FAT Brands chairman Andy Wiederhorn has been indicted on federal charges that he allegedly concealed $47 million in shareholder loans from the IRS, stockholders, and broader investing public, according to the SEC.

Wiederhorn, assisted by former FAT Brands CFO Rebecca D. Hershinger and public accountant William J. Amon, is accused of hiding reportable and taxable income and evading millions in taxes. This also caused FAT Brands to violate a federal law that prohibits direct and indirect extensions of credit to public CEOs in the form of a loan.

Wiederhorn is charged with one count of endeavoring to obstruct the administration of the Internal Revenue Code, six counts of tax evasion, one count of false statements and omission of material facts in statements to accountants in connection with audits and reviews.

Wiederhorn and Hershinger are charged with four counts of wire fraud, two counts of false statements and omission of material facts in statements to accountants in connection with audits and reviews, and one count of certifying faulty financial reports.

Wiederhorn, Hershinger and FAT Brands are charged with two counts of extension and maintenance of credit in the form of personal loan from issuer to executive officer.

Hershinger is also charged with one count of making false statements to federal investigators, including denying that company funds were being used to pay Wiederhorn’s personal American Express bill.

Amon is charged with four counts of aiding and assisting the filing of false tax returns.

Wiederhorn is also charged in a separate indictment for illegally possessing a firearm and ammunition after being convicted of a felony.

Wiederhorn is expected to be arraigned on Friday in United States District Court in downtown Los Angeles. The remaining defendants are expected to be arraigned during the first week of June.

Beginning no later than 2010 and continuing through early 2021, Wiederhorn is accused of causing employees for FAT Brands and Fog Cutter Capital (another one of Wiederhorn’s companies) to give him roughly $47 million for personal use and benefit. Wiederhorn, Amon, Hershinger, and others mislabeled these as shareholder loans and didn’t report the compensation to the IRS, SEC, and broader public.

Wiederhorn and his family members allegedly used these disbursements for private jet travel, vacations, a Rolls Royce Phantom, other luxury cars, jewelry, and a piano.

FAT Brands and Fog Cutter didn’t require Wiederhorn to post collateral, make interest payments, or observe any commercial requirements of a typical true loan. The executive also allegedly determined the amount, timing, and form of both extension and forgiveness of these so-called loans without informing the directors of FAT Brands or Fog Cutter.

The indictment outlines several transfers of hundreds of thousands of dollars that came directly from FAT Brands accounts to pay for Wiederhorn’s personal American Express credit card debts.

“Wiederhorn, posing as both ‘lender’ and ‘borrower,’ caused defendant FAT and FOG to extend to him and then ‘forgive’ tens of millions of dollars in distributions made in the fraudulent form of loans—all while paying no income tax on these distributions and, in fact, using them to generate net operating losses to provide defendant FAT with financially beneficial tax treatment,” the indictment alleges.

Brian Hennigan of Hueston Hennigan LLP, counsel for FAT Brands, said the company was told it has been indicted on two violations for arranging roughly $2.65 million in loans to Wiederhorn.

“These charges are unprecedented, unwarranted, unsubstantiated, and unjust,” the lawyer 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.”

Federal officials accused Wiederhorn of removing every other board director but himself in March 2023 after members communicated with investigators. He allegedly reformed the board with a majority of non-independent directors under his control. At that time, Wiederhorn announced he would step down as CEO so he wouldn’t be a distraction to the company. But he remained as chairman and still serves as the main public spokesperson for FAT Brands. The board was replaced with a new group that includes three of Wiederhorn’s children—Mason, Taylor, and Thayer Wiederhorn—and their grandfather, Donald Berchtold. 

In early 2022, it was revealed that Wiederhorn was under federal scrutiny due to criminal allegations involving him and his family, such as securities fraud and money laundering. December 2021 saw a police raid at the residence of Wiederhorn’s son Thayer and his daughter-in-law.

Wiederhorn claimed the probe was triggered by a shareholder lawsuit that accused him of misconduct during the merger of FAT Brands with Fog Cutter toward the end of 2020. The lawsuit alleges that Wiederhorn benefited from millions in loans from Fog Cutter, which it had obtained by borrowing from FAT Brands. These loans were later forgiven by Fog Cutter, which still had outstanding debts to FAT Brands. The suit further accuses Wiederhorn of arranging the merger between Fog Cutter and FAT Brands to erase this debt.

According to the indictment, Wiederhorn began hiding distributions to himself in the form of shareholder loans about three decades ago while serving as CEO of Wilshire Credit Corporation (WCC). After forgiving himself $65 million in debts owed to WCC, he pleaded guilty in 2004 to the payment of illegal gratuities and filing a false tax return. He served 14 months in prison.

From at least 2006 to 2021, the IRS tried to collect personal income tax and trust fund taxes Wiederhorn owed personally and as a responsible party and guarantor for certain companies, including Fog Cutter. The IRS placed levies and liens on his accounts and assets due to outstanding taxes owed. Starting in 2016, the federal agency began assessing penalties for Fog Cutter’s inability to pay trust fund taxes and establish a payment plan. By March 2021, Wiederhorn’s unpaid personal income tax liability totaled $7.7 million.

Krysti Hawkins, acting assistant director in charge of the FBI’s Los Angeles field office, claimed Wiederhorn “repeatedly evaded his taxes and the law as he engaged in a cover-up to avoid being accountable to shareholders.” She added that the chairman will “face serious consequences for his criminal actions.” U.S. Attorney Martin Estrada accused Wiederhorn of participating in a long-running scheme to defraud investors and the U.S. Treasury “to the tune of millions of dollars.”

Tyler Hatcher, special agent in charge for IRS Criminal Investigation out of the Los Angeles field office, described Wiederhorn as a “serial tax cheat.”

“His actions over decades hurt not only his company and its shareholders, but also every American taxpayer,” Hatcher said in a statement. “Failing to honestly and accurately report income shortchanges Americans, and places undue strain on honest taxpayers. CI is committed to investigating this sort of criminal behavior to ensure accountability and equity in the tax system.”

Finance, Legal, Story