Financing

Federal prosecutors accuse Andy Wiederhorn of misusing company funds

The chairman of Fatburger owner Fat Brands was accused of engineering a $47 million false loan scheme, draining the company of revenue to the point that it struggled to pay its bills.
Fatburger
Andy Wiederhorn has been charged in a $27 million false loan scheme. | Photo: Shutterstock.

Federal prosecutors on Friday morning charged Fat Brands Chairman Andy Wiederhorn with using Fat Brands cash to fund $47 million in personal expenses, misleading the IRS, company’s board, shareholders and its auditors.

Wiederhorn was indicted in criminal court by the U.S. Attorney's Office in Central California, which accused him of concealing $47 million in illicit payments dating back to 2020. The U.S. Securities and Exchange Commission also sued Wiederhorn, Fat Brands and two other current and former company executives, alleging Wiederhorn used $27 million in Fat Brands funds for personal expenses.

The spending was so extensive, the SEC alleges, that Wiederhorn stripped 40% of Fat Brands revenue between 2018 and 2021, “often leaving the company with insufficient cash to pay its own bills.”

The SEC alleges that Wiederhorn used the funds to pay for private jets, first-class airfare, luxury vacations, rent, mortgage payments, shopping and jewelry.

It also alleges that he told auditors and shareholders that the funds he was spending on himself and family were loans to Fog Cutter Capital Group, an investment firm owned by Wiederhorn and his family and an affiliate of Fat Brands.

The company itself was also charged in the scheme.

“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,” Thomas Zaccaro, 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,” he added.

Prosecutors accuse Wiederhorn of leading auditors to believe that the loans were to be used for Fog Cutter’s business expenses and pre-existing liabilities.

Between 2018 and 2019, Wiederhorn instructed his son to wire more than $9 million into Fat Brands, concealing that he had used millions for personal spending and that Fat “was otherwise unable to pay its own bills,” according to the complaint.

Prosecutors also allege that Wiederhorn enlisted the help of former CFO Ron Roe, currently a senior vice president of finance, to send Fat Brands funds to Wiederhorn, his family or his creditors.

The allegations also say that another former CFO, Rebecca Hershinger, signed false statements that failed to disclose Wiederhorn’s personal interest in the transactions. Roe and Hershinger are also charged.

The charges have been long expected. In February, the SEC sent a “Wells Notice” to Wiederhorn and two other current or former Fat Brands employees, indicating that the agency planned to bring an action against them.

In 2022, Fat Brands acknowledged that Wiederhorn was under investigation after reports emerged that federal agents raided the home of his son Thayer. At the time, Wiederhorn’s attorney said the investigation was rooted in a lawsuit filed against the company over the merger between Fat Brands and Fog Cutter.

Fat Brands later paid $2.5 million to settle the lawsuit.

Wiederhorn has suggested that his own history is at the root of the entire issue. Wiederhorn in 2004 pleaded guilty to federal tax charges related to a former company and spent 16 months in prison. “Given my personal history, I’m not surprised the government looked into allegations raised in the derivative lawsuit,” he said.

In addition to the charges this week, Wiederhorn was separately charged with being a felon in possession of a firearm and ammunition.

“The allegations contained in the indictment againt Mr. Wiederhorn show that he is a serial tax cheat,” Tyler Hatcher, special agent in charge for the IRS in the Los Angeles field office, said in a statement. “His actions over decades hurt not only his company and its shareholders, but every American taxpayer.”

The company owns a wide swath of restaurant chains, including Twin Peaks, Fazoli’s, Johnny Rockets, Fatburger, Round Table Pizza and others. Wiederhorn himself stepped aside as CEO amid the investigation, though he remains the primary voice of the company on earnings calls and in interviews.

Fat Brands also merged with Fog Cutter and Wiederhorn replaced most of the board, replacing them with a new slate including family members. The company also relabeled itself as a “controlled company.”

UPDATE: This story has been updated to include comment from Fat Brands’ attorney and to add additional information. 

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