Two New Directors at Krispy Kreme

Krispy Kreme Doughnuts Inc. said Monday that it appointed two new directors to lead an internal probe of accounting practices and other matters being informally investigated by securities regulators.

The doughnut chain said Michael Sutton, former chief accountant of the Securities and Exchange Commission from 1995 to 1998, and Lizanne Thomas, senior corporate partner in the Atlanta office of law firm Jones Day, will act as co-chairpersons of a special committee.

The committee will look into matters raised by the SEC, which launched an informal probe of the Winston-Salem, N.C., company’s accounting practices in July.

It also will investigate claims made in a shareholder lawsuit against the company as well as issues raised by Krispy Kreme’s auditors, PricewaterhouseCoopers.

Krispy Kreme, which is struggling to right itself in the face of slowing sales, has faced questions in recent months over the way it accounts for repurchased franchises.

Some accounting experts have said Krispy Kreme’s failure to amortize, or reduce the value of such assets on its books over time, is not in keeping with industry trends.

The company has defended its practices, saying repurchased franchise rights have indefinite lives and are therefore not subject to amortization.

The additions of Sutton and Thomas bring Krispy Kreme’s total board membership to 11, with nine of those defined as independent by the company.

Last month, the company said it had hired an independent law firm to probe a matter related to an acquisition it made during the year ended Feb. 1. That probe found no intentional misconduct on behalf of the company or its employees, Krispy Kreme said at the time.

Krispy Kreme spokeswoman Amy Hughes said the new probe was “not really related” to the law firm’s investigation, which focused on one specific matter.

Krispy Kreme shares fell 8 cents at $13.11 on the New York Stock Exchange.