Following the E. Coli scare Chipotle faced supoenas, lawsuits, empty stores and drops in sales. Now the company is at the center of yet another lawsuit.
Chipotle shareholders have filed a lawsuit accusing executives and board of directors of using insider knowledge for financial gain. The suit claims the executives, including Co-CEOs Steve Ells and Montgomery Moran, and CFO Jack Hartung, “dealt themselves excessive compensation worth hundreds of millions of dollars through a corrupt stock incentive plan.”
The lawsuit argues that the executives “materially misstated information to keep the stock price inflated.” It says during that time Ells sold 119,057 shares and made $78 million by taking advantage of the “artificially inflated” stock prices. Moran is accused of making over $107 million and Hartung $28 million.
The lawsuit also claims that top directors directed the company to repurchase stock at inflated prices of more than $84 million more than it was worth. The shareholders filed a shareholder derivative suit which means they are taking action against the executives for Chipotle itself. The suit also includes the accusation that the executives had a duty to inform customers and shareholders of the subpar food safety standards so the price of common stock would be truthful.
Current shareholders are still taking a hit following the E. Coli scare. Chipotle stock plummeted to the lowest level in three years last week.
Shareholders previously filed a separate lawsuit in January following the E. Coli scare accusing executives of concealing the facts that protocols on quality were not adequate. They argued that withholding this information meant shareholders didn’t know to drop their stock before it plummeted.
This suit is still pending.