Updated, 2:05 p.m. |
For the second time in less than a week, the Securities and Exchange Commission had a yearslong investigation involving insider trading end in a whimper.
On Wednesday, the agency dropped its accusations against Parker H. Petit, the former chairman and chief executive of Matria Healthcare. The move comes five days after a federal jury in Manhattan cleared the hedge fund manager Nelson Obus of allegations in a separate insider trading case.
Both men maintained for years that they had done nothing wrong. Both chose to spend more in legal fees than the cost of any potential settlement to clear their names. The S.E.C. first filed its case against Mr. Obus in 2006, while the agency brought action against Mr. Petit and his friend, Earl C. Arrowood, in 2012.
“He refused to settle because he didn’t do anything wrong, and he was willing to go to court and have the judge decide,” said Aaron M. Danzig, Mr. Petit’s lawyer.
The agency had accused Mr. Petit of funneling private information about Matria’s pending sale to Mr. Arrowood. Mr. Arrowood recently reached a $22,000 settlement with the S.E.C. in which he neither admitted nor denied any wrongdoing.
Both cases represent the ends of investigations involving relatively small amounts of money. Mr. Arrowood was accused of earning a $94,000 profit on the tip, while Mr. Obus, whose firm Wynnefield Partners manages about $300 million, was accused of earning a little more than $1 million.
The S.E.C. first issued a subpoena to Mr. Obus in 2002, and it began its investigation of Mr. Petit and Mr. Arrowood in 2009.
“I very much appreciate the role the S.E.C. plays in policing the markets and protecting the public from unscrupulous practices,” Mr. Petit said in a statement. “I am also pleased the S.E.C. has decided to dismiss the case against me, and I obviously believe the commission made the right decision. However, I think this action should have occurred much sooner.”
It is not common, although not unheard of, for the S.E.C. to dismiss its own case. The agency did not explain why it decided to drop the case against Mr. Petit.
The S.E.C. accused Mr. Petit of telling Mr. Arrowood that Matria was looking to be acquired in 2007. Mr. Arrowood then spent half of everything he was worth, or about $420,000, to buy 17,500 shares of the company in October and December of that year, the agency said.
In January of 2008, Matria announced it was pursuing a possible sale of the company, and its stock shot up 20 percent in a day. Matria was eventually sold to Inverness Medical Innovations, a provider of in-home medical services, for $900 million (Inverness has since changed its name to Alere).
But lawyers for Mr. Arrowood and Mr. Petit, who had been friends and “flying buddies” for two decades, always denied the charges, and that the case against them contained “none of the hallmark allegations” of a typical insider trading case. Mr. Petit was not accused of tipping off his close friends or family, or of profiting from the information himself.
Mr. Petit made his fortune from Healthdyne, the company he founded in 1970 to develop a monitor to protect at-risk children from crib death, or Sudden Infant Death Syndrome, after his own son died from the mysterious illness. Healthdyne later split into several entities, including Matria.
An aspiring pilot, Mr. Petit first met Mr. Arrowood at an air show sponsored by a company Mr. Arrowood owned in 1993. The two men became friends, and Mr. Arrowood, a former Vietnam fighter pilot who later worked as a pilot for Delta, flew some of Mr. Petit’s planes on personal and business trips. Mr. Arrowood’s niece had even used the monitor Healthdyne invented.
“Mr. and Mrs. Arrowood are quite pleased with this settlement,” Mr. Arrowood’s lawyer, Tony Cochran, said in a statement.