U.S. companies facing bribery accusations overseas, especially in China, would probably try the “everybody does it” defense.

Following accusations Wal-Mart engaged in bribery in Mexico, it has emerged that a senior banker at Morgan Stanley has been charged with bribery charges relating to Chinese real estate.

What is happening?
The US Securities and Exchange Commission (SEC) has charged a former executive at Morgan Stanley with Foreign Corrupt Practices Act (FCPA) violations as well as 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.

Peterson agreed to give up $250,000 in unlawful profits, and to relinquish his interest in $3.4 million of Shanghai real estate.

Lawyers for Peterson declined to comment. Well, Morgan Stanley spokesman Matt Burkhard said the firm was pleased the matter was resolved.

Who is this guilty guy?
Garth R. Peterson, 42 years old, was a managing director in Morgan Stanley’s real estate investment and fund advisory business.

What happened?
Clearly, Peterson was a good businessman, since he successfully managed to buy a $6 million asset for $3 million.

According to the SEC complaint filed in U.S. District Court for the Eastern District of New York, Peterson’s violations occurred from at least 2004 to 2007.

In 2004, after more than 1-year alleviating concerns about a violation of the FCPA with managers, Peterson arranged to sell Morgan Stanley’s 12 percent share in a real estate fund to Asiaphere Holding Ltd., in which he held a (undisclosed to the bank) 57 percent joint share holding. The deal, worth to $6 million, was traded at only $3 million.

He paid himself $860,000 and disguised payments to the Chinese official as finder’s fees that Morgan Stanley’s funds owed to third parties.

What’s 3-2-1 clause?
What we talked above is just one case of his cooperation with a Chinese official. Due to strict audits at foreign companies, Peterson inked an agreement with the Chinese official to avoid such financial supervision. Under the terms of the deal, Morgan Stanley would sell the Chinese official a 3 percent interest in each deal he brought to Morgan Stanley for the cost of 2 percent, providing the Chinese official a 1 percent discount Peterson called it a "finder's fee".

Peterson filed the 3-2-1 clause to his supervisor, however the latter turned it down because of FCPA concerns. Peterson continued the operation without authority.

The 21st Century Business Herald has found that the 3-2-1 clause reaped profits for Peterson and his Chinese partner in at least five real estate property projects.

Morgan Stanley is not being sued.

"We cooperated fully with the government and we are very satisfied with this outcome," said Morgan Stanley spokesman Matt Burkhard. "Mr. Peterson's intentional circumvention of Morgan Stanley's internal controls was a deliberate and egregious violation of our values and policies."

The bank says it did everything it could to comply with the FCPA. “Morgan Stanley trained Peterson on the FCPA seven times and reminded him to comply with the FCPA at least 35 times.”