* DOJ, SEC charge Garth Peterson with FCPA violations
* SEC also charges Peterson with investment adviser fraud
* Peterson pleaded guilty, settled SEC case
By Aruna Viswanatha
WASHINGTON, April 25 A former Morgan Stanley
executive pleaded guilty to conspiring to evade internal
controls required by a U.S. anti-bribery law, in a case that
underlines the fall of a once high-flying dealmaker for the firm
Garth Peterson, who was a managing director in Morgan
Stanley's real estate investment and fund advisory business,
also settled on Wednesday related charges with securities
regulators, and agreed to roughly $3.7 million in sanctions and
a permanent bar from the industry.
Peterson secretly arranged to have millions paid to himself
and a Chinese official and disguised the payments as finder's
fees charged to Morgan Stanley, regulators said.
Such payments violated the Foreign Corrupt Practices Act,
which bars bribes to officials of foreign governments, the
Securities and Exchange Commission said.
The charges come as both the SEC and the Justice Department
have stepped up efforts to enforce the FCPA, extracting billions
of dollars in penalties in recent years, but the case is among
the first related to the financial services industry.
Morgan Stanley, which cooperated in the government's
investigation, was not charged in the case. Lawyers for Peterson
declined to comment.
"Mr. Peterson admitted today that he actively sought to
evade Morgan Stanley's internal controls in an effort to enrich
himself and a Chinese government official," Assistant Attorney
General Lanny Breuer said in a statement announcing the plea.
Morgan Stanley spokesman Matt Burkhard said the firm was
pleased the matter was resolved.
"We cooperated fully with the government and we are very
satisfied with this outcome," Burkhard said. "Mr. Peterson's
intentional circumvention of Morgan Stanley's internal controls
was a deliberate and egregious violation of our values and
Peterson, who is scheduled to be sentenced on July 17, faces
up to five years in prison.
When Peterson joined Morgan Stanley's real estate investment
operation in China in the early 2000s, his networking ability
and language skills helped him gain a quick promotion.
Peterson, an American citizen who spoke fluent Mandarin and
the Shanghai dialect, was described by his Morgan Stanley
colleagues in 2009 as a serial networker, making friends with
the sons and daughters of powerful Beijing and Shanghai leaders
and charming the Chinese executives of multinational
His downfall, however, was just as precipitous. Morgan
Stanley fired Peterson in December 2009 over suspicions that he
had violated the FCPA.
Peterson had a personal friendship with the former chairman
of a Chinese state-owned entity, Yongye Enterprise (Group) Co,
which had influence over the success of Morgan Stanley's real
estate business in Shanghai, the SEC said.
Peterson secretly arranged for both of them to acquire a
valuable Shanghai real estate interest from a Morgan Stanley
fund, it said.
The SEC said Peterson agreed to give up $250,000 in unlawful
profits, and to relinquish his interest in $3.4 million of
Shanghai real estate.