July 15, 2007
Mackey draws SEC's attention

Apparently, a CEO posting information on message boards under a pseudonym that may affect the stock price of his company or that of a rival company that his firm hopes to acquire is something that regulators frown on. Who knew?

Recent revelations about the conduct of Whole Foods chief executive John Mackey on an Internet message board are raising a question once unthinkable: Has the founder of the organic food grocery damaged his ability to lead the company?

Antitrust expert Darren Bush, a University of Houston professor, said Mackey is now his "own worst enemy," and that his Internet message board comments under the name of "rahodeb" could undercut the proposed $565 million takeover of rival grocer Wild Oats Markets Inc."CEOs of public companies should not post on message boards, through aliases or otherwise," said John R. Fahy, a securities law expert with Whitaker Chalk of Fort Worth and a former SEC enforcement attorney. "Beyond the business concerns, there are a host of securities law issues" involving disclosure of information.

Yes, I believe I said that.

Late Friday, The Wall Street Journal, citing anonymous sources, said that the Securities and Exchange Commission has started an informal inquiry into Mackey's conduct, asking for more information to determine whether any laws were violated. Whole Foods spokeswoman Kate Lowery said the company had not been contacted by the SEC.

An inquiry would likely center on the timing of Mackey's financial comments on the message board, and whether they contradicted what the company previously said or were overly optimistic about the company's performance.

The full Mackey is here, in case you have way too much free time on your hands (as apparently Mackey himself did - more on that in a sec). I'm guessing the SEC (and the FTC, with whom Mackey has been battling over Whole Foods' proposed takeover of rival Wild Oats) will find plenty of grist for their mill.

This tidbit is rather astonishing to me:

Last week, the FTC filed a longer version of its initial complaint, accusing Mackey of trying to eliminate Wild Oats store by store and eventually deciding to buy the company.

In a footnote to the document, the FTC revealed that Mackey sometimes used the name rahodeb on Internet message boards. The information was provided to the FTC by Whole Foods as part of a request for documents relating to the proposed acquisition.

The documents, released Tuesday, led to revelations that Mackey spent eight years participating in the Yahoo finance message boards, posting more than a 1,300 comments over eight years, sometimes as many as 17 times a day.

Emphasis mine. Remember how when Internet access became the norm at workplaces there were so many handwringing articles about how much time employees were sure to be wasting online, and how companies needed to have stringent policies in place about misuse of corporate assets and whatnot? One wonders if anyone at Whole Foods ever bothered to monitor Mackey's Internet usage, because it sure seems to me that he was spending a hell of a lot of time as "rahodeb" when he should have been CEO-ing. (I'm not unique in making this observation.) How much trouble might have been avoided if someone at Whole Foods had told Mackey to quit screwing around and get back to work? They wouldn't have even had to know what he was doing, just that he was doing a lot of it.

Anyways. I suspect we're a long way from hearing the end of this. Virginia DeBolt has more.

Posted by Charles Kuffner on July 15, 2007 to Bidness

This is about common sense. Is rule making necessary when on its face it would appear to be unethical, if not stupid for the CEO of a public company to post anonymously? Does John Mackey have too much time on his hands? Yes. And too big an ego too.

Posted by: Steve on July 16, 2007 5:41 PM