SEC files FCPA complaint against former Morgan Stanley exec
WASHINGTON (Legal Newsline) - The Securities and Exchange Commission filed a complaint in federal court Wednesday alleging a former executive at Morgan Stanley with violating the Foreign Corrupt Practices Act.
Garth Peterson was also accused of violating securities laws for investment advisers by secretly acquiring millions of dollars worth of real estate investments for himself and an influential Chinese official who in turn steered business to Morgan Stanley's funds.
The complaint filed with the U.S. District Court for the Eastern District of New York alleges that from about 2004 to 2007, Peterson, an employee at Morgan Stanley's real estate investment and fund advisory business, secretly obtained millions of dollars worth of real estate investments from Morgan Stanley's funds for himself and the former Chairman of Yongye Enterprise Co., a Chinese state-owned entity that was influential in developing MSC's Chinese real estate business.
The SEC says Peterson also arranged to pay himself and the Chinese businessman at least $1.8 million, claiming they were finder's fees owed to third parties by MSC funds. The Chinese official helped Peterson and MSC - in exchange for these offers and payments from Peterson - obtain business while personally benefitting from some of these same investments, it is alleged.
According to the SEC, these actions by Peterson breached the fiduciary duties he and Morgan Stanley owed to clients. The SEC alleges Peterson violated the anti-bribery and internal controls provisions of the Foreign Corrupt Practices Act of 1977 and violations of various securities
The SEC stated that Peterson agreed to a settlement of its complaint. The stipulations are that he will be permanently barred from the securities industry, will pay more than $250,000 in disgorgement and will relinquish his interest in the secretly acquired Shanghai real estate - currently valued at approximately $3.4 million.
"Peterson crossed the line not once, but twice. He secretly bribed a government official to illegally win business for his employer and enriched himself in violation of his fiduciary duty to Morgan Stanley's clients," said Robert Khuzami, Director of the SEC's Division of Enforcement.
"This case illustrates the SEC's commitment to holding individuals accountable for FCPA violations, particularly employees who intentionally circumvent their company's internal controls."
Kara Novaco Brockmeyer, Chief of the SEC Enforcement Division's FCPA Unit, added, "As a rogue employee who took advantage of his firm and its investment advisory clients, Peterson orchestrated a scheme to illegally win business while lining his own pockets and those of an influential Chinese official."
The U.S. Department of Justice has filed a related criminal case against Peterson.
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