BUSINESS

Chipotle is subpoenaed in criminal probe tied to norovirus in Simi Valley

Chipotle Mexican Grill Inc. said Wednesday that it was served with a federal grand jury subpoena in connection with a criminal investigation tied to a norovirus incident at a Simi Valley restaurant.

In a filing with the Securities and Exchange Commission, the Denver restaurant chain said the subpoena, which was served in December, requires it to produce a “broad range of documents” related to the Chipotle restaurant in Simi Valley that experienced the “isolated” incident in August.

The investigation is being conducted by the U.S. attorney's office for the Central District of California in conjunction with the Food and Drug Administration's office of criminal investigations.

Chipotle spokesman Chris Arnold said in an email that the company does not discuss pending legal actions as a matter of policy, but that it would cooperate fully in the investigation.

Criminal inquiries related to food safety outbreaks are uncommon, but there has been increased attention on these issues and companies' responses to them, especially after the FDA Food Safety Modernization Act was signed into law in 2011. The measure focuses on preventing contamination.

“We're sort of in new territory here,” said Michael Roberts, executive director of the Resnick Program for Food Law and Policy at UCLA. “I think we're seeing a new partnership between the FDA and prosecutors.”

In 2014, a federal jury convicted former Peanut Corp. of America owner Stewart Parnell of knowingly shipping peanut butter contaminated with salmonella and covering up the evidence. Parnell was sentenced to 28 years in prison for his role in a 2009 salmonella outbreak that was blamed for nine deaths and linked to the company's plant.

“The FDA ... sent a clear signal that it's going to use its criminal sections to focus on these food safety outbreaks,” Roberts said of the Peanut Corp. case. “It's not so much the outbreak itself, it's the response.”

Chipotle's sales have been rocked by E. coli outbreaks linked to Chipotle restaurants in several states. In November, the chain temporarily closed 43 restaurants in Washington and Oregon after 22 cases were initially linked to some of its eateries. Those restaurants have since reopened.

A month later, 141 Boston College students were reported to have contracted norovirus from eating at a Chipotle restaurant in Brighton, Mass. This separate outbreak was specifically mentioned in the company's Wednesday SEC filing as worsening the “adverse financial and operating impacts” from the E. coli outbreak in October and November.

As of December, 53 people in nine states, including California, have been
affected by one norovirus strain, and five people in three states were hit by another, according to the FDA.

Chipotle's December sales were down 30% from a year earlier, according to the SEC filing.

On Wednesday, shares of Chipotle sank $22.36, or nearly 5%, to $426.67.

Historically, Roberts said, companies have been able to rebound from food safety problems. Chains such as Jack in the Box and Taco Bell recovered from E. coli outbreaks related to food sold at their stores in the quarters and years after the event, according to an investors' note from Credit Suisse analyst Jason West.

“It's a different age where I think consumers are more sensitive to these issues or looking at them more closely,” Roberts said. “There's a growing societal interest in food.”

Copyright © 2016, Los Angeles Times

UPDATES

7:29 p.m.: Updates with additional details and background

10:24 a.m.: This article was updated with details from the SEC filing, Chipotle's midday stock price and additional background information. 

This article was originally published at 7:46 a.m.

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