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UPDATE 2-Ex-Morgan Stanley exec gets prison time in bribery case

NEW YORK, Aug 16 (Reuters) - A former Morgan Stanley real estate dealmaker was sentenced to nine months in prison on Thursday for skirting the bank’s internal controls in an effort to enrich himself and a Chinese government official.

Garth Peterson, 43, had pleaded guilty in April to conspiring to evade internal accounting controls that Morgan Stanley was required to maintain under the U.S. Foreign Corrupt Practices Act, an anti-bribery law.

Peterson, a managing director in Morgan Stanley’s real estate investment and fund advisory business in Shanghai, was fired in 2008 amid a probe into a suspect real estate deal, court records showed.

While federal investigators have increased efforts in recent years to enforce the FCPA, which is intended to thwart illicit payments to foreign officials, Peterson’s case is among the first related to the financial services industry.

The sentence, imposed by U.S. District Judge Jack Weinstein in Brooklyn, New York, was much shorter than the 51- to 60-month term sought by prosecutors.

A spokesman for U.S. Attorney Loretta Lynch in Brooklyn declined to comment.

During Thursday’s sentencing hearing, Peterson apologized to his family and his former employer, saying he went down “the wrong track” when he entered a suspect real estate deal with an unnamed official from Yongye, a state-owned real estate investment corporation in Shanghai.

Prosecutors accused Peterson of helping the official and a Canadian lawyer they did not identify secretly buy a stake, at a discounted price, in a valuable Shanghai property owned by a Morgan Stanley fund.

In exchange, the official would help find investment opportunities for Morgan Stanley in China’s real estate market, prosecutors said.

The discounted property stake was eventually worth nearly $5.4 million more than Peterson and his accomplices paid, prosecutors said.

Peterson was described by some colleagues as a rising star at Morgan Stanley before his termination, according to his pre-sentencing memorandum.

In court filings, Peterson said that he brought the official into the deal as an expression of “guanxi” - a Chinese custom referring to the exchange of favors in professional relationships.

But prosecutors said that Peterson used the deal to curry favor and turn a personal profit.

In April, Peterson settled a related U.S. Securities and Exchange Commission civil case. He agreed to never again work in the securities industry and to relinquish his share in the real estate deal, which was valued by the SEC in April at $3.4 million.

Morgan Stanley was not charged and said it cooperated with authorities. “Mr. Peterson’s intentional circumvention of Morgan Stanley’s internal controls was a deliberate and egregious violation of our values and policies,” Morgan Stanley spokesman Matt Burkhard said.

Judges often impose prison terms of less than one year in FCPA cases, and the Peterson case underscores the inability of prosecutors to win greater punishments, said Mike Koehler, an assistant professor of business law at Southern Illinois University School of Law.

“The DOJ speaks with very lofty rhetoric when it comes to FCPA enforcement, but judges don’t seem to view the issue the same way,” he said.

The case is U.S. v. Peterson, U.S. District Court, Eastern District of New York, No. 12-cr-00224.