Wednesday, July 18, 2007
Whole Foods issued three press releases yesterday:
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.