The SEC may take action against Andy Wiederhorn

The agency has sent a “Wells Notice” to the chairman of Fat Brands, along with one current and one former employee. It signals a likely upcoming civil action.
The chairman of Fazoli's owner Fat Brands is under investigation by the SEC. | Photo: Shutterstock.

The U.S. Securities and Exchange Commission is apparently planning to take action against Fat Brands Chairman Andy Wiederhorn following an investigation that dates back two years.

That revelation came from Fat Brands itself, which on Tuesday said that Wiederhorn received a “Wells Notice” from the agency, which means that it plans to bring a civil enforcement action against him.

Fat Brands, which owns Fazoli’s, Fatburger, Johnny Rockets and several other chains, also said that one current and one former employee have also received such notices.

The Beverly Hills, Calif.-based company said the Wells Notice was related to an SEC investigation that it has already disclosed. Fat Brands also said that all conduct related to the notice occurred before 2020.

Wiederhorn and others who received the notice are generally given 30 days to respond. The notice was sent last week. Fat Brands said it plans a “rigorous response” to the allegations.

“Fat Brands has been cooperating with the government in its investigation related to events that occurred in 2020 and before,” the company said in a statement. “The company does not believe it committed any wrongdoing and plans to submit a rigorous response to the Wells Notice.”

A Wells Notice doesn’t always mean that the SEC will take action, though about 80% of such notices leads to charges, the Wall Street Journal said in 2013.

Fat Brands in 2022 acknowledged that Wiederhorn was under investigation. This came after reports 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 Capital, Wiederhorn’s investment firm.

Shareholders accused Wiederhorn of using Fat Brands as a “discount lender and plaything” for Fog Cutter Capital. Fat Brands later agreed to pay $2.5 million to settle the lawsuit.

Wiederhorn himself has suggested that his own past was to blame. “Given my personal history, I’m not surprised the government looked into allegations raised in the derivative lawsuit,” he said shortly after the investigation was revealed.

Wiederhorn in 2004 pleaded guilty to federal tax charges related to one of his former companies, called Wilshire Credit Corp. He spent 16 months in prison.

Fat Brands stock declined 3% through mid-afternoon trading on Tuesday.

While Wiederhorn has been under investigation, however, the company has made a number of changes. He stepped aside as CEO nearly a year ago, naming two replacements in Ken Kuick and Rob Rosen, who serve as co-CEOs.

Fat Brands also relabeled itself as a “controlled company.” The Wiederhorn family controls more than half of the company’s shares through Fog Cutter. The company then replaced most of its board members.

Meanwhile, Fat Brands acquired Smokey Bones last year and plans to convert many of them into Twin Peaks locations. It also plans to spin off Twin Peaks in an IPO some time this year.

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