Thread: SEC joins probe of Chipotle hiring practices

SEC joins probe of Chipotle hiring practices

By Lisa Baertlein
Fri May 18, 2012 8:47pm EDT

(Reuters) - Chipotle Mexican Grill Inc received a subpoena from the Securities and Exchange Commission as part of an expanding investigation into its alleged hiring of undocumented workers.

The Denver-based company fired about 500 employees more than a year ago following audits by the Department of Homeland Security's Immigration and Customs Enforcement (ICE) arm.

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

Homeland Security and the criminal division of the U.S. Attorney's office for Washington, D.C., already are conducting probes into the company's compliance with immigration laws.

The SEC 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 filing.

Michael Wildes, an immigration attorney and a former federal prosecutor who is not involved in the case, said it is "not common at all" for the SEC to get involved in immigration matters.

"It's often a ping-pong between the Justice Department and immigration authorities" with the Department of Labor at times stepping in, said Wildes.

Chipotle attorney Robert Luskin said in an email "it is not at all unusual for the SEC to join an investigation under these circumstances to determine whether the company has been forthcoming in its public statements."

Luskin, a top Washington lawyer, said he is "very confident that the SEC will find that the company fulfilled all of its obligations."

A spokeswoman for the SEC declined comment.

The popular chain is the highest profile U.S. company to come under the scrutiny of ICE since it shifted enforcement to employers rather than workers in 2009.

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

The company is known for its ability to control costs, particularly labor related expenses, while expanding rapidly.

Chipotle shares closed at $392.13 on Friday, almost 18 times higher than their $22 debut in 2006.

SEC joins probe of Chipotle hiring practices | Reuters

RELATED

http://www.alipac.us/f12/sec-seeks-i...-fired-257802/

RELATED

http://www.alipac.us/f12/crackdown-r...-hires-243853/

Chipotle Receives SEC Subpoena Related to Work Laws

By Leslie Patton - May 21, 2012 6:42 AM PT

(Corrects year investigation began in third paragraph of story published May 18.)

Chipotle Mexican Grill Inc. (CMG), the eatery that fired workers when an immigration investigation began, received a subpoena from the U.S. Securities and Exchange Commission regarding work authorizations.

Chipotle received the subpoena yesterday “requesting that we provide information regarding our compliance with employee work authorization requirements, our related public statements and other disclosures, and related information,” the Denver- based company said in an SEC filing today.

Last year, Chipotle said it was working with the criminal division of the U.S. Attorney’s office in Washington, in addition to U.S. Immigration and Customs Enforcement, to provide certain documents as part of a review. The burrito chain fired about 450 workers after an immigration investigation began in 2010 in Minnesota.

The shares fell 0.6 percent to $392.13 at the close in New York. Chipotle has gained 16 percent this year.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

Chipotle Receives SEC Subpoena Related to Work Laws - Bloomberg

May 21, 2012, 3:35 p.m. ET
By Annie Gasparro
Of DOW JONES NEWSWIRES
The Wall Street Journal

Chipotle Faces New Pressure From Probe Of Workers' Immigration Status

NEW YORK (Dow Jones)--Chipotle Mexican Grill Inc. (CMG) is being subpoenaed by the Securities and Exchange Commission about its hiring practices, the latest development in government investigations scrutinizing its employees' immigration statuses.

Chipotle says it received word on Thursday of the SEC's formal investigation--one that follows audits by the U.S. Immigration and Customs Enforcement department, or ICE, alleging Chipotle employed undocumented workers in some markets.

The initial ICE investigation, which began in 2010 and resulted in Chipotle terminating about 450 illegal workers in Minnesota, was followed by a U.S. Attorneys Office probe in 2011. So far, the investigations have spanned the regions of Minnesota, Washington, D.C., Virginia, Los Angeles and Atlanta.

Because Chipotle owns and operates its more than 1,000 U.S. restaurants, rather than working with franchisees, the company sees a more direct impact from store-level operations and is ultimately responsible for its hiring. Chipotle has said the termination of so many employees in such a short period of time created disruptions, such as increases in labor costs from paying to train new employees. It could likely incur additional charges going forward from legal fees if the investigations continue to expand.

Chipotle, which has outperformed other restaurant chains throughout the recession and recovery, disclosed in a regulatory filing Friday that the SEC has requested information regarding its compliance with employee work and authorization requirements, related public statements and other disclosures.

"We intend to fully cooperate with the SEC in its investigation," Chipotle stated in the filing.

Chipotle has been a favorite among investors in recent years. The quick-casual burrito chain continues to expand its customer base, despite menu price increases and a struggling economy. For example, sales at its established restaurants rose 11% in 2011.

The company's stock, which has risen by about 40% over the past year, was trading $2.43 higher, or 0.6%, at $394.56 late Monday, despite a broader market rally.

After the ICE audits, Chipotle said it would install the U.S. Department of Homeland Security's E-Verify program to avoid future hiring problems. However, P.F. Chang's (PFCB) Pei Wei chain used E-Verify for hiring and still had to close eight Arizona locations when an investigation last year revealed employees had stolen identities to gain employment in the U.S.

"It is not at all unusual for the SEC to join an investigation under these circumstances to determine whether a company has been forthcoming in its public statements," said Chipotle attorney Bob Luskin in a statement. "I am very confident that the SEC will find the company fulfilled all of its obligations."

Some onlookers questioned why the SEC is getting involved late in the game. Miller Tabak analyst Stephen Anderson said he disagrees with Chipotle's lawyers, and doesn't find it normal for companies to receive SEC probes like this.

Sanford C. Bernstein analyst Sara Senatore said the SEC's decision to investigate "may in part reflect the lower burden of proof needed for the SEC's civil investigation," as opposed to that of the Department of Justice's criminal investigation.

Meanwhile, R.W. Baird restaurant analyst David Tarantino said Chipotle's management team "senses that the probe will be focused on Chipotle's public disclosures related to the issues that are being investigated by ICE and the U.S. Attorney."

Analysts warn that the investigation could modestly hurt Chipotle's earnings and stock price in the short term. For instance, P.F. Chang's lost $1.3 million in operating profit from its restaurant closures, though there were no additional charges for legal fees.

Anderson says Chipotle will likely accrue a modest one-time charge in the second quarter and possibly third quarter from incremental legal fees.

"And we cannot rule out the possibility of a small fine or out-of-court settlement," he said. "Nevertheless, we anticipate limited headline risk unless it is found that Chipotle performed inadequate screening procedures in additional markets."

Chipotle Faces New Pressure From Probe Of Workers' Immigration Status - WSJ.com

RELATED

http://www.alipac.us/f12/behind-secs...ration-258792/