Chipotle Mexican Grill Inc. continues to get heat for its hiring practices, with the Securities and Exchange Commission and now federal prosecutors looking into the company.
Earlier this week, the U.S. attorney for the District of Columbia told the Denver-based burrito chain that it was under investigation, according to an SEC filing. Prosecutors are probing possible criminal violations of securities laws related to Chipotle’s choice of employees – some of whom were suspected of being undocumented.
The investigation will attempt to determine whether Chipotle complied with employee work authorization verification and disclosure requirements and piggybacks on a previous probe from federal prosecutors. Executives said they now believe the government will continue examining the company for another year or two.
Chipotle said in the filing that it intends “to continue to fully cooperate in the government’s investigations.” But at a Morgan Stanley conference Wednesday, co-Chief Executive Montgomery Moran said the renewed interest caught the company off-guard.
“We thought that it was probably winding down, so we were surprised,” he said of the investigation.
“We didn't do anything wrong,” he added, saying that Chipotle has already sent over 300,000 pages of documents to the government.
The SEC separately subpoenaed Chipotle last week asking for more information, according to another filing from the company.
“It's not the 11th hour anymore, so we're back to earlier innings,” Moran said.
In 2010, Chipotle fired 450 illegal employees in Minnesota after being probed by the U.S. Immigration and Customs Enforcement agency, an arm of the Department of Homeland Security. The investigation stretched from Washington, D.C. to Los Angeles, encompassing many Chipotle markets in between.
The chain, which doesn’t believe in the franchise model, controls all its own hiring decisions.
But the controversy hasn’t had much effect on Chipotle stock, which has boomed roughly 40% over the past 52 weeks. Last month, the chain said its net income for the first quarter soared more than 35% to $62.7 million, or $1.97 a share.
On Wednesday, the stock was up 1.4%, or $5.75, to $401.31 a share in afternoon trading in New York.
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