Fat Brands' Chair Andy Wiederhorn Charged in $47 Million Loan Fraud Scheme

Fat Brands chairman Andy Wiederhorn was indicted on federal charges for allegedly concealing $47 million in shareholder loans from the IRS and stockholders. Wiederhorn and two others are accused of hiding reportable income, evading taxes, and using company funds for personal extravagances.

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Fat Brands' Chair Andy Wiederhorn Charged in $47 Million Loan Fraud Scheme

Fat Brands' Chair Andy Wiederhorn Charged in $47 Million Loan Fraud Scheme

Andy Wiederhorn, the chairman of Fat Brands, has been indicted on federal charges for allegedly concealing $47 million in shareholder loans from the IRS, stockholders, and the broader investing public. Wiederhorn, along with former CFO Rebecca D. Hershinger and public accountant William J. Amon, is accused of hiding reportable and taxable income and evading millions in taxes.

Why this matters: This case highlights the importance of corporate accountability and transparency, as well as the need for effective regulatory oversight to prevent fraudulent activities. The consequences of such schemes can have far-reaching impacts on investors, employees, and the broader economy.

Wiederhorn faces multiple charges, including one count of endeavoring to obstruct the administration of the Internal Revenue Code, six counts of tax evasion, four counts ofwire fraud, and two counts of extension and maintenance of credit in the form of personal loans from the issuer to an executive officer. Hershinger faces similar charges, as well as one count of making false statements to federal investigators. Amon faces four counts of aiding and assisting the filing of false tax returns.

Prosecutors allege that Wiederhorn schemed with Hershinger and Amon to evade taxes by disguising distributions of company funds to himself as "shareholder loans" that were never repaid. These funds, totaling approximately $47 million between 2010 and 2021, were allegedly used for personal extravagances, including purchasing a Rolls Royce Phantom, funding private-jet travel and vacations, buying luxury automobiles and jewelry, and paying off personal American Express credit card debts.

"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," said U.S. Attorney Martin Estrada. "Instead of looking out for shareholders, the defendant allegedly treated the company as his personal slush fund, in violation of federal law."

Fat Brands, a publicly traded global franchising company based in Beverly Hills, California, owns severalrestaurant concepts, including Fatburger, Johnny Rockets, and Twin Peaks. Wiederhorn's illegal activities allegedly date back 30 years, when he served as the CEO of Wilshire Credit Corp. and pleaded guilty in Oregon to federal charges of filing a false tax return and paying illegal gratuities.

In response to the charges, Brian Hennigan, counsel for Fat Brands, stated that the company was told it has been indicted on two violations for arranging roughly $2.65 million in loans to Wiederhorn. Hennigan called the charges "unprecedented, unwarranted, unsubstantiated, and unjust," and claimed that they are based on conduct that ended over three years ago and ignore the company's cooperation with the investigation.

The indictment of Wiederhorn and Fat Brands has had immediate consequences, with the company's stock shares losing about a quarter of their value after the fraud allegations were announced. The Securities and Exchange Commission has also filed a civil enforcement action against the company and several executives. As the criminal charges against Fat Brands, Wiederhorn, Hershinger, and Amon move forward, the FBI and IRS Criminal Investigation continue theirinvestigationsinto the alleged fraud scheme.