Chipotle’s bad winter is getting worse.
A series of high profile foodborne illness outbreaks at the Mexican restaurant chain had already seen it hit with a slew of lawsuits – and now it says it has been served with a federal grand jury subpoena as part of a criminal investigation of an outbreak of norovirus in California.
Chipotle revealed the subpoena in a Securities and Exchange Commission filing Wednesday in which it also acknowledged that the fallout from the scandal saw its sales plunge at existing stores by 30 percent in December.
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 and the subpoena calls on Chipotle to hand over a “broad range” of documents, the company said.
It marks a new headache for Chipotle, which has been reeling from outbreaks of E. coli and salmonella linked to its restaurants in states across the nation in recent months, and from outbreaks of norovirus at restaurants in Simi Valley, Calif., and Brighton, Mass. It said in its filing that it could not quantify the risk it faces from a possible prosecution.
Last month, the Illinois Department of Public Health reported one individual who said they ate at Chipotle tested positive for the same strain of E. coli as the outbreak, but a specific food source was not identified. “This was the single case reported in Illinois,” according to Melaney Arnold, spokeswoman for the Illinois Department of Public Health.
While civil lawsuits are commonly brought by diners who suffer from food poisoning, criminal federal prosecutions against the food industry are relatively rare, and typically focus on large food processors, not restaurant chains, according to Bill Marler, one of the nation’s leading food poisoning attorneys.
“I’ve been doing these kinds of cases for 25 years, and I can’t think of another case where federal prosecutors have looked at an outbreak at a single restaurant,” said Marler, who is representing a dozen of the 300 people taken ill in the Simi Valley norovirus outbreak.
“The common denominator in all the recent federal criminal prosecutions has been that they target manufacturers who transport adulterated food over state lines, so it’s hard to know what prosecutors are looking for.”
Federal investigators could be interested in emails between the Simi Valley restaurant and Chipotle’s corporate headquarters about the outbreak, or they may be interested in the immigration status of the 18 restaurant staff who also contracted the norovirus and may have caused the outbreak, Marler said.
For a felony charge to stick, prosecutors would have to show that Chipotle executives intended adulterated food to be served, Marler said. But for a misdemeanor, they would need to show only that the executive held a position of responsibility and could have prevented the outbreak, even if they were unaware of it.
Marler added that it was too soon to say whether Chipotle’s series of illness outbreaks is simply “bad luck,” but said it was possible that the company was “too focused on high growth and that it believed that because it serves non-GMO and natural foods that it didn’t have to be as conscious of food safety as say, McDonald’s is – if so, that’s going to change now.”
Recent high profile prosecutions include cases brought against a pair of cantaloupe farmers who shipped listeria-tainted melons that killed 33 people in 2011; a case brought against a pair of Iowa egg farmers who shipped salmonella tainted eggs that may have made as many as 62,000 people ill; and against ConAgra Foods, which agreed to pay $11.2 million for shipping salmonella-tainted peanut butter in 2006 and 2007.
In Chicago, suburban business owner Miguel Leal was earlier this year sentenced to probation for “washing” and repackaging moldy cheese that contained salmonella and E. coli.
But it was the unprecedented 28-year prison sentence handed in September to Stewart Parnell, former CEO of the now defunct Peanut Corporation of America, for knowingly shipping salmonella-tainted peanut butter that killed nine people and sickened 714 others that served notice on food business board rooms that the government was toughening up enforcement.
Attorney David Weisman, who represented Leal in the tainted cheese case, said “Adulterated food prosecutions are still relatively rare, but the government is clearly stepping them up – the perception is that there is a greater need to police food safety.”
The latest setback will further damage the once-golden image of Chipotle, prolonging its fall from grace, but it is unlikely to be a death blow to the restaurant chain, according to marketing experts.
Tim Calkins, a marketing professor at Northwestern University’s Kellogg School of Management, said Chipotle has “further to fall” in the wake of the criminal investigation but called it a “magical brand” that will eventually recover with proper damage control.
“Chipotle has so much goodwill built up, I think they’re going to navigate through this and emerge OK,” Calkins said.
Calkins said brands can bounce back from significant problems, but with so many dining alternatives in the competitive restaurant industry, wary customers may bypass Chipotle for some time.
To recover, Chipotle needs to fix the food safety problems and “operate perfectly” to stop the flow of negative news,” Calkins said. Changing the conversation through positive messaging can only occur after leadership is “very confident” the issues are fully resolved.
New York-based branding strategist Peter Shankman also said Chipotle will survive the crisis but needs to address the problem head-on with an aggressive mea culpa marketing campaign and perhaps some high-level executive “house cleaning” to assuage its once-fanatical customer base.
Winning back customer confidence will not happen overnight, Shankman said.
“This is a year or more process,” Shankman said.
Chipotle did not return calls seeking comment Wednesday morning.
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