Issue Spotting the Whole Foods CEO's Pseudonymous Online Life
With the bar exam just around the corner, it's probably too late to add this doozy of a fact pattern about John Mackey, the co-founder of Whole Foods who had an online pseudonym -- Rahodeb -- under which he posted 1,100 entries on Yahoo Finance's bulletin board touting his company's stock and also criticizing Wild Oats Markets, a rival that his company went on to buy. Mackey's postings were made over a seven-year period - - and apparently, intervening events like the prosecution of Enron honchos for making false statements never made any impression.
So, what's wrong with this picture? Steve Bainbridge takes a stab at some of the issues in need of analysis in this post:
1. Did any of the posts contain material misrepresentations or omissions that might constitute securities (or wire) fraud?
2. Did any of the posts contain libelous statements?
3. If the answer to either of the above is yes, can legal responsibility for such statements be attributed to the company?
4. What impact will this have on the merger? Note the stakeholders potentially affected: The FTC, the DOJ, Wild Oat's board and top management, Wild Oat's shareholders, Whole Foods' shareholders.
5. Your very high profile CEO is now a laughingstock. E.g., one Yahoo board poster wrote: "What a hoot! It's so Nixonian! Maybe he needs some animal fat in his diet. I've known vegans who suffered from teeth and gum disease; now we know a vegan who's suffering from 'foot-in-mouth' disease.
In this post at Law Biz Blog, Ed Poll mentions some of the same issues as Professor Bainbridge, as well as one "of even greater significance":
Whole Foods has portrayed itself as, ethical, honest and concerned primarily about the well-being of its customers. As one analyst opined, the company probably has enough "points in the emotional bank" to weather this storm but this maelstrom certainly chips away at their reputation and our confidence in them.
And finally, we have this take from the Insurance Coverage Blog:
This bizarre story [about Mackey] is a reminder for insurers to redouble their sensitivity to Internet-related risks. Additionally, it is also a reminder to carefully police their own employees' Internet activity. Even the bright, sophisticated, and successful fail sometimes to exercise good judgment online.
Posted by Carolyn Elefant on July 13, 2007 at 07:11 PM | Permalink
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