The former CEO of Fat Brands Inc., a restaurant franchising company with subsidiaries including Fatburger, Johnny Rockets and Fazoli's, has been indicted along with others in a $47 million fraud scheme, authorities announced Friday.
Andrew A. Wiederhorn, the former CEO and current controlling shareholder of Fat Brands, a publicly traded company, was indicted Thursday along with former CFO Rebecca D. Hershinger, outside accountant William J. Amon, and the company itself, according to the U.S. Department of Justice.
Fat Brands, which acquires or develops then franchises restaurant concepts including Fatburger, Johnny Rockets, Hurricane Grill and Wings, Yalla Mediterranean, and Ponderosa and Bonanza Steakhouses, is based in Beverly Hills, Calif.
With the assistance of Hershinger and Amon, Wiederhorn allegedly received $47 million in shareholder loans and concealed them from the IRS and the SEC.
Wiederhorn allegedly began disguising payments to himself in the form of shareholder loans approximately 30 years ago, when he was CEO of the Wilshire Credit Corporation (WCC). He forgave some $65 million in debts he owed WCC, and resolved a previous grand jury investigation into that matter by pleading guilty in 2004 to the payment of illegal gratuities and filing a false federal tax return.
According to the indictment, the IRS has been trying to collect personal income tax and trust fund taxes Wiederhorn owed personally and as a responsible party for multiple business entities since as far back as 2006. Amon, of the advisory firm Anderson, provided tax advisory services to Wiederhorn , Fat Brands, and Fat's former affiliate, Fog Cutter Capital Corporation (FOG), the successor corporate entity to WCC.
Beginning in 2016, the IRS assessed Wiederhorn penalties for FOG's failure to pay trust fund taxes, and by 2021, Wiederhorn's unpaid personal income tax liability to the IRS totaled approximately $7,743,952.
From 2010 to 2021, Wiederhorn allegedly had employees of FAT and FOG distribute approximately $47 million to him for his personal use and benefit. Wiederhorn, Amon, Hershinger and others disguised the distributions as shareholder loans, failing to disclose it as compensation to the IRS and the SEC.
"These disbursements were used to fund the purchase of private-jet travel, vacations, a Rolls Royce Phantom, other luxury automobiles, jewelry, and a piano," according to the indictment.
"Wiederhorn, posing as both 'lender' and 'borrower,' caused defendant FAT and FOG to extend to him and then 'forgive' tens of millions of dollars in distributions made in the fraudulent form of loans - all while paying no income tax on these distributions and, in fact, using them to generate net operating losses to provide defendant FAT with financially beneficial tax treatment," the indictment alleges.
While Fat Brands initially claimed to cooperate with the investigation, after board members communicated with government investigators, Wiederhorn allegedly removed every director other than himself in March 2023, and appointed a majority of non-independent directors under his control.
"This defendant, the former CEO of a publicly traded company, is alleged to have engaged in a long-running scheme to defraud investors and the United States Treasury to the tune of millions of dollars," Martin Estrada, U.S. Attorney for the Central District of California, said in a statement. "Instead of looking out for shareholders, the defendant allegedly treated the company as his personal slush fund, in violation of federal law. The Corporate and Securities Fraud Strike Force of my office focuses on rooting out corporate malfeasance by corporate insiders, and we will continue to protect the public by bringing these important prosecutions."
Wiederhorn is charged with one count of endeavoring to obstruct the administration of the Internal Revenue Code, six counts of tax evasion, and one count of false statements and omission of material facts in statements to accountants in connection with audits and reviews.
Both Wiederhorn and Hershinger are charged with four counts of wire fraud, two counts of false statements and omission of material facts in statements to accountants in connection with audits and reviews, and one count of certifying faulty financial reports.
Wiederhorn, Hershinger and Fat Brands are charged with two counts of extension and maintenance of credit in the form of personal loan from issuer to executive officer.
Hershinger is also charged with one count of making false statements to federal investigators, including denying that company funds were being used to pay Wiederhorn's personal American Express bill.
Amon is charged with four counts of aiding and assisting the filing of false tax returns.
Officials are encouraging investors who believe they were the victims of crimes alleged in the indictment to contact the Department of Justice about the case at USACAC.Wiederhorn.FATBrands@usdoj.gov.
"The allegations contained in the indictment against Mr. Wiederhorn show that he is a serial tax cheat. His actions over decades hurt not only his company and its shareholders, but also every American taxpayer," said Special Agent in Charge Tyler Hatcher, IRS Criminal Investigation, Los Angeles Field Office. "Failing to honestly and accurately report income shortchanges Americans, and places undue strain on honest taxpayers. CI is committed to investigating this sort of criminal behavior to ensure accountability and equity in the tax system."
Brian Hennigan of Hueston Hennigan LLP, Counsel for FAT Brands Inc., issued the following statement:
"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.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. Since becoming a public company, FAT Brands has grown to at a remarkable pace to encompass 18 brands with $2.5 billion in global sales and 2,300 locations worldwide, benefitting franchisees and investors alike. The Company will continue executing on its operating plans and growth strategy."
--with reporting by TMX
