Andy Wiederhorn, former CEO of Fatburger.
CNBC
Federal authorities were charged Friday with fat brand Its chairman, Andy Wiederhorn, carried out a shameless scheme to obtain $47 million in bogus loans from the restaurant company that owns Fatburger, Johnny Rockets and Twin Peaks.
Fat Brands, Wiederhorn and others. criminally prosecuted A federal grand jury in Los Angeles returned indictments on wire fraud, tax evasion and other counts related to the alleged scheme.
In a separate civil lawsuit, the SEC charged the company and Wiederhorn with violations related to the same conduct.
Wiederhorn was convicted in a criminal case involving similar conduct two decades ago and was separately charged in a Los Angeles indictment with being a federal felon in possession of a handgun and ammunition.
As Fat Brands’ CEO, Wiederhorn, 58, allegedly directed the company to lend him its own funds and had no intention of repaying the “sham” loans, the indictment said.
The SEC alleges that Wiederhorn then used the cash to pay for private jets, first-class tickets, luxury vacations, mortgages and rent, and nearly $700,000 in “shopping and jewelry.”
Wiederhorn resigned as CEO last year after the company disclosed that the U.S. Securities and Exchange Commission was investigating him. In February of this year, Fat Brands revealed that it had received a Wells notice from the agency, which means that the SEC plans to take action against it.
Wiederhorn’s alleged fraud accounted for about 44% of Fat Brands’ revenue from 2017 to 2021, meaning the company often failed to pay its bills. In this case, Wiederhorn allegedly transferred the credit card funds paid by Fat back to the company with the assistance of his son Thayer, who was the company’s chief marketing officer at the time and is now its chief operating officer.
Fat Brands never disclosed the cash transfers to investors as related-party transactions. According to the SEC’s complaint, cash transfers were written off in 2020 after the company merged with Fog Cutter Capital Group, Fat Brands’ largest shareholder, which also happens to be majority-owned by Wiederhorn.
Ron Roe, the company’s vice president of finance and former chief financial officer, and Rebecca Hershinger, another former chief financial officer, are also named as defendants in the SEC complaint. Hezinger and tax consultant William Ammon were also named in the indictment.
In addition, Wiederhorn owed personal income taxes to the Internal Revenue Service (IRS) as early as 2006. He also failed to report any of the alleged loans to Fat Brands as income, according to the indictment. As of March 2021, Wiederhorn owed the IRS $7.74 million in unpaid personal taxes.
Two decades ago, he pleaded guilty to filing false tax returns and paying illegal gratuities to associates while leading Fog Cutter Capital. He paid a $2 million fine and spent more than a year in a federal prison in Oregon. While he was in prison, Fog Cutter’s board of directors chose to pay him a bonus equivalent to a fine and continue to pay his salary, a decision that drew widespread criticism.
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