Chipotle Mexican Grill Inc. (NASDAQ:CMG), lost 30 percent in sales for December after a series of food scares hit some of its restaurants, and for revealing that a federal criminal investigation had begun over its customers getting sick.
The company dealt with a norovirus outbreak in a Simi Valley, California, restaurant according to documents produce for a regulatory filing. The investigation isn’t tied to the recent E. coli outbreak which resulted in people getting sick in nine states or the norovirus outbreak in Boston.
The U.S. Attorney’s Office for Central District of California and the Food and Drug Administration’s Office of Criminal Investigations is conducting 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.
When outbreaks happen at restaurants it is caused by an infected employee.
Marler couldn't think of a reason for a federal investigation, other than employment violations.
The announcement of the investigation follows in aftermath of the October and November, E. coli outbreaks that plagued Chipotle. After that reeling from the impacts of a norovirus outbreak in a Boston restaurant. Both cases have received numerous media attention than the isolated incident in California.
The company has felt its first decline since going public in 2006 with sales falling 14.6 percent in the fourth quarter. Due to the decrease in sales, Chipotle announced last month that it could no longer reasonably predict sales trends for 2016 due the abundance of food scares.
In its regulatory filing , 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.
According to Doug Beach, a manager of the food program at Ventura County’s Environmental Health Division, Chipotle had been cooperative with the county's investigation, which uncovered issues such as unclean equipment and employees without the necessary food handling permits.
Beach also noted that complaints were brought forth to the attention of Chipotle about the illnesses on , and shut down the restaurant promptly but failed to notify the county about the incident until the restaurant was reopened.
Going forward in rebuilding its image Chipotle has use full page ads to apologize to customers around the country. The company plans to improve cooking methods and increase the testing of meat and produce.
The company will never know what ingredient was to blame for the E. coli cases according to Co-CEO Steve Ells.