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U.S. v. Garth Peterson

 
:
Peterson, Garth R.
:
DOJ Criminal
:
April 26, 2012
:
U.S. v. Garth Peterson
:
U.S. v. Garth Peterson, No. 12-cr-224 (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.”
:
Financial Services/Financial Institutions
:
China
:
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 (the "MSREFs") for institutional investors and high-net-worth individuals.

According to the criminal information, Peterson conspired with others to circumvent Morgan Stanley's internal controls in order to transfer a multi-million dollar ownership interest in a Shanghai building to himself and a Chinese official with whom he had a personal friendship. The official was an executive at Yongye, a state-owned enterprise owned by the Luwan District government. Peterson encouraged Morgan Stanley to sell an interest in a Shanghai real estate deal to Yongye, and falsely represented to others within Morgan Stanley that Yongye was purchasing the real estate interest, when in fact Peterson knew the interest would be conveyed to a shell company controlled by him, the Chinese official and a Canadian attorney. After Peterson and his co-conspirators falsely represented to Morgan Stanley that Yongye owned the shell company, Morgan Stanley sold the real estate interest in 2006 to the shell company at a discount to the interest's actual 2006 market value. As a result, Peterson and his co-conspirators realized a profit of more than $2.5 million.

The information also notes that Peterson's actions occurred despite the fact that he attended several trainings held by Morgan Stanley's FCPA compliance program, and received multiple compliance reminders. Morgan Stanley was not charged largely because of its strong compliance program.
:
Conspiracy - Internal Controls
:
Imprisonment, Plea
:
The 9-month sentence was much shorter than the 57-71 months suggested by the U.S. Sentencing Guidelines, and the 57 months recommended by the prosecutors. Because of the significant dispartiy, sentencing judge Jack B. Weinstein was required to explain his reasoning behind the sentence. In a statement publicly filed on August 28, 2012, Judge Weinstein said: “White collar criminals such as the defendant may be deterred more easily because these offenders — driven to commit calculated crimes by greed rather lack of opportunity, mental illness, or the heat of the moment — can weigh the probability of gains against the risk of loss." Judge Weinstein said that the term was adequate, and noted that he considered Peterson's harsh upbringing in considering the sentence. He also said that Peterson would be deterred from committing future crimes because the SEC settlement bans him from working with financial institutions regulated by the commission, and that further illegal conduct is unlikely because of the "severe social, economic and other consequences" Peterson has suffered.
:
Not stated.
:
9
:
Employee of Issuer
:
Director
:
U.S.
:
Other Business Advantage
:
2,500,000
:
Goods/Services
:
Shell entity
:
Not stated.
:
China
:
No
:
Yes