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Stockholder seeks damages; claims Chipotle execs knew food safety was inadequate

A woman who bought 105 shares of Chipotle Mexican Grill in December — after the restaurant chain was linked to six outbreaks in as many months — says the chain and its executive trio owes her and other stockholders damages.

Susie Ong filed a securities action in the U.S. District Court for the Southern District of New York on Jan. 8. She is seeking class action status for anyone who acquired Chipotle stock from Feb. 4, 2015 through Jan. 5 this year. She bought 105 shares on Dec. 17 for $558.05 per share. On Dec. 22 Ong sold the shares for $501.46.

http://www.dreamstime.com/royalty-free-stock-photography-chipotle-restaurant-chelsea-new-york-mexican-grill-chain-more-than-restaurants-around-world-image39039407The company’s stock value dropped by $6 billion in 60 days in late 2015. It continued free falling into the first week of the New Year hitting $410 per share, down from a 52-week high $758.

The stockholder’s case came two days after Chipotle revealed a federal grand jury has subpoenaed records related to one of the recent norovirus outbreaks linked to it.

That subpoena is related to a criminal investigation by the U.S. Justice Department and the Food and Drug Administration, according to documents Chipotle filed with the Securities and Exchange Commission.

Ong’s civil case contends Chipotle founder and chairman of the board M. Steven Ells, his co-CEO and company president Montgomery F. Moran, and their chief financial officer John R. Hartung knew the fast food chain had inadequate food safety policies and procedures but lied and omitted material facts in reports to stockholders for months.

“Chipotle’s quality controls were not in compliance with applicable consumer and workplace safety regulations,” according to Ong’s case.

“Chipotle’s quality controls were inadequate to safeguard consumer and employee health … as a result of the foregoing, Chipotle’s public statements were materially false and misleading at all relevant times.”

The stockholder’s complaint alleges the three executives acted knowingly and recklessly “with the intention to defraud in connection with the purchase and sale of securities.”

One of the specific Chipotle statements the case cites as an example came from company officials the first week of December during a norovirus outbreak traced to one of its restaurants near Boston College. More than 140 people, including many members of the school’s basketball team, were sickened. The statement detailed food safety new procedures that included “enhanced internal training.”

“Collectively, we believe these changes will put us at the forefront of the restaurant industry in terms of food safety practices,” Chipotle officials said in the Dec. 4 news release.

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