A federal grand jury this week indicted Andrew Wiederhorn, the former chief executive of the company that owns the Fatburger and Johnny Rockets restaurant chains, on federal charges related to alleged $47 million in “sham loans.”
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 the payment of millions of dollars in taxes, according to the indictment returned Thursday.
Company funds — categorized as “shareholder loans” — were paid to Wiederhorn and his family “for their personal benefit,” the indictment says. Some of that money went toward 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 bogus loans.”
“Instead of taking care of shareholders, the defendant allegedly treated the company as his personal slush fund, violating federal law,” said U.S. Atty. Martin Estrada said in a statement.
Nicola Hanna, Wiederhorn’s lawyer, described the allegations as “both factually and legally incorrect.”
“Mr Wiederhorn has consulted with and followed the advice of world-class professionals in all of his business matters,” Hanna, the former U.S. attorney for the Central District of California, said in a statement. “We look forward to making clear in court that this is an unfortunate example of government overreach – and a case of no victims, no casualties and no crime.”
Wiederhorn was allegedly assisted by the company’s former chief financial officer, Rebecca D. Hershinger, and its outside accountant, William J. Amon, who were also indicted in the 22-count indictment. Fat Brands was also charged.
Brian Hennigan, an attorney for FAT Brands Inc., said the allegations were “unprecedented, unwarranted, baseless and unjust.” He added that they were “based on conduct that ended over three years ago and that they disregarded the company’s cooperation in the investigation.”
Hershinger’s defense attorney, Michael Proctor, called the allegations “baseless” in a statement and said that during his time at FAT Brands, Hershinger “disclosed all material facts to the company’s external auditors and complied with their legal and ethical obligations.”
The indictment lists a variety of crimes against Wiederhorn, including wire fraud, attempting 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.
Between 2010 and 2021, the indictment says Wiederhorn took the money from Fat Brands and its subsidiary Fog Cutter Capital Group Inc.
In 2022, The Times reported that Wiederhorn was under criminal investigation. As part of the investigation, his son’s home in LA was searched by agents; Investigators also attempted to search Wiederhorn’s Beverly Hills mansion.
Read more: The family behind Fatburger is under investigation for alleged fraud and money laundering, records show
Last year, Wiederhorn publicly announced his resignation as CEO, calling it a way to “remove the distraction” of the ongoing federal investigation. Weeks later, however, Wiederhorn removed “all directors except himself” from Fat Brands’ board and “constituted” a new board with directors “under his control,” the indictment says.
Wiederhorn graduated from USC and at age 21 founded Wilshire Credit Corp., for which he received $300 million from Eli Broad, an early backer. The Oregon native returned to Portland and founded Fog Cutter Capital in 1997. With a net worth of around $140 million, Fog Cutter acquired a controlling interest in Fatburger in 2003.
At the time, federal investigators were looking into Wiederhorn’s dealings, and in 2004 he pleaded guilty in U.S. District Court in Oregon to charges of paying illegal tips to an employee and filing a false tax return. He served 15 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.
After his release from prison, Wiederhorn tried to burnish his reputation and appeared on the reality TV show “Undercover Boss” at a Fatburger location in Arizona. He moved to Southern California and told the Times in 2017 that he never intentionally did anything wrong.
He took Fat Brands public around 2017 and led an expansion of more than 2,000 stores, including sports bar Twin Peaks, Italian restaurant chain Fazoli’s, Round Table Pizza and Marble Slab Creamery.
But investors resented Wiederhorn’s business decisions and accused him in a lawsuit of “looting” the company financially while his relatives received six-figure salaries on the company’s payroll. In a shareholder lawsuit filed in 2021, he was accused of “driving fat brands into ruin and bleeding them dry of money.”
Last month, Wiederhorn spoke on Fox Business about raising the minimum wage for fast food workers in California. He said prices were rising because “operators can’t afford it.”
“Everyone wants their employees to make more money, but that comes at a cost, and a restaurant operator simply doesn’t have that margin,” he said.
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This story originally appeared in the Los Angeles Times.