This account does not make it clear whether the man with the bandana already had the gun out when Pete arrived back at his neighbors. The account also doesn't mention whether or not Pete or somebody else called the police when they became suspicious of criminal activity.
So, assuming that the account's silence means the police were not called, let's look at what happened:
- Pete was with friends on premesis owned by a neighbor.
- A woman apporaches the group.
- Somehow by her actions, the woman makes Pete think some criminal activity is brewing.
- Pete leaves the scene and returns to his home/office and retrieves a gun.
- Pete does not call the police.
- Pete, now armed, returns to the neighbor's.
- A man wearing a bandana is present.
- The man in the bandana may or may not have already produced a gun.
- At some point, the man in the bandana does produce a gun.
- Pete produces his gun and orders the man in the bandana to put his gun down.
Now we all know what happened next from the account, but the "I'd rather be tried by twelve than carried by six" crowd thinks Pete at this point should have shot the man in the bandana. But, had that happened, let's look at how it gets presented in court:
- Pete and friends are unarmed
- Woman approaches
- Pete becomes suspicious of criminal activity
- Pete leaves and retreives a gun
- Pete does not call police
- Pete returns to the neighbor
- The man in the banana produces a gun
- Pete shoots the man in the bandana.
By suspecting criminal activity, leaving the vicinity, not calling the police, arming himself, returning to the scene and then shooting first, Pete will be portrayed as having escalated the conflict.
As Doug M pointed out, once you think something suspicious is going on, leave the area and once you do, don't return.