Risk & Compliance

Whole Foods “Blogging” Probe Dropped by SEC

It takes no Reg FD or other action after its review of CEO Mackey's online postings mentioning Wild Oats before the Whole Foods merger.
Stephen TaubApril 28, 2008

Whole Foods Market said the Securities and Exchange Commission has ended its inquiry into financial message-board postings by CEO John Mackey, and that the commission recommended no enforcement action against the company or any individual.

In July 2007 the natural-foods retailing chain disclosed that its board had created a special committee to conduct an independent internal investigation related to online financial message-board postings that mentioned both Whole Foods and arch-rival Wild Oats Markets, which Whole Foods was trying to acquire. The company said at the time that it had received an inquiry from the SEC related to the matter.

In October 2007, Whole Foods said that the special committee had completed its investigation. The board reaffirmed its support of the Whole Foods Market leadership team, and said the findings of the investigation had been turned over to the SEC.

Last July, Mackey’s on-line postings drew wide attention when they cropped up in a lawsuit by the Federal Trade Commission that aimed to stop Whole Foods from buying Wild Oats for antitrust reasons. The suit included information about Mackey’s postings, written under the name “rahodeb” (a scrambled version of “Deborah,” his wife’s name.) The postings called Wild Oats stock overpriced and predicted it would fall into bankruptcy.

For his part, Mackey stated: “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.”

Last summer, we speculated that the SEC would investigate whether Mackey violated Regulation FD (fair disclosure), which says that when an issuer discloses “material nonpublic information” to people who might trade on it, they must make public disclosure of that information.

The SEC has not said — nor has Whole Foods — what specific potential violation had been investigated.

In February 2007, Whole Foods and Wild Oats announced they had agreed to merge in a deal valued at $671 million, including the assumption of debt. In late August, Whole Foods completed its purchase of Wild Oats in a deal valued around $700 million, including the assumption of debt.