Whole Foods CEO’s Pseudonymous Postings Endanger Takeover

Mackey's use of a pseudonym on the Yahoo boards wasn't necessarily illegal, but it was "dicey," according to Harvey Pitt, a former chairman at the Securities and Exchange Commission. Without revealing his identity Mackey praised his own stock, and derided his competitor Wild Oats, a company that Whole Foods are now trying to buy.

Executives of public companies must disclose financial information to all company investors, said Peter J. Henning, a professor of securities law at Wayne State University in Detroit. Henning added that, “I would have to believe that Whole Foods’ general counsel nearly keeled over when they learned about this.”

According to this news report, Mackey has defended his Yahoo posts, saying that many people on the message boards use pseudonyms and that he never revealed any proprietary information about the company. He also never meant for those postings to be identified with him. Some of the opinions "Rahodeb" articulated represented Mackey's own opinions, he explained, and some did not. 

"It's just wrong" for any company officer to post on an investment message board, whether anonymously or openly, said blogger Herb Greenberg. "To post on outside message boards, especially using an alias, not only shows poor judgment but strikes to the heart of a company's culture and makes you wonder what else might not be quite right."

Experts are divided about whether Mackey's posts will affect the FTC case, according to this article. James Rill, a former antitrust chief at the Justice Department, called Mackey's actions "imprudent," but said they didn't add much to the FTC's argument. If Mackey indicates that some of the posts were false, though, his credibility in court could be damaged, according to Steve Newborn, head of the antitrust practice for law firm Weil Gotshal & Manges.

Other law experts who believe Mackey's posts represent more of a control issue for Whole Foods than a legal matter. Mackey disseminated information that the company's general counsel and board of directors had not reviewed. But, the author of this article argues, this is “more a looney problem than a legal problem.”

CNN asks what the Whole Foods board should do with a CEO “whose odd behavior is, at best, an unneeded distraction, and, at worst, unethical and potentially illegal.” Governance guru Charles Elson believes the posts demonstrate "a real lack of discretion and wisdom," and that the Whole Foods Board "has to do something.” His take on the story reflects the tenor of opinion among the pundits interviewed by CNN.

More than 1,300 postings from Rahodeb, the name that concealed the Whole Foods CEO’s identity, can be read on the Yahoo Finance Message Boards.

This link is to Rahodeb's final posting on the Yahoo message board.

In October 2000, the Securities and Exchange Commission adopted a final rule regarding fair "Regulation FD," or fair disclosure. In short, the rule stated that any information that could potentially prompt a stock trading decision must be made available to all persons, and not just a select few.

Whole Foods Market has posted information about the FTC Challenge to the proposed Wild Oats Merger on its Web site.

One of the missions of the FTC is to maintain competition in the marketplace.