Economy

Chipotle Executives Profited During the Food Safety Scandal, Shareholders Claim

June 19th 2016

Everyone's favorite burrito chain is in hot water again, and this time it's not because of E. coli or other foodborne pathogens.

Shareholders filed a suit against Chipotle executives over what they claim was a conspiracy to defraud investors and customers through a "corrupt stock incentive plan" while the company was having major issues with foodborne illnesses. According to the complaint, Chipotle execs and its board of directors awarded themselves "hundreds of millions of dollars" by acting on inside information about sub-par food safety standards, selling tens of millions of dollars in shares at a profit prior to the food safety information leaking.

If the accusations are true, Chipotle's top leadership knew about issues with food safety at restaurants across the country but failed to act. Instead, they used the information to profit off of high stock prices that later tanked when news broke of the food contamination, failing to protect the public while making money at their customers' expense, the suit alleged.

Among those who allegedly profited off of the food safety issues: Chipotle founder and co-CEO Steve Ells, whom the suit claimed sold $78.3 million in company shares "while the stock price was artificially inflated and before the fraud was exposed."

More than just shareholders and consumers were hurt, the suit charged. The company itself was also put at risk: Top executives directed the company to buy back stock at a high price, despite being aware of hidden food safety issues, according to the suit.

The lawsuit — a shareholder derivative suit — was filed against the executives by the shareholders in Denver District Court in April and consolidated with a similar case last month.

ATTN: has reached out to Chipotle for comment, but hadn't heard back at press time. We'll update the story with their reply.

RELATED: Chipotle Sued for Gender Discrimination

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