SEC v. Garth Ronald Peterson, No. 12-cv-2033 (E.D.N.Y. 2012)
Peterson's employer, Morgan Stanley, was not subject to civil or criminal charges. Both the DOJ and SEC, in their respective filings, noted Morgan Stanley's strong compliance program and the lengths to which Morgan Stanley went to train and remind Peterson of FCPA compliance.
In its press release, the DOJ specifically stated, “After considering all the available facts and circumstances, including that Morgan Stanley constructed and maintained a system of internal controls, which provided reasonable assurances that its employees were not bribing government officials, the Department of Justice declined to bring any enforcement action against Morgan Stanley related to Peterson’s conduct. The company voluntarily disclosed this matter and has cooperated throughout the department’s investigation.”
The SEC stated in its press release that Peterson was a "rogue employee" and that "Morgan Stanley, which is not charged in the matter, cooperated with the SEC's inquiry and conducted a thorough internal investigation to determine the scope of the improper payment and other misconduct involved."
Financial Services/Financial Institutions
2004; 2005; 2006; 2007
Executive at Shanghai Yongye Enterprise (Group) Co. Ltd. ("Yongye"), a state-owned, limited-liability corporation incorporated by the Luwan District government, to operate as the Luwan District government's real-estate-development arm.
Garth Peterson was a managing director in charge of Morgan Stanley Real Estate Group's Shanghai office in the People's Republic of China. Morgan Stanley is a global financial services firm listed on the New York Stock Exchange. Morgan Stanley, through MSRE, created and managed real estate funds for institutional investors and high-net-worth individuals.
According to the complaint, Peterson led Morgan Stanley's efforts to build a Chinese real estate investment portfolio for its real estate funds by cultivating a relationship with an official at Yongye, a state-owned corporation operated by the Luwan District government. Morgan Stanley partnered with Yongye on a number of significant Chinese real estate investments. At the same time, Peterson and the Chinese official expanded their personal business dealings both in a real estate interest secretly acquired from Morgan Stanley as well as by investing together in Chinese franchises of well-known U.S. fast food restaurants. Peterson failed to disclose these investments in annual disclosures that Morgan Stanley required him to make as part of his employment.
According to the complaint, Peterson openly credited the Chinese official with helping obtain approvals required from other Chinese government entities for a deal to close. He wrote to several Morgan Stanley employees in response to an e-mail discussing the terms of one of Yongye’s purported investments, “Everyone pls keep in mind the big picture here. YY gave us this deal. ... So we owe them a favor relating to this deal. ... This should be very easy and friendly.” In another e-mail a week later, Peterson described “YYI” as “our friends who are coming in because WE OWE THEM A FAVOR.”
The SEC alleges that a Morgan Stanley compliance officer specifically informed Peterson in 2004 that employees of Yongye were government officials for purposes of the FCPA. Peterson also received at least 35 FCPA compliance reminders from Morgan Stanley, but nonetheless committed the FCPA violations.
Disgorgement of $3,667,713 plus $154,900.44 in prejudgment interest for a total of $3,822,613.44. Peterson agreed to satisfy the disgorgement by paying $241,589 and relinquishing his interest in the Jin Lin Tiandi Serviced Apartments. In the parallel criminal matter, Peterson was sentenced to 9 months imprisonment on August 16, 2012.