A federal grand jury this week indicted Andrew Wiederhorn, the previous chief govt of the corporate that owns the Fatburger and Johnny Rockets restaurant chains, on federal fees alleging a $47-million “sham mortgage” scheme.
Wiederhorn, the present controlling shareholder of the publicly traded Fats Manufacturers Inc., is accused of concealing hundreds of thousands of {dollars} in reportable compensation and taxable revenue from the Inside Income Service and evading the cost of hundreds of thousands in taxes, in line with the indictment returned Thursday.
Firm cash — categorized as “shareholder loans” — was disbursed to Wiederhorn and his household “for his or her private profit,” in line with the indictment. A few of that cash went towards private-jet journey, holidays, an almost half-million-dollar Rolls-Royce Phantom, different luxurious cars, jewellery and a piano.
Based on the indictment, Wiederhorn “had no intention of repaying these sham ‘loans.’”
“As a substitute of looking for shareholders, the defendant allegedly handled the corporate as his private slush fund, in violation of federal regulation,” U.S. Atty. Martin Estrada stated in a press release.
Nicola Hanna, Wiederhorn’s lawyer, referred to the fees as “mistaken on each the info and the regulation.”
“Mr. Wiederhorn consulted and adopted the recommendation of world-class professionals in all of his enterprise dealings,” Hanna, the previous U.S. lawyer for the Central District of California, stated in a press release. “We stay up for making clear in court docket that that is an unlucky instance of presidency overreach — and a case with no victims, no losses and no crimes.”
Wiederhorn was allegedly assisted by the corporate’s former chief monetary officer, Rebecca D. Hershinger, and his exterior accountant, William J. Amon, who had been additionally charged within the 22-count indictment. Fats Manufacturers has additionally been charged.
Brian Hennigan, counsel for FAT Manufacturers Inc., stated the fees had been “unprecedented, unwarranted, unsubstantiated and unjust.” He added that they had been “based mostly on conduct that ended over three years in the past and ignore the corporate’s cooperation with the investigation.”
Hershinger’s protection lawyer, Michael Proctor, in a press release referred to as the fees “baseless” and stated that, whereas Hershinger was at FAT Manufacturers, “she disclosed all materials info to the corporate’s exterior auditors, and complied along with her authorized and moral obligations.”
The indictment lists all kinds of felony counts in opposition to Wiederhorn, together with wire fraud, endeavoring to hinder the administration of the IRS, tax evasion and false statements and omission of fabric info in statements to accountants in reference to audits and opinions.
Between 2010 and 2021, the indictment alleges, Wiederhorn took the cash from Fats Manufacturers and its affiliate, Fog Cutter Capital Group Inc.
In 2022, The Instances reported that Wiederhorn confronted a prison probe. As a part of the inquiry, his son’s L.A. house was raided by brokers; investigators additionally sought to raid Wiederhorn’s Beverly Hills mansion.
Final 12 months, Wiederhorn publicly introduced he was stepping down as CEO, framing it as a technique to “eradicate the distraction” of the continuing federal probe. Weeks later, nonetheless, Wiederhorn “eliminated each director aside from himself” from the board of Fats Manufacturers and “reconstituted” a brand new board with administrators “underneath his management,” in line with the indictment.
Wiederhorn graduated from USC, and at age 21 based Wilshire Credit score Corp., drawing in a $300-million funding from Eli Broad, an early backer. The Oregon native returned to Portland and launched Fog Cutter Capital in 1997. With a internet value of about $140 million, Fog Cutter purchased a controlling curiosity in Fatburger in 2003.
Round that point, federal investigators had been scrutinizing Wiederhorn’s companies, and in 2004 he pleaded responsible in U.S. District Courtroom in Oregon to fees of paying an unlawful gratuity to an affiliate and to submitting a false tax return. He served 15 months in federal jail and paid a $2-million high-quality.
The day earlier than his responsible plea, Fog Cutter Capital gave him a $2-million bonus and agreed to maintain paying him whereas he sat behind bars.
Out of jail, Wiederhorn tried to burnish his fame and appeared on the fact TV present “Undercover Boss” at a Fatburger outlet in Arizona. He moved to Southern California and informed The Instances in 2017 that he by no means deliberately did something mistaken.
He took Fats Manufacturers public round 2017 and led an enlargement of greater than 2,000 retailers, together with sports activities bar Twin Peaks, Italian restaurant chain Fazoli’s, Spherical Desk Pizza and Marble Slab Creamery.
But traders have chafed at Wiederhorn’s enterprise selections and in litigation accused him of “looting” the corporate of money whereas his family members loved six-figure salaries on the company payroll. One shareholder swimsuit filed in 2021 accused him of “working Fats Manufacturers into the bottom and bleeding it of its money.”
Final month, Wiederhorn went on Fox Business channel to speak about California’s minimal wage enhance for fast-food employees. He stated costs would go up as a result of “operators can’t afford it.”
“Everybody desires their staff to earn more money, however there’s a price to that and a restaurant operator simply doesn’t have that margin,” he stated.
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