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Doughnut chain subject of SEC investigation

Thursday, July 29, 2004 | 9:09 a.m.

WINSTON-SALEM, N.C. -- Krispy Kreme Doughnuts Inc., the second-biggest U.S. doughnut chain, said today the Securities and Exchange Commission is investigating how the company accounted for the repurchase of franchises and earnings forecasts.

The company's shares fell as much as much as 12 percent. Krispy Kreme is "fully cooperating" with the informal inquiry, the Winston-Salem-based doughnut maker said in a statement.

Chief Executive Scott Livengood, 51, has been buying stores back from its franchisees in such markets as Michigan and Northern California. Investors and analysts suggest these franchisees haven't been performing well.

Shares fell $2.02 to $16.64 at 10:27 a.m. in New York Stock Exchange composite trading.

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