Federal authorities have charged Fat Brands and its chair, Andy Wiederhorn, with a scheme that allegedly earned him $47 million in bogus loans from the restaurant company. The charges include wire fraud, tax evasion, and other counts. The U.S. Securities and Exchange Commission (SEC) has also filed a civil complaint against the company and Wiederhorn for violations related to the same conduct.
Fat Brands’ counsel, Brian Hennigan, has called the charges “unprecedented, unwarranted, unsubstantiated, and unjust.” He states that they are based on conduct that occurred over three years ago and ignore the company’s cooperation with the investigation.
Wiederhorn, who was previously convicted in a criminal case involving similar conduct, is also facing separate charges of being a federal felon in possession of a handgun and ammunition. His attorney, Nicola Hanna, believes this is a case of government overreach and claims there are no victims, losses, or crimes.
According to the indictment, Wiederhorn allegedly directed Fat Brands to loan him funds without any intention of repaying the loans. The SEC alleges that he used the money for personal expenses such as private jets, luxury vacations, and shopping.
Wiederhorn stepped down as CEO of Fat Brands last year after the SEC began investigating him. The company disclosed in February that it had received a Wells notice from the agency, indicating that the SEC was planning to take action against it.
The alleged fraud committed by Wiederhorn accounted for approximately 44% of Fat Brands’ revenue between 2017 and 2021. This resulted in the company struggling to pay its bills at times. Wiederhorn would allegedly redirect funds from credit cards paid for by Fat Brands back to the company with the help of his son, who was the company’s chief marketing officer at the time.
Fat Brands did not disclose these cash transfers as related party transactions to investors. The transfers were written off in 2020 after the company merged with Fog Cutter Capital Group, its largest shareholder, which was majority-owned by Wiederhorn.
The SEC complaint also names Ron Roe, the company’s vice president of finance and former CFO, Rebecca Hershinger, another former CFO, and William Amon, a tax advisor, as defendants. In addition to the charges related to the scheme, Wiederhorn has also owed taxes for his personal income since 2006 and did not report the loans from Fat Brands as income.
Wiederhorn has a history of legal issues. Two decades ago, he pleaded guilty to filing a false tax return and paying an illegal gratuity. He paid a $2 million fine and spent over a year in federal prison. During his time in prison, Fog Cutter Capital’s board chose to pay him a bonus equal to the fine and continued to pay his salary, which drew criticism.
Wiederhorn is expected to be arraigned in U.S. District Court in downtown Los Angeles, and the arraignments for the other defendants are scheduled for the first week of June.
