Federal authorities filed charges on Friday Big brands and chairman Andy Wiederhorn of perpetrating a brazen scheme that netted him $47 million in bogus loans from the restaurant company that owns Fatburger, Johnny Rockets and Twin Peaks.
Fat Brands, Wiederhorn and a few other people were criminally indicted by a federal grand jury in Los Angeles on wire fraud, tax evasion and other charges related to the alleged scheme.
In a separate civil complaint, the U.S. Securities and Exchange Commission charged the company and Wiederhorn with violations related to the same conduct.
“These allegations are unprecedented, baseless, baseless and unjust,” Fat Brands attorney Brian Hennigan said in a statement. “They are based on conduct that ended more than three years ago and ignore the company's cooperation in the investigation.”
Wiederhorn, who was convicted 20 years ago in a criminal case involving similar conduct, was separately criminally charged in a Los Angeles indictment for being a federal felon in possession of a gun and ammunition.
“We look forward to making it clear to the court that this is an unfortunate example of excessive government policy – and a case with no victims, no losses and no crimes,” said Wiederhorn's lawyer Nicola Hanna.
As CEO of Fat Brands, Wiederhorn, 58, allegedly directed the company to lend him its own funds without any intention of ever repaying the “sham loans,” according to the indictment.
The SEC alleges that Wiederhorn then used the money to pay for private jets, first-class airline tickets, luxury vacations, mortgage and rent payments, plus nearly $700,000 on “shopping and jewelry.”
Wiederhorn stepped down as CEO last year after the company announced that he was being investigated by the SEC. In February, Fat Brands announced that it had received a Wells notice from the agency, meaning the SEC planned to take action against the company.
Wiederhorn's alleged fraud accounted for about 44% of Fat Brands' sales between 2017 and 2021, often leaving the company unable to pay its bills. In such situations, Wiederhorn would allegedly send money from credit cards paid by Fat Brands back to the company, with the help of his son Thayer, who was then the company's Chief Marketing Officer and is now its Chief Operating Officer.
Fat Brands never disclosed the money transfers to investors as related party transactions. In 2020, the cash transfers were written off following the company's merger with Fog Cutter Capital Group, Fat Brands' largest shareholder, which was also majority owned by Wiederhorn, according to the SEC complaint.
Ron Roe, the company's vice president of finance and former chief financial officer, and Rebecca Hershinger, another former CFO, were also named as defendants in the SEC complaint. Hershinger and tax attorney William Amon were also named in the indictment.
In addition, Wiederhorn already owed taxes on his personal income to the IRS in 2006. He also did not report the so-called loans from Fat Brands as income, according to the indictment. As of March 2021, Wiederhorn owed $7.74 million to the IRS for his unpaid personal taxes.
Twenty years ago, he pleaded guilty to filing a false tax return and paying an illegal gratuity to an employee while running Fog Cutter Capital. He paid a $2 million fine and spent more than a year in federal prison in Oregon. During his time in prison, Fog Cutter's board opted to pay him a bonus equal to the fine and continued to pay him his salary, a decision that drew widespread criticism.