Garth R. Peterson, a managing director in Morgan Stanley’s real estate investment and fund advisory business in China, pleaded guilty today to a one-count criminal information charging him with conspiring to evade internal accounting controls that Morgan Stanley was required to maintain under the FCPA.
Peterson, 42, an American citizen living in Singapore, is scheduled to be sentenced on July 17. He faces up to of five years in prison.
The DOJ didn’t charge Morgan Stanley.
Peterson was also charged today in a civil complaint filed by the SEC. He agreed to pay about $250,000 in disgorgement and forfeit Shanghai real estate worth $3.4 million to settle with the SEC. He was charged for FCPA offenses and violations of the investment advisor rules.
The SEC referred to him as ‘a rogue employee who took advantage of his firm and its investment advisory clients.’
Morgan Stanley ‘conducted a thorough internal investigation to determine the scope of the improper payments and other misconduct involved,’ the SEC said.
Peterson was fired in 2008 due to his FCPA misconduct.
The SEC said Peterson ‘had a personal friendship and secret business relationship with the former Chairman of Yongye Enterprise (Group) Co. – a Chinese state-owned entity with influence over the success of Morgan Stanley’s real estate business in Shanghai.’
Officers and employees of state-owned enterprises are ‘foreign officials’ under the FCPA.
The SEC said,
Peterson secretly arranged to have at least $1.8 million paid to himself and the Chinese official that he disguised as finder’s fees that Morgan Stanley’s funds owed to third parties. Peterson also secretly arranged for him, the Chinese official, and an attorney to acquire a valuable Shanghai real estate interest from a Morgan Stanley fund.
The SEC permanently barred Peterson from the securities industry.
Morgan Stanley disclosed its investigation in early 2009.
Peterson’s violations occurred from at least 2004 to 2007, the government said.
The DOJ’s release is here.
The civil complaint in SEC v. Garth Ronald Peterson can be downloaded here.