFEBGFund.

20. McLeod promised investors guaranteed returns of eight to ten percent and toldthem that their principal would be invested in and secured by government bonds. McLeodexplained to several investors that the fund invested in only long term government securities,which provided a thirteen percent return. McLeod said that he used the three to five percent

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McLeod tell them lies, such as there would be a delay in payment because the government was inarrears sending interest checks on the underlying bonds, or because of the purportedly long-termnature of the bonds.

26. The bond fund has been FEBG's greatest source of income for at least the pastfour years. In fact, FEBG has recently been doing many seminars for free due to restrictedgovernment budgets. FEBG has survived on Ponzi proceeds and has not been profitable since atleast 2004. Since forming FSAMG in 2008, McLeod has also used Ponzi proceeds to payFSAMG's payroll and operational expenses.

MISREPRESENTATIONS AND OMISSIONS27. Defendants made a number of material false statements and omISSIOns to

investors orally, in the "FEBG, Inc. Special Fund" promissory notes, in the FEBG Bond Fundaccount statements, and in correspondence with investors.

28. Most significantly, McLeod, in his representative capacity forFEBG andFSAMG, misrepresented to investors that their money would be placed in a bond fund investedin and secured by government securities. There was, in truth, no fund or other investmentvehicle and McLeod never invested any investor money in bonds.

29. Despite this, McLeod referred to the fund as the FEBG Bond Fund and the FEBGaccount statements purport to reflect "FEBG Bond Activity."

30. The FEBG Special Fund Promissory notes indicated that the investors ' principal"will be placed in an account secured by government securities" and will remain "untouched ingovernment securities."

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31. In his letter to investors, McLeod wrote, "With all of the Ponzi Scams going onaround the world I wanted to insure you that this account is 100% secured by US Gov'tSecurities and the principal is never touched until liquidated."

32. McLeod told one investor, "FEBG is 100% Gov't securities so unless the[government] goes out of the business all ok there too!"

33. McLeod also promised investors a guaranteed rate of return of eight to tenpercent, but failed to disclose that this guarantee was impossible to fulfill because the investmentwas a Ponzi scheme. FEBG had insufficient income to pay investors other than from moneyfrom new investors.

34. McLeod perpetuated the scheme by lulling investors with false account statementsfor the FEBG Bond Fund. These account statements show fictitious account balances andpurported interest earned by the investors.

35. Finally, Defendants misappropriated the offering proceeds to conduct a Ponzischeme, and to pay distributions to McLeod, and at least $1 million in extravagant entertainmentexpenditures.

CLAIMS FOR RELIEFCOUNT I

FRAUD IN VIOLATION OFSECTIONS 17(3)(1) OF THE SECURITIES ACT

36. The Commission repeats and realleges Paragraphs 1 through 35 ofthis Complaintas if fully set forth herein.

37. From 1988 through June 2010, Defendants, directly and indirectly, by use of themeans or instruments of transportation or communication in interstate commerce and by use of

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the mails, in the offer or sale of securities, knowingly, willfully or recklessly employed devices,schemes or artifices to defraud.

38. By reason of the foregoing, Defendants have violated and, unless enjoined, willcontinue to violate Section 17(a)(I) of the Securities Act, 15 U.S.c. 77q(a)(1).

COUNT IIFRAUD IN VIOLATION OFSECTIONS 17(3)(2) AND 17(3)(3) OF THE SECURITIES ACT D

39. The Commission repeats and realleges Paragraphs 1 through 35 ofthis Complaintas if fully set forth herein.

40. From 1988 through June 2010, Defendants, directly and indirectly, by use of themeans or instruments of transportation or communication in interstate commerce and by the useof the mails, in the offer or sale of securities: (a) obtained money or property by means of untruestatements of material facts and omissions to state material facts necessary to make thestatements made, in the light of the circumstances under which they were made, not misleading;and/or (b) engaged in transactions, practices and courses of business which have operated as afraud or deceit upon purchasers of such securities.

41. By reason of the foregoing, Defendants, directly and indirectly, violated and,unless enjoined, will continue to violate Sections 17(a)(2) and 17(a)(3) of the Securities Act, 15U.S.c. 77(q)(a)(2) and 77(q)(a)(3).

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COUNT IIIFRAUD IN VIOLATION OF SECTION 10(b) OF THEEXCHANGE ACT AND RULE 10b-5 THEREUNDER

42. The Commission repeats and realleges paragraphs 1 through 35 of this Complaintas if fully set forth herein.

43. From 1988 through June 2010, Defendants, directly and indirectly, by use of themeans and instrumentality of interstate commerce, and of the mails in connection with thepurchase or sale of securities, knowingly, willfully or recklessly: (a) employed devices, schemesor artifices to defraud; (b) made untrue statements of material facts and/or omitted to statematerial facts necessary in order to make the statements made, in light of the circumstancesunder which they were made, not misleading; and/or (c) engaged in acts, practices and courses ofbusiness which have operated, and will continue to operate as a fraud upon the purchasers ofsuch securities.

44. By reason of the foregoing, Defendants, directly and indirectly, violated and,unless enjoined, will continue to violate Section 10(b) of the Securities Act, 15 U.S.C. 78j(b),and Rule 10b-5, 17 C.ER. 240.1Ob-5, thereunder.

COUNT IVFRAUD IN VIOLATION OF SECTIONS 206(1) AND 206(2)

(Against FSAMG and the Estate of Wayne McLeod)45. The Commission repeats and realleges paragraphs 1 through 35 of this Complaint

as if fully set forth herein.46. From 1988 through June 2010, FSAMG and McLeod, by use ofthe mails, and the

means and instrumentality of interstate commerce, directly or indirectly, knowingly, willfully orrecklessly: (a) employed devices, schemes or artifices to defraud clients or prospective clients;

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and (b) engaged in transactions, practices and courses of business that operated as a fraud ordeceit upon clients or prospective clients.

47. Among other things, FSAMG and McLeod made untrue statements of materialfacts and omitted to state material facts necessary to make the statements made, in light of thecircumstances under which they were made, not misleading, to any client or prospective clientand otherwise engaged in acts, practices, and courses ofbusiness that were fraudulent, deceptive,or manipulative with respect to its clients or prospective clients.

48. By reason of the foregoing, FSAMG and McLeod, directly and indirectly,violated and, unless enjoined, will continue to violate Sections 206(1) and 206(2) of the AdvisersAct, 15 U.S.c. 80b-6(1) and (2).

RELIEF REQUESTEDwHEREFORE, the Commission respectfully requests that the Court:

I. Declaratory ReliefDeclare, determine and find that Defendants committed the violations of the federal

securities laws alleged in this Complaint.II. Permanent Injunctive Relief

Issue a Permanent Injunction restraining and enjoining FSAMG and FEBG fromviolating: (i) Section 17(a)(1) of the Securities Act, 15 U.S.C. 77q(a); (ii) Sections 17(a)(2) and17(a)(3) of the Securities Act, 15 U.S.c. 77(q)(a)(2) and 77(q)(a)(3); (iii) Section 10(b) of theExchange Act, 15 U.S.c. 78j(b), and Rule 10b-5, 17 C.F.R. 240.lOb-5; and FSAMG fromviolating Sections 206(1) and 206(2) of the Advisers Act, 15 U.S.C. 80b-6(1) and (2).

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III. DisgorgementIssue an Order requiring Defendants to disgorge all ill-gotten profits or proceeds they

received as a result of the acts and/or courses of conduct complained ofherein, with prejudgmentinterest.

IV. PenaltiesIssue an Order directing FSAMG and FEBG to pay civil money penalties pursuant to

Section 20(d) of the Securities Act, 15 U.S.c. 77t(d); Section 21(d) of the Exchange Act, 15U.S.c. 78(d)(3); and Section 209(e) of the Advisers Act, 15 U.S.c. 80b-9.

V. Further ReliefGrant such other and further relief as may be necessary and appropriate.

VI. Retention of JurisdictionFurther, the Commission respectfully requests the Court retain jurisdiction over this

action in order to implement and carry out the terms of all orders and decrees that may hereby beentered, or to entertain any suitable application or motion by the Commission for additionalrelief within the jurisdiction of this Court.

Respectfully submitted,

June 24,2010 By:c. Ian AndersonSenior Trial CounselNew York Reg. No. 2693067Direct Dial: (305) 982-6317E-mail: andersonci@sec.govLead CounselAttorney for PlaintiffSECURITIES AND EXCHANGECOMMISSION801 Brickell Avenue; Suite 1800Miami, Florida 33131

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Telephone: (305) 982-6300Facsimile: (305) 536-4154

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