An alarming e-mail showed up in Douglas Garner's inbox late one Friday afternoon last month.

It was from his family's investment adviser, Kenneth Wayne McLeod, and spoke cryptically about regulators and the shutdown of the fund in which Garner had invested his — and his father's — life savings.

"After more than 20 years I have deemed it necessary to terminate the [Federal Employee Benefits Group Fund] effective immediately," McLeod wrote June 18. "It is not my intention and I'm truly sorry from the bottom of my heart. I Pray that at some point in time you can and will forgive me."

Garner, director of air operations for Customs and Border Protection in Jacksonville, Fla., had one immediate thought: "Ponzi."

Four days later, McLeod was dead from a self-inflicted gunshot wound. And the retirement plans of Garner and about 138 other victims who hadn't gotten their money out of McLeod's sham fund were crushed — perhaps for good.

The Securities and Exchange Commission on June 24 filed fraud charges against McLeod's estate, his benefits consulting firm, Federal Employee Benefits Group Inc., (FEBG) and his registered investment adviser, F&S Asset Management Group Inc. Prosecutors say McLeod ran a 22-year Ponzi scheme that defrauded federal and state law enforcement officers and other public employees and retirees of at least $34 million. About 260 investors put money into the bond fund, though some successfully liquidated their assets.

It wasn't just those victims who were fooled by the scam — so were numerous federal agencies, such as the Drug Enforcement Administration and CBP that paid McLeod tens of thousands of dollars for his retirement investment seminars.

SEC has frozen all assets involved, and said it is unclear who controls FEBG and F&S Asset Management Group since McLeod's death.

"McLeod victimized law enforcement agents and other government employees who dedicated their lives to the service of this country," said Eric Bustillo, director of the SEC Miami regional office. "The victims gave years of public service, and McLeod stole their futures."

The federal law enforcement community is outraged.

"We consider this an absolute betrayal of trust," said Jon Adler, national president of the Federal Law Enforcement Officers Association. "I hope God judges McLeod with more fairness than I would."

According to SEC's complaint, McLeod raised millions of dollars from about 260 investors since 1998. McLeod promised to invest their money in tax-free, secure government bonds and promised annual returns of 8 percent to 10 percent, SEC said.

Instead, SEC said, McLeod invested none of the money. He used money raised from new investors to pay interest and principal for old investors, and to cover the costs of running his companies, SEC said. McLeod persuaded many investors to "reinvest" their interest and principal into the fraudulent bond fund, SEC said.

Some investors were able to redeem their investments. But SEC said McLeod lied to others who tried to get their money back, and told them payments would be delayed because the government was behind on its payments, or that the bonds were long-term and they couldn't be redeemed at that point.

Meanwhile, McLeod used money raised through the bond fund to pay for annual trips to the Super Bowl for himself and about 40 friends, as well as sports stadium box seats and other entertainment.

Investigation began June 10

McLeod's scam took 22 years to build, but fell apart in less than two weeks — almost as soon as SEC investigators began poking at it.

According to court filings, SEC began investigating McLeod on June 10, after it received a telephone tip from the Financial Industry Regulatory Authority, the largest private securities regulator in the U.S.

McLeod lied to SEC investigators during his first interview June 15, and first said FEBG managed no funds and sent no account statements to investors, SEC said. But when investigators showed him an investor account statement for the FEBG fund, he changed his story.

McLeod "responded that FEBG had borrowed ‘a couple of million dollars from friends,' 20-30 individuals, the vast majority [of] whom are federal agents," SEC said in court filings. "He said the loans were made ‘on a handshake.' "

SEC said that in a second interview June 17, McLeod confessed everything.

"McLeod told the staff that, from the outset, the FEBG Bond Fund was a ‘scheme' and that he told prospective investors ‘anything they wanted to hear' in order to get them to invest," SEC said.

The next day, McLeod sent a mass e-mail to his remaining investors. Garner, the investor from CBP, immediately wrote back to McLeod and left him a voice mail asking what his message meant.

"Usually Wayne would respond within an hour," Garner told Federal Times. "There was no response, so I knew it wasn't pretty."

Garner met McLeod at a 1998 retirement seminar held by the Customs Service, the predecessor to CBP. Garner said Customs' invitation to McLeod was seen as an implicit endorsement that made him feel it was OK to trust McLeod. And when one of Garner's colleagues invested in McLeod's fund and in three years made enough to buy a house and retire, he grew to trust him even more.

"Law enforcement doesn't open their doors to just anybody," Garner said. "We're very distrusting as an organization. We look at a clown, and we think ‘child molester.' But when we do let someone in, we trust them all the way."

That was standard operating procedure for McLeod. Federal agencies paid him up to $15,000 to give retirement seminars, and he used that access to meet potential victims and build credibility for himself and his phony funds.

Adler said McLeod often spoke glowingly about law enforcement officers, and told them his father was a former officer, to flatter victims and gain their trust.

FEBG also sponsored a benefits seminar that was hosted by Federal Times in 2005, and McLeod wrote two columns for Federal Times.

In 2003, McLeod convinced Garner to invest the money from the sale of his family's home in the FEBG fund and promised a 10 percent annual return. Garner now has more than $275,000, including interest, invested in the bond fund. His father — who first invested in the FEBG bond fund in 2007 — has nearly $900,000, including interest, invested. Garner has no idea how much of his savings — if anything — he'll be able to recover. He's facing mandatory retirement in five years and still has to put two of his six children through college.

"What that means is I have to keep working for the rest of my life," Garner said. "I won't have a penny to rub together anymore after I pay my mortgage."