Chipotle subpoenaed as part of investigation; sales plunge

NEW YORK (AP) – Chipotle has been served with a federal subpoena as part of a criminal investigation tied to a norovirus outbreak at one of its restaurants.

The subpoena, received last month, requires Chipotle to produce a broad range of documents tied to a restaurant in Simi Valley, California, where the outbreak took place in August, the company said Wednesday.

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, according to a filing with the Securities and Exchange Commission.

Representatives from those offices were not immediately available for comment.

Doug Beach, a manager of the food program at Ventura County’s Environmental Health Division, told The Associated Press Wednesday that the U.S. Attorney’s office had requested records from the his office regarding the Chipotle case about a month ago.

“That was a first for us,” Beach said in a phone interview.

Beach said Chipotle had been cooperative with the county’s investigation, which uncovered issues such as unclean equipment and employees without the necessary food handling permits.

He also noted Chipotle started getting complaints about illnesses on Tuesday, Aug. 18, and shut down its restaurant the following Friday. Yet the company did not alert the county of the matter until Saturday – after it had already reopened the restaurant, Beach said.

The disclosure of the federal investigation comes as Chipotle Mexican Grill Inc. reels from an E. coli outbreak linked to its restaurants in late October and November. That was followed by a separate norovirus outbreak at a restaurant in Boston. The cases received far more national media attention than the norovirus outbreak in California, and the company’s sales have plunged.

Sales fell 30 percent at established locations in December, Chipotle said Wednesday.

The Denver company said sales for the full fourth quarter were down 14.6 percent at established locations, marking the first decline since the company went public in 2006. It also cut its profit outlook for the period.

Last month, Chipotle said it could no longer reasonably predict sales trends given the food scares. It retracted its sales forecast for 2016.

In its regulatory filing Wednesday, the company said it could not determine or predict the amount of any “fines, penalties or further liabilities” it might face in connection with the federal investigation.

A Chipotle spokesman, Chris Arnold, said in an email the company does not discuss pending litigation, but that it intends to cooperate fully with the investigation.

The emergence of a criminal investigation after a norovirus outbreak is unusual, said Bill Marler, a food safety lawyer representing Chipotle customers who were sickened in Simi Valley.

Outbreaks at restaurants are typically caused by an infected employee.

Marler couldn’t think of a reason for a federal investigation, other than employment violations.

To rehabilitate its image, Chipotle has taken out full-page ads apologizing to customers in dozens of newspapers around the country. It also vowed changes to step up food safety at its restaurants, in part by tweaking its cooking methods and increasing testing of meat and produce.

Co-CEO Steve Ells has said the company will likely never know what ingredient was to blame for the E. coli cases.