updated 2/24/2005 11:15:22 AM ET 2005-02-24T16:15:22

Krispy Kreme Doughnuts Inc. said Thursday it is cooperating with an investigation by federal prosecutors from New York who want to interview current and former executives with the company.

Krispy Kreme said it believes the probe, by the U.S. attorney for the Southern District of New York, is related to matters currently under formal investigation by the Securities and Exchange Commission (SEC).

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.

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

Founded in 1937, Krispy Kreme went public in 2000 at $21 a share and in the past year hit a high price of $39.99. It closed Wednesday at $5.75 a share.

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.

Last month, the company’s board ousted Scott Livengood as CEO; it now is being run by turnaround specialist Stephen Cooper, who has announced job cuts and other efforts to trim expenses.

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