FAT (Fresh. Authentic. Tasty.) Brands Inc. (NASDQ:FAT) has been hit with allegations of fraud. This past Friday, the Securities and Exchange Commission (SEC) filed fraud charges against FAT, its former CEO and current Chairman, Andrew Wiederhorn, and its former CFOs, Ron Roe and Rebecca Hershinger, regarding FAT’s disclosures about related-person transactions with Wiederhorn and his family.
Simultaneously, the US Attorney’s Office for the Central District of California has announced criminal charges against Wiederhorn, FAT, Hershinger, and another individual. The Department of Justice claims that Wiederhorn attempted to conceal $47 million in distributions he received in the form of shareholder loans.
FAT, which issued shares using the Reg A+ securities exemption, raised money in 2017. The offering raised approximately $24 million through the sale of 2,000,000 shares priced at $12.00 per share. FAT includes restaurant brands Fatburger, Johnny Rockets, and Twin Peaks. FAT trades on the NASDAQ.
The SEC alleges that Wiederhorn used almost $27 million of FAT’s cash for personal expenses, including private jets, first-class airfare, luxury vacations, rent and mortgage payments, shopping, and jewelry. The complaint also alleges that he, along with Roe’s help, made false and misleading statements.
The SEC’s complaint further alleges that Wiederhorn misled FAT’s board of directors and FAT’s auditors, leading them to believe that FAT’s loans to FAT’s affiliate, Fog Cutter Capital Group, Inc. (FCCG), were for business expenses and existing liabilities. The SEC alleges that Weiderorn pillaged about 40% of the company. The SEC reports that FAT was unable to pay its own bills.
The complaint seeks injunctions and civil penalties against all defendants. It also seeks disgorgement with prejudgment interest against FAT and Wiederhorn, as well as officer and director bars against Wiederhorn, Roe, and Hershinger.
The criminal suit has charged the following defendants:
- Wiederhorn, of Beverly Hills;
- William J. Amon, of Los Angeles, a certified public accountant, attorney, and one-time managing director of Andersen’s Los Angeles Office, who provided tax-advisory services to Wiederhorn, FAT, and FAT’s former affiliate, Fog Cutter Capital Corporation (FOG);
- Rebecca D. Hershinger, a Los Angeles-area resident who formerly served as FAT’s CFO and, in that role, certified FAT’s public filings; and
- Fat Brands Inc., based in Beverly Hills
The criminal indictment alleges:
“After defendant FAT became an issuer of securities through its IPO, 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. These disbursements were used to fund the purchase of private-jet travel, vacations, a Rolls Royce Phantom, other luxury automobiles, jewelry, and a piano.”
The DOJ has charged each defendant as follows:
- 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.
- Wiederhorn has also been charged in a separate indictment for illegally possessing a firearm and ammunition after being convicted of a felony.
- Both 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 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 in filing false tax returns.
The FBI and IRS Criminal Investigation are said to be continuing their investigation of this matter.
FAT Brands’ attorney has issued a statement claiming the “charges are 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.”
Have a crowdfunding offering you'd like to share? Submit an offering for consideration using our Submit a Tip form and we may share it on our site!
