May 28, 2024

The Fatburger logo

The Fatburger logo
Photo: Artur Widak/NurPhoto (Getty Images)

Fat Brands is the parent company of Fatburger, Johnny Rockets, and a few other restaurant chains. Last year, former CEO Andy Wiederhorn stepped down after the Los Angeles Times reported that the federal government was investigating him for fraud. He has since stayed on as the company’s chairman, but on Friday the Justice Department charged him with perpetuating a $47 million fraud against his own shareholders.

To pay for “the purchase of private-jet travel, vacations, a Rolls Royce Phantom, other luxury automobiles, jewelry, and a piano,” the government says that he had the company take out loans that were actually just cash transfers. The scheme allegedly lasted from 2010 until 2021. Fat Brands shares fell about 28% in Friday trading.

“The indictment alleges that with the assistance of his co-defendants, 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, the Acting Assistant Director in Charge of the FBI’s Los Angeles Field Office, in a statement accompanying the charges’ unveiling. “Rather than continuing to fund his lavish lifestyle, Mr. Wiederhorn will face serious consequences for his alleged criminal actions.”

The Justice Department also indicted former CFO Rebecca Hershinger, accountant William Amon, and Fat Brands itself. Separately, the Securities and Exchange Commission filed a civil complaint against the same parties plus Ron Roe, also a former CFO, alleging that the “fraudulent scheme stripped FAT of approximately 40 percent of its revenue, often leaving the Company with insufficient cash to pay its own bills.”

In a statement, Fat Brands said that “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.”

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