Whole Foods CEO's message posts trouble experts

CHICAGO (Reuters) - Corporate governance experts said Whole Foods Market Inc. should launch an internal investigation into chat room postings made by Chief Executive John Mackey under an alias that boosted his company and were critical of rivals.

The Wall Street Journal, citing people familiar with the matter, reported on Friday that the U.S. Securities and Exchange Commission had launched an informal probe of Mackey's postings, in a sign the issue will not go away any time soon.

A Whole Foods spokeswoman said the company had not been contacted by the SEC and was unable to comment on the report in the journal's online edition.

While the corporate governance experts declined to say Mackey's comments were illegal, they did wonder what the long-term impact was for his company's reputation.

Mackey used the message boards to predict a bleak future for Wild Oats Markets Inc., the rival it has since sought to acquire.

He posted messages on a Yahoo Inc. financial forum under the user name "rahodeb" -- an anagram of his wife, Deborah's, name -- according to a court document filed by the U.S. Federal Trade Commission and postings on Yahoo.

Mackey's messages painted a bright future for Whole Foods, the largest U.S. natural and organic grocer, and downplayed competitors.

Jacob Frenkel, a former enforcement lawyer for the SEC and federal prosecutor now with the law firm of Shulman Rogers Gandal Pordy & Ecker in Maryland, said Mackey's conduct was ill-advised but probably not illegal.

Still, Frenkel said it's likely Mackey's postings will be investigated by the SEC.

Frenkel said the SEC could consider whether Mackey's postings used deception to drive down the price of Wild Oats or inflate his company's shares, which could constitute stock manipulation.

"If someone is putting out information with the purpose suppressing or depressing the price of a stock, that could be manipulative," Frenkel said.

Mackey stopped posting as "rahodeb" on Yahoo message boards months before his company offered to buy Wild Oats.

He is also known for being vocal on a company blog. His postings include his thoughts on the U.S. Federal Trade Commission's bid to block the acquisition.

The U.S. Securities and Exchange Commission declined to comment on the matter.

For its part, Whole Foods has said its board is not meeting about the issue and that Mackey's posts did not violate any internal company policy.

Mackey, who started natural and organic grocer Whole Foods in 1980 and serves as its chairman and CEO, has not been available for interviews.

"It is unclear whether what he did is or is not a violation of the securities laws," said Thomas Dewey, a lawyer who specializes in governance issues and advises boards at Dewey Pegno & Kramarsky LLP.

Dewey said he had never heard of a CEO going on a message board or chat-room under a pseudonym and discussing his or her company before, "precisely because at a minimum it raises all kinds of difficult legal as well as investor relations issues."

Wild Oats declined to comment on any specific information in Mackey's posts.

"We believe this was one person's opinion and the postings are historical, therefore, they are not relevant to the benefits that the merger presents for both companies," a spokeswoman said.

Frenkel said Whole Foods would be well advised to hire someone to do an independent investigation into Mackey's postings. Even if they were not illegal, Frenkel said, the controversy over whether they were improper may persist.

"The reputational harm is not only personal, but to the company," Frenkel said. "Despite the company's efforts to distance itself from its CEO, the fact remains the CEO was posting information about his company and about a competitor."

(Additional reporting by Peter Kaplan and Karey Wutkowski in Washington, D.C.)