M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Wednesday, July 18, 2007

The Whole Foods CEO Mea Culpa

Whole Foods issued three press releases yesterday:

SEC Contacts Whole Foods Market as it Begins Inquiry

Apology Statement

Whole Foods Market’s Board of Directors Begins Independent Internal Investigation Associated with Online Financial Message Board Postings

The titles of each say it all.  And the CEO apology was short and begging:

Whole Foods Market today released the following statement from Co-founder, Chairman and CEO, John Mackey: "I sincerely apologize to all Whole Foods Market stakeholders for my error in judgment in anonymously participating on online financial message boards. I am very sorry and I ask our stakeholders to please forgive me."

In light of the SEC investigation, the Whole Foods board had little choice but to launch an internal probe and retain counsel to investigate John Mackey's illicit postings on the Wild Oats yahoo chat board (see the postings here, the Wall Street Journal has compiled highlights here).   And there is potential liability exposure here for Mackey under both the anti-fraud provisions of the Exchange Act and Regulation FD for selective disclosure.  However, given the anonymous nature of the postings and the free-for-all that chat boards are these days, reliance and materiality will both be difficult to establish, and a Regulation FD action can only be brought by the SEC.  Still, as I stated last week:

In the end, the Whole Foods-Wild Oats saga highlights for attorneys the problems of head-strong clients/CEOs who likely do not take advice well, as well as the perils of second requests.  But just because you have a dumb CEO still doesn't justify the FTC actions here challenging Whole Foods' proposed acquisition of Wild Oats.  As far as I know, there is no stupidity provision in the antitrust laws though some may argue there should be one in the law generally. 

The hearing on the FTC's request for a preliminary injunction halting Whole Foods acquisition of Wild Oats is schedule to begin on July 31 in the U.S. District Court in Washington D.C.


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What else could he do but aplogize? His behavior was highly unethical, perhaps criminal. He has for years been touting himself (on his own blog) as the paragon of transparency, and then it was revealed that for seven-plus years he was touting himself and his company, and ripping a competitor, under an alias. Yes, he should be fired. The guy's hubris is so great it took him a week of heat to force him to apologize. Actually it took several days for the media and the blogosphere to really turn on him. Why? -- see: http://jon8332.typepad.com/force_for_good/2007/07/wacky-mackey-ep.html

Posted by: Jon Harmon | Jul 18, 2007 7:06:50 PM

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