A federal grand jury indicted the former CEO of Fat Brands, Inc. this week for what they said was a years-long scheme to distribute $47 million of shareholder funds disguised as loans to himself to avoid paying taxes.
Andrew A. Wiederhorn, of Beverly Hills, who is still the controlling shareholder of the company behind such restaurant chains as Fatburger and Johnny Rockets, was accused of conspiring with the company’s CFO and an accountant to hide the disbursements to himself over more than a decade.
By reporting this income as shareholder loans, Wiederhorn was able to avoid paying millions of dollars in taxes, the U.S. Department of Justice’s Los Angeles office said Friday, May 10.
The indictment alleges that he used the company funds “to fund the purchase of private-jet travel, vacations, a Rolls Royce Phantom, other luxury automobiles, jewelry and a piano.”
“Mr. Wiederhorn repeatedly evaded his taxes and the law as he engaged in a cover-up to avoid being accountable to shareholders,” Krysti Hawkins, acting assistant director of the FBI’s L.A. field office, said in a statement.
Also named as defendants in the indictment are Fat Brand’s former CFO, Rebecca D. Hershinger, and William J. Amon, an accountant who provided tax-advisory services to Wiederhorn and the company.
Fat Brands itself is also listed as a defendant.
In a statement, Fat Brands called the charges “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,” the company’s statement said.
The indictment also alleges that multiple transfers of hundreds of thousands of dollars were made from Fat Brands accounts to pay Wiederhorn’s personal American Express credit card debts.
Prosecutors contend that Wiederhorn never repaid any of the so-called company loans, which were essentially “forgiven” by the company, “all while paying no income tax on these distributions and, in fact, using them to generate net operating losses to provide defendant (Fat Brands) with financially beneficial tax treatment.”
Wiederhorn is charged with one count of endeavoring to obstruct the administration of the Internal Revenue Code, six counts of tax evasion and one count of false statements and omission of material facts in statements to accountants in connection with audits and reviews. He and Hershinger are also charged with four counts of wire fraud, two counts of false statements and omission of material facts in statement to accountants, 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, among things, 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 was also charged in a separate indictment for illegally possessing a firearm and ammunition after being convicted of a felony.
City News Service contributed to this report.