Andy Wiederhorn, the chairman of Fatburger parent company FAT Brands, was charged Friday with a number of federal offenses including misappropriating $27 million from the company for personal expenses and using it to “fund his lavish lifestyle.”
Andy Wiederhorn, the chairman of Fatburger parent company FAT Brands
The U.S. Securities and Exchange Commission alleges Wiederhorn, 58, used shareholder funds to pay for private jets, first class airfare, luxury vacations, rent, mortgage payments and nearly $700,000 in shopping and jewelry. The fraudulent scheme stripped FAT Brands of 40 percent of its revenue, “often leaving the company with insufficient cash to pay its own bills,” according to a complaint filed May 10 by the SEC in a U.S. District Court in California.
In a separate complaint also announced today and following a parallel investigation, FAT Brands, Wiederhorn and others were criminally indicted by a federal grand jury in Los Angeles for wire fraud, tax evasion and other counts related to the alleged scheme. Wiederhorn, who spent nearly 16 months in federal prison in 2004 and 2005 after he pleaded guilty to two felony counts for paying an illegal gratuity to a pension fund manager and for filing a false tax return, was separately charged with being a federal felon in possession of a handgun and ammunition.
The SEC complaint accuses Wiederhorn of instructing son Thayer Wiederhorn, now FAT’s chief operating officer, to “wire $9 million to FAT Brands” between 2018 and 2019 to cover up the funds he had allegedly used for his own personal expenditures. The Justice Department indictment, meanwhile, alleges Wiederhorn concealed $47 million in shareholder loans from the IRS, stockholders and broader investing public.
In an interview with Franchise Times earlier this week, Wiederhorn said he was instructed by his legal counsel not to comment on the SEC investigation, which began about 18 months ago.
“Today, FAT Brands was informed that it has been indicted on two violations of SOX 402 for arranging approximately $2.65 million in loans to Andy Wiederhorn,” Brian Hennigan, an attorney with Hueston Hennigan and counsel for FAT Brands, said in a statement. “These charges are unprecedented, unwarranted, unsubstantiated, and unjust. They are based on conduct that ended over three years ago and ignore the company’s cooperation with the investigation.
“FAT Brands will take all necessary action to defend itself, while seeking a just resolution to these charges.”
Along with Wiederhorn and FAT Brands, the SEC also charged two of the company’s former chief financial officers, Rebecca Hershinger and Ron Roe. Hershinger allegedly signed false statements that failed to disclose Wiederhorn’s personal interest in the transactions, and Roe, the complaint alleges, was enlisted to send funds to Wiederhorn and his family members.
Wiederhorn was expected to be arraigned Friday afternoon in U.S. District Court in downtown Los Angeles. The remaining defendants’ arraignments are expected to be in the first week of June.
“This defendant, the former CEO of a publicly traded company, is alleged to have engaged in a long-running scheme to defraud investors and the United States Treasury to the tune of millions of dollars,” U.S. Attorney Martin Estrada said in a statement. “Instead of looking out for shareholders, the defendant allegedly treated the company as his personal slush fund, in violation of federal law.”
Shares of FAT Brands closed down nearly 27 percent May 10.
The federal indictment outlines several transfers of hundreds of thousands of dollars that Wiederhorn allegedly caused others at FAT Brands to make directly from FAT Brands accounts to pay Wiederhorn’s personal American Express credit card debts.
According to federal prosecutors, Wiederhorn began disguising distributions to himself in the form of shareholder loans approximately 30 years ago, when he served as CEO of Wilshire Credit Corp. After forgiving himself of some $65 million in putative debts owed to WCC, Wiederhorn pleaded guilty in 2004 in Oregon to the payment of illegal gratuities and filing a false federal tax return.
He stepped down as CEO of FAT Brands last year amid the federal investigation into his company and his family, but continued to oversee FAT Brands as chairman and spoke on the company’s latest earning’s call.
FAT Brands, a publicly traded global franchising company based in Beverly Hills, California, owns Fatburger, Johnny Rockets, Twin Peaks, Hurricane Grill and Wings, Fazoli’s and several other restaurant concepts. Since going public in 2017, the company has grown its portfolio to 18 brands with $2.5 billion in sales and 2,300 locations worldwide.
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