Chipotle hit with federal subpoena over California norovirus outbreak

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Chipotle Investigated for Illness Outbreaks

(Reuters) -- Chipotle Mexican Grill Inc, under scrutiny for months over outbreaks of foodborne illness across several U.S. states, said on Wednesday it was served with a subpoena in a federal criminal probe linked to a norovirus case in California last year.

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Shares of the burrito chain fell more than 5 percent to $424.95, their lowest in more than two years, as the Denver-based company grapples with a wave of norovirus and E. coli outbreaks that have sickened customers and battered sales.

The company in a filing also projected a 14.6 percent plunge in fourth-quarter same-store sales, compared with a previously estimated 8-11 percent drop, which would be the first such decline in the company's history.

The company in a filing also projected a 14.6 percent plunge in fourth-quarter same-store sales, compared with a previously estimated 8-11 percent drop, which would be the first such decline in the company's history.

Chipotle said it received the subpoena as a part of a criminal investigation by the U.S. Department of Justice and the Food and Drug Administration. A federal grand jury will decide whether to press charges in the case.

Norovirus is the leading cause of food-related illnesses and outbreaks in the United States, often occurring when infected restaurant employees and food workers touch raw ingredients before serving. The highly contagious virus can cause vomiting and diarrhea.

The investigation announced on Wednesday is the latest headache for the company, which has seen sales slump after an E. coli outbreak sickened more than 50 people in nine states in October and November.

That outbreak was followed by a norovirus incident at a restaurant in Brighton, Massachusetts the week of Dec. 7, in which 120 Boston College students fell ill.

BROAD RANGE OF DOCUMENTS

Chipotle said the subpoena was served in December. It requires the company to produce a broad range of documents related to the August norovirus incident at its restaurant in Simi Valley, California, which sickened more than 200 people, including 18 workers.

In September, two California residents sued Chipotle for damages in U.S. court after they said they became sick from eating at the Simi Valley location.

Alyssa McDonald vomited repeatedly, developed "explosive diarrhea," and suffered chest pains after eating at restaurant, according to court documents. Another customer said she had to go to a hospital emergency room for days.

The Ventura County Health Department found her stool tested positive for norovirus, the lawsuit said.

See more of the Chipotle virus outbreak in the gallery below:

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Chipotle closings because of E.coli
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Chipotle hit with federal subpoena over California norovirus outbreak
Passers-by walk near a closed Chipotle restaurant on Monday, Dec. 7, 2015, in the Cleveland Circle neighborhood of Boston. Chipotle said late Monday that it closed the restaurant after several students at Boston College, including members of the menâs basketball team, reported âgastrointestinal symptomsâ after eating at the chain. The school said it was working with local health officials to determine the cause of the illness. (AP Photo/Steven Senne)
A sign is posted on the door to a Chipotle restaurant, Monday, Dec. 7, 2015, in the Cleveland Circle neighborhood of Boston. Chipotle said late Monday that it closed the restaurant after several students at Boston College, including members of the menâs basketball team, reported âgastrointestinal symptomsâ after eating at the chain. The school said it was working with local health officials to determine the cause of the illness. (AP Photo/Steven Senne)
A customer leaves a Chipotle restaurant in Seattle as the company started to reopen the outlets closed because of an E. coli outbreak in the Pacific Northwest, Wednesday, Nov. 11, 2015. (AP Photo/Donna Blankinship)
Customers leave a Chipotle restaurant with food in Portland, Ore., Wednesday, Nov. 11, 2015. Chipotle started reopening its restaurants in the Pacific Northwest on Wednesday after an E. coli outbreak sickened about 45 people, a high-profile example of foodborne illnesses that are more common than the public realizes, health experts say. Forty-three outposts of the Mexican food chain in Washington state and the Portland, Oregon, area were closed at the end of October because of the outbreak that hospitalized more than a dozen people. The first restaurants opened for lunch Wednesday. (AP Photo/Don Ryan)
A customer enjoys lunch at a Chipotle restaurant in Portland, Ore., Wednesday, Nov. 11, 2015. Chipotle started reopening its restaurants in the Pacific Northwest on Wednesday after an E. coli outbreak sickened about 45 people, a high-profile example of foodborne illnesses that are more common than the public realizes, health experts say. Forty-three outposts of the Mexican food chain in Washington state and the Portland, Oregon, area were closed at the end of October because of the outbreak that hospitalized more than a dozen people. The first restaurants opened for lunch Wednesday. (AP Photo/Don Ryan)
Rosanna Fleming enters a Chipotle restaurant for lunch as another customer enters a second door in the background in Portland, Ore., Wednesday, Nov. 11, 2015. Chipotle started reopening its restaurants in the Pacific Northwest on Wednesday after an E. coli outbreak sickened about 45 people, a high-profile example of foodborne illnesses that are more common than the public realizes, health experts say. Forty-three outposts of the Mexican food chain in Washington state and the Portland, Oregon, area were closed at the end of October because of the outbreak that hospitalized more than a dozen people. The first restaurants opened for lunch Wednesday. (AP Photo/Don Ryan)
Workers clean inside a still-closed Chipotle restaurant Monday, Nov. 9, 2015, in Seattle. Health officials in Washington and Oregon have said that more than three dozen people have gotten sick with E. coli in an outbreak linked to Chipotle restaurants in the two states. More than 40 Chipotle restaurants remain closed in Washington state and the Portland area while authorities search for the cause. (AP Photo/Elaine Thompson)
FILE - In this Nov. 9, 2015, file photo, pedestrians walk past a still-closed Chipotle restaurant in Seattle. An outbreak of E. coli that originated in the Pacific Northwest has spread south and east and has now infected people in six states. New cases have been reported in California, New York and Ohio, the Centers for Disease Control and Prevention said Friday, Nov. 20, 2015. (AP Photo/Elaine Thompson, File)
A worker sits at a counter inside a still-closed Chipotle restaurant Monday, Nov. 9, 2015, in Seattle. Health officials in Washington and Oregon have said that more than three dozen people have gotten sick with E. coli in an outbreak linked to Chipotle restaurants in the two states. More than 40 Chipotle restaurants remain closed in Washington state and the Portland area while authorities search for the cause. (AP Photo/Elaine Thompson)
Workers clean inside a still-closed Chipotle restaurant Monday, Nov. 9, 2015, in Seattle. Health officials in Washington and Oregon have said that more than three dozen people have gotten sick with E. coli in an outbreak linked to Chipotle restaurants in the two states. More than 40 Chipotle restaurants remain closed in Washington state and the Portland area while authorities search for the cause. (AP Photo/Elaine Thompson)
A closed Chipotle restaurant is shown, Tuesday, Nov. 3, 2015, in Federal Way, Wash. Chipotle closed 43 of its Pacific Northwest locations after the chain's third foodborne illness this year sickened about two dozen people. (AP Photo/Ted S. Warren)
A pedestrian, right, walks past a closed Chipotle restaurant Monday, Nov. 2, 2015, in Seattle. An E. coli outbreak linked to Chipotle restaurants in Washington state and Oregon has sickened nearly two dozen people in the third outbreak of foodborne illness at the popular chain this year. Cases of the bacterial illness were traced to six of the fast-casual Mexican food restaurants, but the company voluntarily closed down 43 of its locations in the two states as a precaution. (AP Photo/Elaine Thompson)
A sign posted on the door of a Chipotle restaurant in Portland, Ore. reads that the location is "temporarily closed due to a supply chain issue," on Monday, Nov. 2, 2015. An E. coli outbreak linked to Chipotle restaurants in Washington state and Oregon has sickened nearly two dozen people in the third outbreak of food borne illness at the popular chain this year. (AP Photo/Don Ryan)
FILE - In this Nov. 2, 2015, file photo, a pedestrian walks past a closed Chipotle restaurant in Seattle. Washington state health officials say they have found no source for the E. coli outbreak related to Chipotle and the chain's Pacific Northwest restaurants could reopen later this week. Washington state epidemiologist Dr. Scott Lindquist says all the tests of food from Chipotle stores in Washington and Oregon came back negative for E. coli. (AP Photo/Elaine Thompson, File)
A woman talks on the phone as she stands in the kitchen area of a closed Chipotle restaurant, Monday, Nov. 2, 2015, in Seattle. An E. coli outbreak linked to Chipotle restaurants in Washington state and Oregon has sickened nearly two dozen people in the third outbreak of foodborne illness at the popular chain this year. Cases of the bacterial illness were traced to six of the fast-casual Mexican food restaurants, but the company voluntarily closed down 43 of its locations in the two states as a precaution. (AP Photo/Elaine Thompson)
Signage hangs from a closed Chipotle restaurant in Portland, Ore., Monday, Nov. 2, 2015. Chipotle voluntarily closed down 43 of its locations in Washington and the Portland area as a precaution after an E. coli outbreak linked to six of its restaurants in the two states has sickened nearly two dozen people. (AP Photo/Don Ryan)
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Ventura County health official Doug Beach said his office was interviewed by the FDA and U.S. Attorney's office in the fall. Authorities, he said, focused their lines of enquiry squarely on Chipotle.

A federal investigation into a one-restaurant outbreak is surprising since there wasn't a clear interstate element, said Bill Marler, a Seattle-based lawyer who is representing customers saying they were sickened in Simi Valley.

The FDA declined to comment specifically on the investigation. The U.S. Attorney's office declined to comment, as did Chipotle spokesman Chris Arnold.

Chipotle said same-store sales were trending down 16 percent at the onset of December but fell 34 percent after the Brighton incident and the subsequent national media attention it garnered.

Overall same-restaurant sales for December were down 30 percent, the company said.

Any more incremental bad news, particularly if there is an unfavorable decision from the grand jury, could trigger consideration among shareholders of a management change, Maxim Group analyst Stephen Anderson said.

The company, which also announced a $300 million share buyback, said it will fully cooperate with the probe.

The company's shares have fallen nearly 30 percent since Oct. 31, when the first E. coli outbreak was reported.

Watch more coverage:

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