Morgan Stanley agreed to waive criminal restitution from its former managing director Garth Peterson after a judge found that he had ‘limited assets’ to fund a planned global settlement with the DOJ and SEC.
A month earlier, Judge Jack B. Weinstein of the U.S. District Court in Brooklyn said Morgan Stanley, as Peterson’s ‘victim’ under federal criminal law, might be entitled to mandatory restitution from him under 18 U.S.C. §§ 3663A.
Judge Weinstein said the DOJ and SEC hadn’t included Morgan Stanley’s potential rights in the global settlement. Because of Peterson’s limited assets, the judge said, Morgan Stanley’s claims might have prevented the DOJ and SEC from settling with him on terms they’ve proposed.
To resolve the problem, the judge said, Morgan Stanley agreed to waive restitution from Peterson in the criminal case. It kept its right to bring civil claims against him. Those wouldn’t impact his plea deal with the government.
Peterson, 42, ran Morgan Stanley’s real estate investment and fund advisory business in China. He pleaded guilty in April 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. He faces up to of five years in prison. He’s free on $500,000 bail.
Peterson was also charged in April 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. The SEC waived 25% of his disgorgement of ‘ill-gotten gains.’
This month, Judge Weinstein reset Peterson’s sentencing from July 17 to August 20.
The DOJ and SEC declined to charge Morgan Stanley in the case. They said the firm’s compliance program ‘provided reasonable assurances’ that Morgan Stanley’s employees were not bribing government officials. Peterson, they said, was a ‘rogue employee.’
Judge Weinstein’s settlement memo about Peterson can be downloaded here.