Former Fat Brands CEO Indicted for Alleged $47 Million Tax Evasion Scheme

Andrew Wiederhorn, FAT Brands' Chairman, and others were indicted for allegedly concealing $47 million in distributions received as shareholder loans. The SEC filed fraud charges, alleging Wiederhorn used company cash for personal expenses, misleading the board and auditors.

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Aqsa Younas Rana
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Former Fat Brands CEO Indicted for Alleged $47 Million Tax Evasion Scheme

Former Fat Brands CEO Indicted for Alleged $47 Million Tax Evasion Scheme

Andrew Wiederhorn, the former CEO and current Chairman of FAT Brands Inc. (NASDAQ: FAT), has been indicted for allegedly concealing $47 million in distributions he received in the form of shareholder loans. The US Attorney's Office for the Central District of California has announced criminal charges against Wiederhorn, FAT, its former CFOs Ron Roe and Rebecca Hershinger, and another individual.

Why this matters: This case highlights the importance of corporate accountability and transparency, as well as the need for effective oversight mechanisms to prevent fraudulent activities. The outcome of this investigation could have significant implications for the business community, influencing how companies report their financial activities and interact with regulatory bodies.

The Securities and Exchange Commission (SEC) has filed fraud charges against FAT, Wiederhorn, Roe, and Hershinger, alleging that Wiederhorn used almost $27 million of FAT's cash for personal expenses, including private jets, first-class airfare, luxury vacations, rent and mortgage payments, shopping, and jewelry. The SEC alleges that Wiederhorn misled FAT's board of directors and auditors, leading them to believe that FAT's loans to its affiliate, Fog Cutter Capital Group, Inc. (FCCG), were for business expenses and existing liabilities. The SEC claims that Wiederhorn "pillaged" about 40% of the company, causing FAT to be unable to pay its own bills.

The criminal indictment alleges that Wiederhorn caused millions of dollars from FAT's accounts to be disbursed to himself and his family members for their personal benefit, including private-jet travel, vacations, a Rolls Royce Phantom, other luxury automobiles, jewelry, and a piano. The DOJ has charged each defendant with various counts of fraud and conspiracy. The FBI and IRS Criminal Investigation are continuing their investigation of this matter.

FAT Brands' attorney has issued a statement claiming that the "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 Inc. raised approximately $24 million through a Reg A+ securities exemption in 2017. The company's portfolio includes restaurant brands Fatburger, Johnny Rockets, and Twin Peaks. The SEC seeks injunctions and civil penalties against all defendants, as well as disgorgement with prejudgment interest against FAT and Wiederhorn, and officer and director bars against Wiederhorn, Roe, and Hershinger.

The indictment of Andrew Wiederhorn and FAT Brands executives for the alleged multi-year tax evasion scheme involving $47 million in misreported shareholder loans marks a significant development in the case. As the FBI and IRS Criminal Investigation continue their probe, the outcome could have major implications for FAT Brands and its leadership. "Mr. Wiederhorn repeatedly evaded his taxes and the law as he engaged in a cover-up to avoid being accountable to shareholders," said Krysti Hawkins, acting assistant director of the FBI's L.A. field office.

Key Takeaways

  • Andrew Wiederhorn, FAT Brands' Chairman, indicted for concealing $47M in shareholder loans.
  • SEC alleges Wiederhorn used $27M for personal expenses, including luxury items and travel.
  • FAT Brands and executives face fraud charges, including conspiracy and tax evasion.
  • Company raised $24M through Reg A+ securities exemption in 2017.
  • Outcome could have significant implications for corporate accountability and transparency.