Chipotle Shares Plunge Following SEC Investigation Announcement

* SEC joins immigration investigation

* Shares fall nearly 2 pct before rebounding

May 21 (Reuters) - Shares of Chipotle Mexican Grill Inc fell as much as 1.8 percent on Monday, the first day of trading after the company said the U.S. Securities and Exchange Commission had joined a probe of the hiring practices of the popular burrito chain.

The shares later recovered to trade slightly higher in early afternoon.

The Denver-based company, one of the restaurant industry's top performers, fired hundreds of workers in 2010 and 2011 after audits by the U.S. Department of Homeland Security's Immigration and Customs Enforcement (ICE) arm turned up undocumented workers on payrolls in Minnesota, Virginia and Washington, D.C.

The SEC has joined Homeland Security and the federal prosecutor's office for Washington, D.C., in investigating the company's compliance with immigration laws.

Chipotle said on Friday that it received a subpoena from the SEC on May 17 and intended to fully cooperate with the agency's investigation.

The subpoena requested "information regarding our compliance with employee work authorization requirements, our related public statements and other disclosures, and related information," Chipotle said in a regulatory filing.

"The SEC would be looking for a false statement, omission or scheme to deceive, especially affecting income," James Brosnahan, senior partner at Morrison & Foerster in San Francisco, told Reuters. Brosnahan is not related to the Chipotle case.

Chipotle attorney Robert Luskin on Friday told Reuters that it was not unusual for the SEC to join an investigation and said he was "very confident that the SEC will find that the company fulfilled all of its obligations."

But Miller Tabak & Co analyst Stephen Anderson said in a client note, "Although a lawyer representing (Chipotle) said it was not uncommon for companies to receive SEC probes, we do not find this to be the case."

He added, "Nevertheless, we anticipate limited headline risk unless it is found that (Chipotle) performed inadequate screening procedures in additional markets."

Chipotle is the highest-profile U.S. company to come under the scrutiny of ICE since it shifted enforcement to employers from workers in 2009.

Investors have flocked to Chipotle in large part for its soaring sales and ability to contain labor costs. Many investors are keeping tabs on the financial impact of the immigration probe.

Unlike many rivals, Chipotle owns and operates its more than 1,000 U.S. restaurants and is ultimately responsible for hiring.

Audit-related terminations already have forced the company to spend money to train replacement workers.

Chipotle shares made their debut in 2006 at $22. On Monday afternoon, the shares were up 0.3 percent at $393.29. Earlier in the day they fell as low as $384.95. (Reporting By Lisa Baertlein in Los Angeles; editing by John Wallace and Matthew Lewis)

Comments

[JacksonJones]

05:28 PM on 05/22/2012

What a silly silly story. First of all, there is almost nothing an employer can do to prevent hiring illegal aliens besides following the standard ID verification procedure, with or without using the gov't's electronic SSN verification system, which isn't any more accurate than the regular system (but does get you an answer faster).

If someone turns up with ID that looks valid and checks out with the government, then they must be viewed the same way as any other applicant, and an employer can get into just as much trouble asking for too much ID from "suspicious-looking" applicants as it can for asking for too little. To give itself the best chance to avoid trouble (and you can never be sure of avoiding it completely), an employer has to stick to the instructions on the I-9 form.

And now, I am off to get a burrito.....barbacoa por favor.....arroz? pocquito......pintos...pico y picante...queso...no crema....lechuga...muchas gracias!

[Viper1st]

08:53 AM on 05/23/2012

Then ~ why not, employers put the responsibility of determining the citizenship status via E-Verify, rather than making that determination themselves?

E-Verify is 96% accurate, with provisions for petitioning revisions.

Try out the FREE "Self-Everify" currently available in 5 States ~

http://www.uscis.gov/portal/site/uscis/menuitem.eb1d4c2a3e5b9ac89243c6a7543f6d1a/?vgnextchannel=2ec07cd67450d210VgnVCM100000082ca60aRCRD&vgnextoid=2ec07cd67450d210VgnVCM100000082ca60aRCRD

[JacksonJones]

08:02 PM on 05/23/2012

I think that is a good tool for employers to use, but E-Verify is the electronic SSN verification system I was talking about. It is very good at telling you if the SSN someone gives is not a valid SSN or does not match the name given, but it cannot help at all if the person is using a valid SSN with the appropriate name for that SSN but is not actually the person with that name/SSN if that person also has fake but not obviously fake ID showing them to be that person.

In that case, the person with the fake ID checks out under all of the I-9 requirements and E-Verify won't ding them either.

[demilieu]

01:47 PM on 05/22/2012

eric cartman???

[lightbreeze]

11:50 AM on 05/22/2012

Ok, the big story here in the first paragraph was "CMG fell as much as 1.8% on the news", but by the last paragraph we find out shares were up .3% Monday afternoon,

And today (Tuesday) at noon?

404.24, up 10.91 (+2.77%)

And the front page headline reads:

"You'll Never Guess Who's Losing Confidence In Chipotle"

It should read:

"Readers are Losing Confidence In HuffPo"

[Bellalina]

11:02 AM on 05/22/2012

This is hardly a problem limited to Chipolte. We had a brand new Jack-In-The-Box open up and despite the amount of locals who applied to work there, none of them were hired. Instead you go in there and no one speaks English. They can't get your order right and you can't complain about it. The food taste weird and my daughter had a bad reaction to a meal we had ordered twice before. So we never went back. Instead we returned to another one across town that was a year older. It employed a few friends and we liked the atmosphere. Since we had looked forward to a closer one we had not been there in a long while. The first thing we noticed was no one spoke English and the food was really bad and they got our order really wrong. We asked friends who had worked there and they told us they we let go...We already hated our local BK due to bad food and bad service....Will never do McD or TB..so we make our own burgers..But I miss the original Chipolte in Denver..nice people, good food and great service..sigh Then McDonalds ruined it!

[NoSillyName]

08:33 PM on 05/22/2012

Agreed. The original Chipolte in Cherry Creek was a great place!

[mashtoe]

01:57 AM on 05/22/2012

The stores here in Bellevue and Redmond Wa are full of illegals. Heck, most places in Seattle hire illegals. Police don't do a thing. Seattle is run by Democrats who support wage suppression. Democrats hate American workers so its not surprising there is so much illegal labor here.

[dblohangel]

02:19 AM on 05/22/2012

@ mashtoe "Democrats hate American workers so its not surprising there is so much illegal labor here. " Don't you mean to say some members of both parties are disrespectful of American workers? Our American economy would fall apart if not for the numbers of undocumented workers who perform the gigs most US citizens believe are beneath them.

[jennyjen]

04:22 AM on 05/22/2012

Police shouldn't do anything. ICE handles immigration issues. How exactly do you know that the stores are full of illegals. By profiling? Or did you ask for documentation?

Ridiculous comments about democrats.

[JacksonJones]

05:20 PM on 05/22/2012

Well said.

[DemiCrat]

11:53 PM on 05/21/2012

This is kind of an oddly structured article with some nonsensical implications, especially in the title. This should be a story about the SEC investigation and Chipotle's hiring practices, not about the company's stock's volatility. The stock took a hit this morning on news of the investigation, but this article doesn't mention it actually closed .31% up on the day. Confidence in this stock has always been and still remains very high. Chipotle has large cash assets and no long term debt on its books, zero. It has a solid business model and exhibited confidence in itself with its recent massive stock buy back. This is shared by its investors as it has a P/E ratio of 54.10. They are also in the process of making some large investments using the ridiculous about of cash they have on hand. Their net profit per unit sold is actually fairly high relative to some of their competitors. Investors love their stock and customers love their product. This investigation will have little bearing on their future stock price.

[Frank Torres]

11:26 PM on 05/21/2012

Down here in Florida, we've got so many of these kinds of restaurants. You can't make these mistakes, your customers won't miss you.

http://orlandopolitics.net/

[dsa1115]

08:57 PM on 05/21/2012

Why don't they just call it, Chipotle Illegal Mexican Grill.

[Brianna Cole]

08:56 PM on 05/21/2012

Please, Chipotle..... Open a branch in Japan!!! I neeeeed your amazingly tasty goodness!

[munki]

10:16 PM on 05/21/2012

I am here in Tokyo... YES... much better than other fast food... but menu may be adjusted... like Mac...

[Brianna Cole]

10:36 PM on 05/21/2012

Which means it will actually LOOK like advertised!

[PackCat]

11:38 PM on 05/21/2012

They allow illegal Mexicans in Japan? How are they gonna find servers?

[Brianna Cole]

11:40 PM on 05/21/2012

Funny. I'm sure that Native Japanese people could do it just as well. They can (IME) do anything as good as any other culture, just with 1/10 the imagination.

[mashtoe]

01:59 AM on 05/22/2012

Uh, pay higher wages? I think that is how markets are supposed to work. Or do you align yourself with slaver traders who believe exploitation is the key?

[NoSillyName]

07:37 PM on 05/21/2012

Well, this is a sad turn of events. Chipoltle was FANTASTIC when it was the original site in the Cherry Creek area of Denver. One location. Lots of food options. Delicious. Huge amount of food for a small amount of money. Nice, friendly staff.

Then, after years, it turns into a chain. Streamlined. Food selection gets small. Management varies per location. Staff so-so. And trouble begins.

A very sad story. Original place was one of my favorites.

[new here]

10:37 AM on 05/22/2012

Have you been to a Chipotle in NYC. The quantity is half of what you get in other cities.

[Gronkie]

06:54 PM on 05/21/2012

2% Plunge! Wow, what a roller coaster ride!

[exchef100]

05:58 PM on 05/21/2012

Please don't mess with my beloved Chipotle. Give them all amnesty and allow them to keep creating my beautiful burrito bowls.

[Cat-Lover]

05:32 PM on 05/21/2012

Yo Quiero Taco Bell

[NoSillyName]

07:46 PM on 05/21/2012

Funny that I went into a TB in the '90s in Denver (on Broadway, almost in Englewood) and none of the workers spoke English. I had to point to the item I wanted (Taco Salad, back when they offered Ranch Dressing with them).

"Illegal Immigration" was not talked about as America's Biggest Problem back then.

[Cat-Lover]

09:41 PM on 05/21/2012

I know that place. Conozco ese lugar.
It was a der Weinershnitzal before.
I learned my Spanish there. Alla aprendi el ingles.

[carrotandstick]

05:07 PM on 05/21/2012

Since when the hell is dropping 2% "plunging". Reuters don't become FoxNews.

[frank day]

05:49 PM on 05/21/2012

Hmmm... considering how much the market rose during that period a 2% drop is disturbing, but I agree that it doesn't qualify as a "plunge".

[Chi Epsilon]

04:24 PM on 05/21/2012

I believe Eric Cartmen has a product to help fix the problem.