A federal grand jury this week indicted Andrew Wiederhorn, the former CEO of the company that owns the Fatburger and Johnny Rockets restaurant chains, on federal charges over a $47 million “sham loan.”
Wiederhorn, the current controlling shareholder of publicly traded Fat Brands Inc., is accused of concealing millions of dollars in reportable compensation and taxable income from the Internal Revenue Service and evading payment of millions in taxes, a court filing said Thursday. returned complaint.
Company money – categorized as “shareholder loans” – was paid out to Wiederhorn and his family “for their personal benefit,” the indictment said. Some of that money went to private jet trips, vacations, a nearly half-million dollar Rolls Royce Phantom, other luxury cars, jewelry and a piano.
According to the indictment, Wiederhorn “had no intention of repaying these sham loans.”
“Instead of looking out for shareholders, the defendant allegedly treated the company as his personal slush fund, in violation of federal law,” said U.S. Atty. Martin Estrada said in a statement.
Nicola Hanna, Wiederhorn's lawyer, called the allegations “false in both the facts and the law.”
“Mr. Wiederhorn consulted and followed the advice of world-class professionals in all of his business dealings,” Hanna, the former U.S. attorney for the Central District of California, said in a statement. “We look forward to making it clear to the court that this is an unfortunate example of government overreach – and a case with no victims, no losses and no crimes.”
Wiederhorn was reportedly assisted by the company's former chief financial officer, Rebecca D. Hershinger, and its outside accountant, William J. Amon, who were also charged in the 22-count indictment. Fat Brands has also been sued.
Brian Hennigan, attorney for FAT Brands Inc., said the allegations were “unprecedented, baseless, baseless and unjust.” He added that they were “based on conduct that ended more than three years ago and ignored the company's cooperation with the investigation.”
Hershinger's attorney, Michael Proctor, called the allegations “baseless” in a statement and said that while Hershinger was at FAT Brands, “she disclosed all material facts to the company's external auditors and complied with her legal and ethical obligations .'
The indictment alleges a wide range of crimes against Wiederhorn, including wire fraud, attempts to obstruct the administration of the IRS, tax evasion and false statements and omissions of material facts in statements to accountants in connection with audits and reviews.
The indictment alleges that Wiederhorn took the money from Fat Brands and its subsidiary, Fog Cutter Capital Group Inc., between 2010 and 2021.
In 2022The Times reported that Wiederhorn was facing a criminal investigation. As part of the investigation, his son's home in LA was raided by officers; investigators also attempted to raid Wiederhorn's mansion in Beverly Hills.
Read more: Family behind Fatburger is being investigated for alleged fraud and money laundering, records show
Last year, Wiederhorn publicly announced he would step down as CEO, calling it a way to “eliminate the distraction” from the ongoing federal investigation. Weeks later, however, Wiederhorn fired “every director except himself” from Fat Brands' board and “reconstituted” a new board with directors “under his control,” according to the complaint.
Wiederhorn graduated from USC and founded Wilshire Credit Corp. at the age of 21. on, securing a $300 million investment from Eli Broad, an early financier. The Oregon native returned to Portland and launched Fog Cutter Capital in 1997. With a net worth of approximately $140 million, Fog Cutter purchased a controlling stake in Fatburger in 2003.
Around that time, federal investigators were investigating Wiederhorn's businesses, and in 2004 he pleaded guilty in U.S. District Court in Oregon to charges of paying an illegal gratuity to an employee and filing a false tax return. He served fifteen months in federal prison and paid a $2 million fine.
The day before his guilty plea, Fog Cutter Capital gave him a $2 million bonus and agreed to continue paying him while he was behind bars.
When he got out of prison, Wiederhorn tried to burnish his reputation and appeared on the reality TV show “Undercover Boss” at a Fatburger store in Arizona. He moved to Southern California and told The Times in 2017 that he had never intentionally done anything wrong.
He took Fat Brands public around 2017 and led an expansion of more than 2,000 outlets, including sports bar Twin Peaks, Italian restaurant chain Fazoli's, Round Table Pizza and Marble Slab Creamery.
Still, investors chafe at Wiederhorn's business decisions, accusing him in a lawsuit of “looting” the company of cash while his relatives enjoyed six-figure salaries on the company payroll. In a shareholder lawsuit filed in 2021, he was accused of “driving Fat Brands into the ground and draining its money.”
Last month, Wiederhorn continued Fox Business channel to talk about California's minimum wage increase for fast food workers. He said prices would rise because “operators can't afford it.”
“Everyone wants their employees to make more money, but that comes at a cost and a restaurant operator just doesn't have that margin,” he said.
This story originally appeared in Los Angeles Times.
