The U.S. Securities and Exchange Commission has filed a civil complaint against Parker “Pete” Petit, charging the prominent Atlanta medical industry entrepreneur and philanthropist with allegedly providing insider information in 2007 to a friend that allowed the other man to profit from two stock trades.
The SEC said Petit allegedly passed non-public information to Earl Arrowood, a retired Delta Air Lines pilot, indicating that Matria Healthcare, for which Petit served as chairman and CEO, was actively looking to be acquired. The company eventually was acquired by Alere.
Arrowood, who previously had never made an equity trade, invested $420,000, half of his net worth, in Matria stock through two purchases, bringing him a $94,000 profit, according to the government. Arrowood’s attorney, Tony Cochran, said Arrowood made less than $10,000 on the sale and intends to defend himself against the allegations.
Petit, 72, and Arrowood, 67, each are charged with one count of fraud in the complaint in the U.S. District Court in Atlanta.
The government, in the complaint, detailed a series of calls Arrowood made to numbers associated with Petit near the purchase dates. In a written statement, Petit said he had no prior knowledge of Arrowood’s stock purchases, and had not spoken to Arrowood within two weeks of the October 2007 transaction. In December 2007, Petit said they discussed his purchase of a new airplane.
Petit was not accused of profiting from the sales, said Aaron Danzig, Petit’s attorney. Petit, in the statement, said he understood the fragile nature of mergers and wouldn’t have engaged in even casual conversations about Matria so as not to jeopardize its sale.
Danzig said the case is without merit and that Petit passed a polygraph test administered by a former chief polygraph examiner for the FBI, proving he did not supply Arrowood with insider information.
“The SEC, in its zeal to prosecute a respected executive and philanthropist, has jumped to a false conclusion that Pete’s relationship with Mr. Arrowood led to improper trading by Mr. Arrowood on inside information,” Danzig said in the statement. “Nothing could be further from the truth.”
A Georgia Tech and Georgia State graduate, Petit founded Healthdyne, a health care company that made high-tech devices and grew to $1 billion-plus annual revenue. Healthdyne merged in 1996 with another company to form Matria, which was acquired by Inverness Medical Innovations in May 2008.
Petit now serves as chairman and CEO of MiMedx Group, an orthopedics implant company.
On Wednesday, the board of MiMedx issued a statement saying it fully supports Petit, and it is “not aware of any direct evidence that would implicate Mr. Petit in any wrongdoing.”
Petit is a big donor at Atlanta universities, where his name is synonymous with science education. Buildings at Georgia State University and Georgia Tech bear his name, and he funded an engineering in medicine professorial chair at Georgia Tech, and endowed the Petit Institute for Bioengineering and Biosciences at the school. He gave $1.5 million to Georgia State in support of the school’s new football team, and last year funded the Chair in Bioengineering and Bioscience in his name, according to Danzig’s statement.
The SEC complaint details the longstanding relationship between Petit and Arrowood, telling how they met in 1993 at an air show sponsored by Sky Warriors, an Arrowood-owned company. Petit flew in several aerial combat missions sponsored by Sky Warriors, and the two became friends, the complaint said. Later Petit helped managed Arrowood’s retirement investments.
On Wednesday, several people spoke out in support of Petit.
“I’ve known him for going on 45 years and I’ve never known a finer guy,” U.S. Sen. Johnny Isakson said. “I’m confident he will be exonerated.”
Said Terry Dewberry, former Matria board member, “Pete is one of the most straightforward guys you would ever run into. The thought that he would do what they allege is inconceivable to me.”
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