Last updated: February 12, 2009 9:08 pm

Morgan Stanley suspends top official

Morgan Stanley has suspended its global head of real estate investing after revealing that actions by an employee believed to be the former China property head “appear to have violated” the foreign corrupt practices act, a US law that prohibits corporate bribery.

People close to Morgan Stanley said the bank had put Sonny Kalsi, a high-profile banker who leads its big real estate division, on administrative leave effective immediately.

The move came after Morgan Stanley disclosed in a filing to the Securities and Exchange Commission that it had discovered actions initiated by an unnamed China-based employee that “appear to have violated” the act.

Three people familiar with the matter said the employee referred to in the filing
was Garth Peterson, Morgan Stanley’s top property deal-maker in China until he was fired around Christmas.

The bank said it had “terminated the employee” involved and reported the activity to the appropriate authorities.

The regulatory disclosure about the China-based employee, which came in the last paragraph of a filing on an unrelated matter, made no mention of Mr Kalsi.

The 41-year-old Indian-born banker is well-regarded within Morgan Stanley and was seen as a rising star following his successful tenure as head of the bank’s real estate business in Asia at the beginning of the decade.

Morgan Stanley declined to comment beyond the filing. Mr Kalsi and Mr Peterson could not be reached.

Starting in 2003, the bank invested several billion renminbi in shopping malls, apartment blocks and office buildings in Shanghai and at one point was regarded as the largest single global real estate investor in the city.

It put a number of those properties on the market last September. By the end of September, Morgan Stanley had $91.3bn of real estate assets under management globally, with $26.5bn of that in Asia.

China’s real estate sector is rife with bribery, corruption and consulting firms that promise access to senior government officials and preferential treatment in bids for land and projects in exchange for “consulting fees”. US companies and their agents are prohibited from paying bribes to win business abroad.

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