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Ex-Morgan Stanley Executive Gets Nine Months in China Case

August 16, 2012

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A former Morgan Stanley & Co. real estate executive was sentenced to nine months in prison for transferring multi-million dollar interests in a Shanghai building from his employer to himself and a Chinese official. Photographer: Victor J. Blue/Bloomberg

Ex-Morgan Stanley & Co. (MS:US) real estate executive Garth R. Peterson was sentenced to nine months in prison for transferring multi-million dollar interests in a Shanghai building from his employer to himself and a Chinese official.

Peterson, 43, was sentenced today by U.S. District Judge Jack B. Weinstein in Brooklyn, New York, for conspiring to circumvent internal bank controls required under the Foreign Corrupt Practices Act. He faced as long as five years in prison.

“I was on the wrong track,” Peterson told Weinstein after his lawyers pleaded for leniency, citing his cooperation with the U.S. and the fact that he has a wife and children in Singapore.

A former managing director at the bank’s Shanghai real- estate office, Peterson in 2006 arranged to sell an interest in a building held by Morgan Stanley to a shell company owned by him, a Chinese official and a Canadian lawyer, the government alleged.

Peterson told the bank the shell company was affiliated with a state-owned development firm, Shanghai Yongye Enterprise (Group) Co., the government said.

Illegal Gains

Illegal gains from the scheme totaled $5.39 million for all three conspirators, prosecutors said Aug. 13 in court papers. They urged that he be sentenced to at least four years and three months in prison.

“A probationary sentence for an individual who engaged in the conduct that Peterson did would only reinforce the public’s sense that that wealthy executives are essentially immune from prosecution,” said the memorandum by the Justice Department’s Stephen J. Spiegelhalter and John Nowak.

Peterson’s attorneys, Abigail E. Rosen and Frank H. Wohl, asked for a sentence of “no or minimal incarceration,” citing his cooperation with authorities when he learned of the investigation, and the probable harm to his children from his imprisonment.

He pleaded guilty to the conspiracy charge in April. His alleged co-conspirators, the Chinese official and the lawyer, haven’t been identified in the case.

Business Advantage

The Chinese official represented Yongye in a 2004 deal in which Morgan Stanley purchased the Shanghai tower, according to prosecutors. In a November 2004 e-mail, Peterson told his superiors that the official “has really gone out of his way to help us on the deal. I hope people understand that very clearly,” according to a document filed by prosecutors.

The Foreign Corrupt Practices Act prohibits payments to a foreign government official to secure a business advantage.

Morgan Stanley trained Peterson seven times on his duties under the anti-bribery statute from 2002 to 2008, and he was reminded of his duty to comply at least 35 times, the Justice Department said.

The U.S. Securities and Exchange Commission accused Peterson of violating the FCPA and securities laws in a civil suit in federal court in New York. Under a judgment in that case filed in May, Peterson was ordered to pay at least $241,589 and forfeit his real estate interests.

The criminal case is U.S. v. Peterson, 12-cr-00224, U.S. District Court, Eastern District of New York (Brooklyn). The civil case is Securities and Exchange Commission v. Peterson, 12-cv-02033, U.S. District Court, Eastern District of New York (Brooklyn).

To contact the reporters on this story: Christie Smythe in federal court in Brooklyn, New York, at; Tiffany Kary in New York at

To contact the editor responsible for this story: Andrew Dunn at

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Companies Mentioned

  • MS
    (Morgan Stanley)
    • $38.51 USD
    • 0.41
    • 1.06%
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