Biotech Values

[DewDiligence]

SEC Opens Inquiry Into Online Posts by Whole Foods CEO

http://online.wsj.com/article/SB118436389533866187.html

>>
By KARA SCANNELL
July 13, 2007 6:20 p.m.

The Securities and Exchange Commission has opened an informal inquiry into the online postings of Whole Foods Market Inc.'s chief executive, according to people familiar with the matter.

For about eight years, Whole Foods CEO John Mackey posted numerous comments about the organic supermarket chain on Yahoo stock forums using a pseudonym. In some of his postings Mr. Mackey, the company's co-founder lauded Whole Foods' stock, cheered its financial results and bashed a company Whole Foods made a bid to acquire. While it isn't clear that Mr. Mackey violated any laws in his posting, they have raised numerous legal questions.

The SEC is likely to examine whether Mr. Mackey's comments contradicted what the company previously said or were overly optimistic about the firm's performance. In addition, the SEC will likely look at whether the CEO selectively disclosed material corporate information, which could violate a securities law passed in 2000, known as Regulation Fair Disclosure, which was designed to prevent executives from sharing information with favored clients or analysts.

Whole Foods didn't immediately return calls seeking comment.

In the past, Reg FD has run into challenges with many critics saying it violates freedom of speech. The SEC lost one of its early attempts to enforce Reg FD in 2005 when a federal judge in Manhattan threw out the lawsuit against Siebel Systems Inc., saying the SEC had applied the law in an "overly aggressive manner." The SEC didn't appeal. It has since brought other allegations against corporations for Reg FD violations.

Mr. Mackey's posting came to light as the Federal Trade Commission began investigating the company's planned acquisition of Wild Oats Markets Inc.

On Wednesday, Whole Foods said that among millions of documents it gave the FTC were postings its CEO made from 1999 to 2006 "under an alias to avoid having his comments associated with the Company and to avoid others placing too much emphasis on his remarks." Mr. Mackey used the pseudonym Rahodeb after his wife Deborah.

The company statement from earlier this week said: "Many of the opinions expressed in these postings now have far less relevance than when they were written."
<<