I was thinking the amount of fat and trans
fat in K.K. must be kriminal ....... that's why
they taste so good.

Joel

Posted on Thu, Feb. 24, 2005




Krispy Kreme announces criminal probe

PAUL NOWELL

Associated Press

CHARLOTTE, N.C. - Shares of Krispy Kreme Doughnuts Inc. dropped nearly
7 percent Thursday after the company said it is cooperating with an
investigation by federal prosecutors who want to interview current and
former executives.

The Winston-Salem-based doughnut chain said it believes the probe by
the U.S. attorney for the Southern District of New York is related to
matters already under formal investigation by the Securities and
Exchange Commission.

While Thursday's news involved no new accusations against the company,
investors continued their yearlong flight from once-hot Krispy Kreme
shares.

The company's stock fell 39 cents, or 6.8 percent, to close at $5.36
in Thursday trading on the New York Stock Exchange, below its previous
52-week low of $5.50. Less than two years ago, the stock was trading
at nearly $50.

Carl Sibilski, an analyst at Chicago-based Morningstar, said the news
of yet another investigation was the last thing investors want to hear
about Krispy Kreme.

"It doesn't appear to me the New York investigation is focusing on
anything we don't already know about," he said, "but it heightens
concerns and raises its visibility if more entities are investigating
the company."

Krispy Kreme is under formal SEC investigation of its franchise
buybacks and earnings outlooks and is facing shareholder lawsuits. The
SEC investigation was announced in October.

Allegations included in the lawsuits and being looked into by the SEC
include that Krispy Kreme improperly recorded payments to former
franchise owners in Michigan and northern California as compensation,
rather than as a purchase price in buying back their franchises.

Shareholders have also alleged that executives intentionally padded
sales figures to hide the fact that doughnut sales began declining in
early 2003.

"From my perspective, another investigation gives more credibility to
these allegations," Sibilski said.

Krispy Kreme did not elaborate on a short news release it issued to
disclose the new investigation.

"We will cooperate fully," company spokeswoman Amy Hughes said.

Megan Gaffney, a spokeswoman for the U.S. attorney's office in New
York, said she could not provide details on the investigation.

Krispy Kreme has created a special committee of independent directors
to investigate all matters being probed, the company said. That
committee may conclude that the company's financial statements need to
be changed.

In December, amid allegations in a stockholder lawsuit of padded sales
figures, the company restated its 2004 earnings and warned investors
that it was in danger of defaulting on a $150 million credit line.

After posting losses in two of the last three quarters, the company's
board last month ousted Scott Livengood as CEO. Krispy Kreme now is
being run by turnaround specialist Stephen F. Cooper, who has
announced the company will lay off 25 percent of its corporate
employees and end a lease on a corporate jet.

Analysts have expressed concern that the company, once a Wall Street
darling, may be headed for bankruptcy.

Krispy Kreme currently has 432 stores in 45 states, Australia, Canada,
Mexico and the United Kingdom.

ON THE NET

Krispy Kreme: http://www.krispykreme.com