Op-Ed: Whole Foods In Hot Water: CEO Linked To Accused Sex-offender Rabbi

 

Defrocked rabbi and alleged sex offender Marc Gafni said of one of his victims, “She was 14 going on 35.” This admission, as reported by The New York Times in a December 25 exposé, has triggered an avalanche of outcry from Gafni’s alleged victims and their supporters.

Also reported in The Times story, “A co-founder of Whole Foods, John Mackey…is a chairman of the executive board of Mr. Gafni’s center, and he hosts board meetings at his Texas ranch.”  Back to Mackey in a moment.

http://www.nytimes.com/2015/12/26/us/marc-gafni-center-for-integral-wisdom.html

The story has blown up Twitter and social media.  In follow-up news stories in the New York Daily News and several Jewish publications, Gafni’s alleged victims and their supporters recount decades of his abuse.  They describe how he has evaded capture by relocating, changing his name, disappearing as a disgraced rabbi, then reappearing years later as a new age guru.

A group of more than 100 rabbis launched an online petition, demanding that Whole Foods sever ties with Gafni.  At the time of this writing, the petition has garnered more than 2800 online signatures:

 https://www.change.org/p/whole-foods-www-esalen-com-stop-marc-gafni-from-abusing-again?recruiter=85364171&utm_source=share_petition&utm_medium=copylink

James McRitchie, an activist investor emailed members of the company’s Board of Directors on New Year’s Day:

“Mr. Mackey has a fiduciary duty to WFM shareholders. His affiliation with Gafni and the center certainly put the reputation and value of WFM at risk.”

But voices of Gafni’s supporters have been noticeably quiet amidst the uproar.  Most noticeably M.I.A. is Gafni’s most enthusiastic ally, John Mackey, the CEO of Whole Foods Market.

So what does Whole Foods have to say about all this?

Michael Silverman, Whole Foods Market Global Corporate Communications, emailed:

“John Mackey’s involvement with Marc Gafni and the Center for Integral Wisdom is his personal business and does not represent an endorsement or support for either Mr. Gafni or the Center for Integral Wisdom by Whole Foods Market.”

A similar statement appears on John Mackey’s Whole Foods blog:

“My involvement with Marc Gafni and the Center for Integral Wisdom is conducted strictly in my personal life…”

http://www.wholefoodsmarket.com/blog/video-discussion-shadow

But Mackey’s and Whole Foods’ statements, characterizing the CEO’s relationship with Gafni as “personal,” are questionable.

You see, Mackey is Board Chair of Gafni’s nonprofit Center for Integral Wisdom. So he’s legally on the hook.  On the hook for what, you ask?  Well, for all business of the nonprofit.  But especially for this:

The IRS prohibits tax-exempt organizations from engaging in commercial, for-profit business activities.  A website for the CIW’s Success 3.0 Summit says, “Success 3.0 is an independent LLC generated by the Center for Integral Wisdom,“ and “John Mackey, (Board Chair CIW).”

http://www.success3summit.org/leadership.php

And the Office of the California Attorney General granted Gafni’s CIW exemption from registering with the state, as nonprofits are required to do.  The Office of the AG confirmed that CIW is exempt because it is “operated primarily as a religious organization.”

But on January 5, 2016, the Forward, a Jewish-American newspaper, reported Gafni saying, “I’ve left the spiritual teaching world and am functioning as the president of an activist think tank.”

http://forward.com/news/328311/marc-gafni-defends-return-to-spotlight-as-backlash-gathers-steam/#ixzz3wgq9oYYT

Has Gafni told the Attorney General that he’s no longer heading up a religious organization, but rather, a think tank?

Complaints were submitted on January 11 to the IRS and California Office of the Attorney General, questioning the CIW’s status as a religious organization, and “generating” what appears to be a for-profit enterprise: the Success 3.0 Summit.

Speakers at the 2014 Summit included Alanis Morissette, Arianna Huffington, Zappos CEO Tony Hsiegh, and Michael Franti of the band Spearhead.  I’d imagine they weren’t paid their speakers’ fees in organic kale chips.

http://www.success3summit.org/speakers.php

Here’s the point:  Regardless of whether the IRS or California Attorney General find any wrongdoing or decide to take any formal action against CIW, Mackey needs to divorce himself from Gafni and resign his board seat on the think tank.  Why?  Well, besides singing the praises of a guy who told a reporter, “She was 14 going on 35,” there’s this:

Customers, investors, and partners of Whole Foods, an $11 billion grocery giant, do not make a distinction between the CEO and the company.  Perception is reality: Mackey is the company.  He can be quietly nibbling on artisan cheese in the dairy aisle.  He is still the face of Whole Foods.

According to Wikipedia, John Mackey’s net worth is $100 million. Being a co-founder and CEO comes with $100 million worth of privileges.  And a few limitations.  One of these restrictions is making sure your relationships — personal or otherwise — don’t tarnish the reputation of the company, arguably its most valuable asset.

Mackey’s relationship with alleged sex offender Gafni, given the current media hurricane, is giving Whole Foods a bad name.  Whole Foods’ reputation is in hot water.  And that’s even worse than $6 asparagus water.

 

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Op-Ed: Whole Foods In Hot Water: CEO Linked To Accused Sex-offender Rabbi

Whole Foods Under Shareholders’ Spotlight

In the wake of a New York Times story by Mark Oppenheimer about Whole Foods Market CEO John Mackey’s relationship with former rabbi and alleged sex offender Marc Gafni, the company has come under scrutiny.

On December 25th, The Times reported Gafni saying of one of his alleged victims, “She was 14 going on 35.”

Also reported in Oppenheimer’s story, “A co-founder of Whole Foods, John Mackey…is a chairman of the executive board of Mr. Gafni’s center, and he hosts board meetings at his Texas ranch.”

http://www.nytimes.com/2015/12/26/us/marc-gafni-center-for-integral-wisdom.html

James McRitchie, a California investor and shareholder activist emailed members of the Whole Foods Board of Directors on New Year’s Day:

“Mr. Mackey has a fiduciary duty to WFM shareholders. His affiliation with Gafni and the center certainly put the reputation and value of WFM at risk.”

A group of more than 100 rabbis has launched an online petition, demanding that Whole Foods sever ties with Gafni.  At the time of this writing, the petition has garnered more than 2800 online signatures.  It includes comments from people claiming to have had unfavorable contact with the former rabbi:

https://www.change.org/p/whole-foods-www-esalen-com-stop-marc-gafni-from-abusing-again?recruiter=85364171&utm_source=share_petition&utm_medium=copylink

The flow of follow-up stories has been steady.

Oppenheimer filed these follow-ups in Tablet:

“Understanding the Marc Gafni Story, Part II”

http://www.tabletmag.com/scroll/196238/understanding-the-marc-gafni-story-part-ii

“More voices weigh in on Marc Gafni Controversy”

http://www.tabletmag.com/scroll/196355/more-voices-weigh-in-on-marc-gafni-controversy

New York community newspaper The Jewish Week, which had originally broken the Gafni allegations story in 2004, reported, “Some critics contend that Mackey, in his capacity as an executive board member of Gafni’s nonprofit center, is violating his fiduciary responsibility to the ethical values of Whole Foods.”

http://www.thejewishweek.com/news/national/gafni-faces-fallout-new-age-community

Michael Silverman, Whole Foods Market Global Corporate Communications representative emailed this statement:

“John Mackey’s involvement with Marc Gafni and the Center for Integral Wisdom is his personal business and does not represent an endorsement or support for either Mr. Gafni or the Center for Integral Wisdom by Whole Foods Market.”

A similar statement appears on John Mackey’s Whole Foods blog:

“My involvement with Marc Gafni and the Center for Integral Wisdom is conducted strictly in my personal life…”

http://www.wholefoodsmarket.com/blog/video-discussion-shadow

However, the accuracy of Mackey’s and Whole Foods’ statements, characterizing the CEO’s relationship with Gafni as “personal” is in question.

As a director on the board of Gafni’s Center for Integral Wisdom, a tax-exempt California nonprofit corporation, subject to state and IRS laws and regulations, Mr. Mackey has fiduciary duties to the organization.

According to Gene Takagi, an attorney with the NEO Law Group in San Francisco, “All directors of a nonprofit corporation have fiduciary duties of care and loyalty to the corporation.”

The IRS prohibits tax-exempt organizations from engaging in commercial, for-profit business activities.  A website for the CIW’s Success 3.0 Summit says, “Success 3.0 is an independent LLC generated by the Center for Integral Wisdom,“ and “John Mackey, (Board Chair CIW).”

http://www.success3summit.org/leadership.php

The California Nonprofit Integrity Act of 2004 requires that nonprofits register with the Office of the Attorney General, Registry of Charitable Trusts.  Religious organizations are exempt from registering.

On May 19, 2014, the Office of the California Attorney General issued a letter of exemption to the Center for Integral Wisdom/Center for World Spirituality, confirming that the organization “operated primarily as a religious organization.”

However, on January 5, 2016, the Forward reported Gafni saying, “I’ve left the spiritual teaching world and am functioning as the president of an activist think tank.”

http://forward.com/news/328311/marc-gafni-defends-return-to-spotlight-as-backlash-gathers-steam/#ixzz3wgq9oYYT

As of this writing, public records show that the Center for Integral Wisdom/Center for World Spirituality is still classified as a tax-exempt, California religious organization.

Complaints were submitted Wednesday to the IRS and California state Attorney General’s office, questioning federal tax and state nonprofit regulatory compliance by the Center for Integral Wisdom. John Mackey was named in both complaints, as Board Chair of the organization.

I spoke with public relations representatives from socially responsible fund managers Calvert, Domini, and Parnassus, all of which hold Whole Foods Market stock in their active equity portfolios. As of this writing, none of the firms have commented.

Shane Yonston, a Principal Advisor with Impact Investors emailed:

“Whole Foods positions itself as a socially responsible company, which is an important part of its brand. If these core values come into question by employees, consumers, partners, or investors, it can have long-term damaging effects on the company’s stock value. Reputational risk is real, and the way Mr. Mackey chooses to handle this conflict will certainly be watched by investors in the SRI community.”

Jo-Ellen Pozner, faculty, UC Berkeley, Haas School of Business, emailed:
“My take on this situation, in a nutshell, is that corporate leaders are showing a real lack of judgment in endorsing somebody with a tainted reputation of this particular sort. Not only does it show a disregard for important groups of stakeholders, it reveals a bit of hubris and tone-deafness. I think these sorts of associations are bad publicity, and reveal a blind spot which makes me question managerial judgment.”
Certainly, we are all watching.

 

 

Whole Foods Under Shareholders’ Spotlight