Krispy Kreme ousts chief executive amid Federal investigation

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The Independent Online

Krispy Kreme Doughnuts, the scandal-hit fast food chain, bowed to pressure yesterday and parted company with its embattled chief executive, Scott Livengood. He will be replaced by Stephen Cooper, a turnaround specialist who has restructured Enron and Laidlaw, the parent company for Greyhound buses.

Krispy Kreme Doughnuts, the scandal-hit fast food chain, bowed to pressure yesterday and parted company with its embattled chief executive, Scott Livengood. He will be replaced by Stephen Cooper, a turnaround specialist who has restructured Enron and Laidlaw, the parent company for Greyhound buses.

The management shake-up heightened fears about the difficulties facing Krispy Kreme. It is being investigated by the Securities and Exchange Commission over alleged misrepresentations in its accounting methods and it is also the subject of shareholder lawsuits. Its shares, once the darling of Wall Street, lost three-quarters of their value last year.

Krispy Kreme said Mr Livengood, who rose from being a personnel trainee in 1977 to be Krispy Kreme's chief executive since 1998, would retire immediately. He has been under fire from Wall Street, which believes he expanded the company too quickly without the business know-how necessary to guide the rapid growth.

Mr Livengood has also been accused along with other company executives in shareholder lawsuits of filing false financial statements and trying to mask demand for the US's second-largest doughnut chain by shipping excess produce to stores.

Mr Livengood, once the top salesman for the company, sold shares worth $10.3m (£5.5m) in August 2003, just after the stock peaked. His compensation, including salary and bonus in the year ended 1 February 2004 was $791,102, down from $1m a year earlier, according to SEC filings.

Mr Cooper has been interim chief executive of Enron since January 2002. He completed the second-largest bankruptcy in US history in November, liquidating all of the Houston-based company's assets to pay back creditors owed more than $67bn.

Mr Cooper is also chairman of the New York-based Kroll Zolfo Cooper, which has been retained as Krispy Kreme's financial advisor. He will be joined by a colleague from Kroll, Steven Panagos, who has been appointed Krispy Kreme's president and chief operating officer.

The appointments come after a roller-coaster ride for Krispy Kreme, which floated on the stock market in April 2000. Its shares soared 76 per cent on the first day of trading and peaked at $49.37 in August 2003. Since then, Krispy Kreme has soured for investors, partly because recent anti-carbohydrates diet fads have dented sales.

The company warned recently sales were down 18 per cent in the eight weeks to 26 December, adding thatits results for the fourth quarter would be depressed by the "substantial costs" incurred in addressing lawsuits and the SEC inquiry.

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