Chipotle Executive Indicted -- WSJ

By Pervaiz Shallwani and Julie Jargon 

Efforts to regain customer trust at Chipotle Mexican Grill Inc. could suffer a setback as the restaurant chain put its top marketing executive on administrative leave after Manhattan prosecutors unveiled an indictment involving the executive and a cocaine drug ring.

While the indictment, made public on Thursday, has nothing to do with Chipotle itself, the involvement of an executive seen as the architect of its efforts to win back wary diners after an E.coli outbreak last fall could have a damping effect.

Mark Crumpacker, Chipotle's chief creative and development officer, was one of 18 alleged buyers indicted in the drug ring and is expected to be arraigned in the coming days, according to a law-enforcement official.

Mr. Crumpacker, 53 years old, couldn't be reached for comment. His lawyer couldn't immediately be identified.

Among the others indicted was Fox Business Network producer Katie Welnhofer, who couldn't be reached for comment. A Fox Business Network spokeswoman declined to comment.

21st Century Fox and News Corp, owner of The Wall Street Journal, were until mid-2013 part of the same company.

The 18 alleged buyers are each charged with a single count of criminal possession of a controlled substance in the seventh degree, which is a misdemeanor offense.

Chipotle spokesman Chris Arnold said the company has placed Mr. Crumpacker on administrative leave. "We made this decision in order to remain focused on the operation of our business, and to allow Mark to focus on these personal matters. Mark's responsibilities have been assigned to other senior managers in his absence," he said.

In court documents related to three drug traffickers indicted on a charge of allegedly selling more than $75,000 worth of cocaine during the course of a year, Mr. Crumpacker's name was redacted because he hasn't been arraigned but his Manhattan apartment street address was listed several times in connection with the purchase of cocaine.

The indictment marks the latest blow for a company still reeling from a series of disease outbreaks that left Chipotle's sales and share price battered.

An outbreak of E. coli tied to Chipotle that surfaced last October sickened 55 people across the U.S., and a smaller E. coli outbreak sickened five more There were also salmonella cases in Minnesota that sickened 64 and outbreaks of norovirus traced to Chipotle restaurants in California and Boston last year that together sickened hundreds.

Late last year, Chipotle was served with a grand-jury subpoena as part of a federal criminal probe seeking information on the California norovirus outbreak and the investigation's scope has since widened to include companywide food-safety matters dating back to Jan. 1, 2013. Chipotle has said it is cooperating with that investigation.

To get customers back, the company has been giving away burritos and other items. Earlier this month the chain introduced its first-ever loyalty program to reward frequent customers.

Mr. Crumpacker has been the public face of the company's marketing efforts. In April he told investors that a nationwide advertising campaign featuring the quality of its food "is the largest media spend in our history."

Despite some success in drawing in guests with the free food, Chipotle's same-store sales dropped more steeply than expected in the first quarter and it posted its first loss as a public company. The company is scheduled to report second-quarter results on July 21.

When he addressed investors in April, Mr. Crumpacker sounded upbeat, saying he was encouraged by the response to some of the company's new marketing efforts and said, "We expect that we will see continued progress in these areas going forward as customers regain confidence in us and remember what it is that they always loved about Chipotle."

Write to Pervaiz Shallwani at [e-mail] and Julie Jargon at [e-mail]

(END) Dow Jones Newswires

July 01, 2016 02:48 ET (06:48 GMT)

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