Andy Wiederhorn — former CEO and current chairman of FAT Brands — has been accused by the U.S. Securities and Exchange Commission of misappropriating $27 million of company money and using it to “fund his lavish lifestyle,” a complaint filed on May 10 by federal prosecutors in the Central District Court of California reads.
The complaint was filed three months after the SEC concluded its investigation into Wiederhorn, who was being inspected by federal authorities under allegations of securities and wire fraud, money laundering, and attempted tax evasion. This is not the first time Wiederhorn has run afoul of federal law: he previously served time in prison for tax fraud from 2005-2006. In 2023, he stepped down as CEO of the company, but has still been running earnings calls since then.
According to the SEC complaint, Wiederhorn is accused of spending $27 million of company income on “personal expenses including private jets, first class airfare, luxury vacations, his rent and mortgage payments, shopping, and jewelry,” at one point stripping FAT Brands of 40% of its revenue, and “often leaving the company with insufficient cash to pay its own bills.” At one point, the complaint alleges that Wiederhorn instructed his son to “wire $9 million to FAT Brands” to cover up the funds he had allegedly used for his own personal expenditures.
According to the SEC claim, from Oct. 2017 to Dec. 2020, Wiederhorn directed approximately $38 million in cash to Fog Cutter Capital Group, the controlling stockholder owned by Wiederhorn, which merged with FAT Brands in 2020. However, after an initial promissory note was paid back, Wiederhorn continued to transfer cash to Fog Cutter, and directed FAT Brands to loan $28.3 million of FAT Brands cash to Fog Cutter Capital in an intercompany loan. Wiederhorn then allegedly used $20 million of those funds for personal use, including paying off his personal credit cards, “payments for private jets, first class airfare, luxury vacations, Wiederhorn’s mortgage and rent payments, and nearly $700,000 in shopping and jewelry.”
The charges also accuse former FAT Brands CFO and current senior vice president of finance, Ron Roe, of being compliant in the financial misappropriation schemes, and claims that both Roe and former Fat Brands CFO Rebecca Hershinger “personally signed, certified, and disseminated false and misleading statements” regarding these transactions.
In addition to the above accusations, the complaint also claims that Wiederhorn and his associates concealed the nature of the personal cash transfers including the coverup by Wiederhorn’s son Thayer, violated internal controls put in place by the FAT board of directors, had all of his children involved as officers of the company, lied to FAT Brands’ auditors, submitted falsified SEC filings, continued to make false statements regarding the fiscal dealings of the company, and kept inaccurate books.
The SEC is requesting that the court “impose permanent injunctions against each of the defendants” for multiple counts of fraud and false and misleading statements, and bar all parties involved from acting as an officer or director of a public company ever again.
FAT Brands has stood behind its founder as the company’s legal counsel has maintained Wiederhorn’s innocence in this investigation:
“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,” Brian Hennigan of Hueston Hennigan LLP, Counsel for FAT Brands Inc., said in a statement. “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.”
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