LOS ANGELES (CN) — The chairman and former CEO of FAT Brands Inc. — the holding company of Fatburger, Johnny Rockets and other chains — has been charged with concealing $47 million in income from the Internal Revenue Service by treating the payments as shareholder loans despite never paying them back.
Andrew Wiederhorn, 58, faces multiple counts of tax evasion, endeavoring to obstruct the IRS, and making false statements, among other charges, the U.S. attorney’s office in Los Angeles announced on Friday. Separately, the Beverly Hills resident was indicted for being a convicted felon in possession of a firearm.
Wiederhorn is FAT Brands controlling shareholder. According to his indictment, he didn’t post collateral, make interest payments or observe any of the normal requirements for real loans. Without informing the company’s directors, he decided for himself the amount of bogus loans he received over a ten-year period, the indictment states, as well as when to forgive them.
“After defendant FAT became an issuer of securities through its IPO [initial public offering], defendant Wiederhorn caused millions of dollars from defendant FAT’s accounts to be disbursed to defendant Wiederhorn and his family members for their personal benefit,” the indictment states. “These disbursements were used to fund the purchase of private-jet travel, vacations, a Rolls Royce Phantom, other luxury automobiles, jewelry, and a piano.”
Wiederhorn’s attorney didn’t immediately respond to a request for comment.
The publicly traded company was also charged in the indictment, accused of violating the Sarbanes-Oxley Act’s prohibition on companies making personal loans to its chief executive.
“These charges are unprecedented, unwarranted, unsubstantiated, and unjust,” FAT Brands said in a statement. “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.”
After the FAT Brands board started to communicate with the government, Wiederhorn removed every director other than himself in March 2023, federal prosecutors say. He then reconstituted the board with a majority of non-independent directors under his control.
In a separate lawsuit filed Friday, the Securities and Exchange Commission also accused Wiederhorn of not disclosing to the company’s auditors and investors that he was spending FAT Brands cash to fund his lavish lifestyle. He thereby stripping the company of about 40% of its revenue during the relevant period, the SEC says, leaving the company at times with insufficient cash to pay its bills.
According to the indictment, Wiederhorn began disguising payments to himself in the form of shareholder loans as long as 30 years ago, when he served as CEO of the predecessor company of FAT Brands. He forgave himself some $65 million in putative debts owed to this previous business and in 2004 pleaded guilty to the payment of illegal gratuities and filing a false federal tax return.
From about 2006 to 2021, the IRS had been trying to collect personal income tax and trust fund taxes from Wiederhorn, the government said, including by putting levies and liens on his accounts and assets. By March 2021, he owed about $7.8 million to the IRS, including in statutory interest and penalties, according to the indictment.
“The allegations contained in the indictment against Mr. Wiederhorn show that he is a serial tax cheat,” said Tyler Hatcher, the special agent-in-charge at the IRS Criminal Investigation’s Los Angeles field office. “His actions over decades hurt not only his company and its shareholders, but also every American taxpayer.”