Fat Chance: Restaurant Company, Fat Brands, grilled over $47 million scam

Fat Brands which owns popular restaurant chains Johnny Rockets, Fatburger and Twin Peaks and its CEO, Andy Wiederhorn, have been criminally indicted for tax evasion, wire fraud, and other counts by a federal grand jury in Los Angeles. Andy Wiederhorn allegedly cooked up a scheme to bank $47 million in fraudulent loans from Fat Brands, smearing the company name with his audacious greed.

Under Wiederhorn’s direction, he apparently instructed Fat Brands to “loan” him and his company, Fog Cutter Capital Group, what amounted to 44% of the company’s revenue with no intention of paying the funds back. With so much of its profits being poached by Wiederhorn, Fat Brands had trouble paying bills adding another layer to the brazen scam. The SEC alleges Wiederhorn and his son Thayer, who’s married to Real Housewives Kim Richards’s daughter and also works for the company, would reroute money through Fat Brands’ credit cards to cover any unpaid bills.  Armed with his fat check, Wiederhorn allegedly led a lavish lifestyle, spending the stolen cash on private jets, jewelry, luxe vacations, rent, mortgage, first class plane tickets, and shopping. Intelligo’s assets check could have raised red flags, pointing to properties and cars that seemed out of context or suspect. To further thicken this gluttonous plot, Wiederhorn didn’t pay taxes on the stolen funds, neglecting to claim the income to the IRS. Fat Brands also failed to disclose the cash transfers to investors.   

Last year Wiederhorn stepped down from his position as chief executive after Fat Brands announced he was being investigated by the U.S. Securities and Exchange Commission. The SEC has also set forth a civil complaint, accusing Fat Brands and Wiederhorn of violations related to the scheme. As the news broke, stocks for Fat Brands, valued at $92 million, plummeted 27%. 

A background check could have exposed a dodgy past consisting of guns and jail time.

This isn’t the first time Wiederhorn has been in hot water. Two decades ago he was charged with filing a false tax return as well as paying an illegal gratuity. He pleaded guilty and served 15 months in federal prison. At the time he paid $2 million in restitution, however, it was later discovered his company, Fog Cutter Capital paid him $2 million while in prison, resulting in Nasdaq’s delisting of Fog Cutter. Wiederhorn was also charged for being a federal felon in possession of a firearm and ammunition in Los Angeles. In addition, Wiederhorn currently owes the IRS over $7 million in unpaid personal taxes.   Had due diligence been performed, Fat Brands and its investors would be privy to Wiederhorn’s past and could have funneled their $47 millions in earnings back into their companies rather than funding Widerhorn’s luxurious life. Properly vetting the C-suite execs managing your investments is alway a good move. Schedule your free demo with Intelligo today and check your people before you wreck your profits.