According to Forbes.com major MMA sponsor Muscle Pharm is being investigated by the Securities and Exchange Comission. According to the report, investigation is centered around executive compensation, related party transactions, and lack of disclosures. At one point Muscle Pharm top executive Brad Pyatt was making more than the CEOs of some corporations with billion dollar valuations.
Muscle Pharm is a major sponsor to many athletes, trainers, and major sports organizations.
MusclePharm — which makes an array of fitness supplements and sponsors the Ultimate Fighting Championship — was issued a formal order of investigation by the SEC looking into “internal controls, disclosures of related party transactions, settlements of claims including share issuances, executive compensation, and disclosure of perquisites,” according to a Sept. 30th filing.
A company spokesman said MusclePharm was unable to comment on the SEC inquiry, but later provided the following statement, “This investigation has absolutely nothing to do with Arnold Schwarzenegger and is totally unrelated to Mr. Schwarzenegger.”
Although Schwarzenegger is the largest common shareholder of the Denver, Colo.-based company with an 8.8% stake worth about $7.2 million, he only acquired the shares in July after forming a partnership with MusclePharm. Public filings show that Schwarzenegger reached an agreement with the company to endorse MusclePharm products, including a “special Arnold Schwarzenegger product line of between 4 and 8 products,” in exchange for royalties off the products and 780,000 common shares. There’s no indication that the investigation relates to Schwarzenegger, as MusclePharm suggests, especially given how recent the relationship is.
The company, founded in 2008, is run by founder and CEO Brad Pyatt, who owns 5.8% of the common shares, worth $4.8 million), but controls 31% of all voting shares. Pyatt did a short stint with the Indianapolis Colts in the early 2000s, and unfortunately hasn’t had much personal or business success financially since then. The company states in its annual report that Pyatt has suffered a personal bankruptcy and other failed business ventures, acknowledging that this could “expose us to assertions by others that our management team may not know how to effectively run a business.” Court records show Pyatt completed Chapter 7 bankruptcy proceedings in March 2010.
Stay tuned to MixedMartialArts.com as we cover the investigation and its affects on the sport of MMA.
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