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ATLANTA — Law firm Holzer Holzer & Fistel, LLC is investigating whether company officers of Yum Brands, Inc. violated federal securities laws. The investigation focuses on a series of statements made by the franchise conglomerate between October 9, 2012 and January 7, 2013, mainly those relating to the profitability of its Chinese operations.
Reports in the Chinese media claimed last November that Yum Brands chicken suppliers fed toxic chemicals to chickens sold to KFC restaurants in China. On January 7, 2013, Yum revealed that it was lowering its sales forecast for its Chinese operation as a result of those adverse reports. In reaction to the negative disclosure, the company’s stock declined significantly.
Recent food scandals
Yum Brands apologized to KFC customers in China recently for mishandling a food scare that hit the company’s sales in its biggest market. Su Jingshi, chairman and chief executive of Yum China posted his comment on the company’s microblog. “We regret shortcomings in our self-checking process, a lack of internal communication,” he stated. He also apologized for the company’s failure to actively report test results to the government and a lack of transparency and speed in it external communications.
The Shanghai Food and Drug Administration also found high levels of an antiviral drug in one of the eight samples of chicken it tested, even though the watchdog group determined that the levels of antibiotics and steroids were safe.
The scandal erupted when the official China Central Television reported in late December that some of the chicken supplied to KFC and McDonald’s Corp contained excess amounts of antiviral drugs and hormones used to accelerate growth.
A Reuters report last week said that Yum gets more than half of its revenue and operating profit from China.