The SEC alleged that Garth Peterson, who was a managing director in Morgan Stanley’s real estate investment and fund advisory business, had a personal friendship and secret business relationship with the former Chairman of Yongye Enterprise (Group) Co. – a Chinese state-owned entity with influence over the success of Morgan Stanley’s real estate business in Shanghai.
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Peterson secretly arranged to have at least US$1.8 million paid to himself and the Chinese official that he disguised as finder’s fees that Morgan Stanley’s funds owed to third parties.
Peterson also secretly arranged for him, the Chinese official, and an attorney to acquire a valuable Shanghai real estate interest from a Morgan Stanley fund. Peterson was acquiring an interest from the fund but negotiated both sides of the transaction< SEC further alleged.
According to SEC, in exchange for offers and payments from Peterson, the Chinese official helped Peterson and Morgan Stanley obtain business while personally benefitting from some of these same investments.
Peterson agreed to a settlement of the SEC’s charges in which he will be permanently barred from the securities industry, pay more than US$250,000 in disgorgement, and relinquish his interest in the valuable Shanghai real estate that he secretly acquired through his misconduct.
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By GlobalDataThe US Department of Justice has filed a related criminal case against Peterson.
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."
