Federal authorities on Friday charged Fats Manufacturers and its chair Andy Wiederhorn of committing a brazen scheme that netted him $47 million in bogus loans from the restaurant firm that owns Fatburger, Johnny Rockets and Twin Peaks.
Shares of Fats Manufacturers closed down 27% on Friday. The corporate has a market worth of $92 million.
Fats Manufacturers, Wiederhorn and some different individuals had been criminally indicted by a federal grand jury in Los Angeles for wire fraud, tax evasion and different counts associated to the alleged scheme.
In a separate civil criticism, the U.S. Securities and Alternate Fee accused the corporate and Wiederhorn of violations associated to the identical conduct.
“These expenses are unprecedented, unwarranted, unsubstantiated and unjust,” Fats Manufacturers counsel Brian Hennigan mentioned in a press release. “They’re based mostly on conduct that ended over three years in the past and ignore the Firm’s cooperation with the investigation.”
Wiederhorn, who was convicted 20 years in the past in a felony case that concerned comparable conduct, was individually criminally charged in an indictment in Los Angeles of being a federal felon in possession of a handgun and ammunition.
“We sit up for making clear in courtroom that that is an unlucky instance of presidency overreach — and a case with no victims, no losses and no crimes,” Wiederhorn’s legal professional Nicola Hanna mentioned.
As chief govt of Fats Manufacturers, Wiederhorn, 58, allegedly directed the corporate to mortgage its personal funds to him, with no intention of ever paying the “sham” loans again, in keeping with the indictment.
The SEC alleges that Wiederhorn then used the money to pay for personal jets, first-class airfare, luxurious holidays, mortgage and hire funds, plus practically $700,000 in “buying and jewellery.”
Wiederhorn stepped down as CEO final yr, following the corporate’s disclosure that the SEC was investigating him. In February, Fats Manufacturers disclosed it had acquired a Wells discover from the company, which means the SEC was planning to take motion towards it.
Wiederhorn’s alleged fraud accounted for roughly 44% of Fats Manufacturers’ income between 2017 and 2021, which meant the corporate typically was not capable of pay its payments. In these conditions, Wiederhorn would allegedly redirect funds from bank cards paid for by Fats Manufacturers again to the corporate with help from his son Thayer, who was then the corporate’s chief advertising and marketing officer and is now its chief working officer.
Fats Manufacturers by no means disclosed the money transfers as associated celebration transactions to buyers. In 2020, the money transfers had been written off after the corporate’s merger with Fog Cutter Capital Group, Fats Manufacturers’ largest shareholder, which additionally occurred to be majority owned by Wiederhorn, in keeping with the SEC criticism.
Ron Roe, the corporate’s vice chairman of finance and former chief monetary officer, and Rebecca Hershinger, one other former CFO, had been additionally named as defendants within the SEC criticism. Hershinger and tax advisor William Amon had been additionally named within the indictment. Hershinger’s legal professional Michael Proctor mentioned in a press release to CNBC that the costs are baseless.
Moreover, way back to 2006, Wiederhorn has owed taxes for his private revenue to the IRS. He additionally didn’t report any of the so-called loans from Fats Manufacturers as revenue, in keeping with the indictment. As of March 2021, Wiederhorn owed $7.74 million to the IRS for his unpaid private taxes.
Twenty years in the past, he pleaded responsible to submitting a false tax return and paying an unlawful gratuity to an affiliate whereas main Fog Cutter Capital. He paid a $2 million positive and spent greater than a yr in federal jail in Oregon. Throughout his time in jail, Fog Cutter Capital’s board opted to pay him a bonus equal to the positive and continued paying his wage, a call that attracted widespread criticism.
Wiederhorn is predicted to be arraigned Friday afternoon in U.S. District Courtroom in downtown Los Angeles. The remaining defendants’ arraignments are anticipated to be within the first week of June.
