Pakistani clients eat at a Fatburger outlet in Karachi, Pakistan.
Rizwan Tabassum | AFP | Getty Pictures
Shares of Fat Brands cratered greater than 20% on Tuesday morning after the Fatburger and Johnny Rockets mum or dad disclosed that its CEO has been underneath investigation for months.
In a regulatory submitting, Fats Manufacturers stated the U.S. Legal professional’s Workplace for the Central District of California and the Securities and Trade Fee advised the corporate in December that they’d begun investigating CEO Andrew Wiederhorn.
The federal government is in search of paperwork and supplies associated to Fats Manufacturers’ merger with Fog Cutter Capital Group in December 2020 and transactions between Wiederhorn and people entities, in response to the submitting. Fog Cutter Capital is the biggest shareholder of Fats Manufacturers, and Wiederhorn is its majority shareholder.
Investigators are additionally trying into compensation, extensions of credit score and different advantages that Wiederhorn or his household obtained. Wiederhorn’s son Thayer serves as chief working officer of the corporate.
The disclosure adopted a Los Angeles Times report on Saturday that the allegations towards Wiederhorn embrace securities and wire fraud, cash laundering and tried tax evasion. The newspaper additionally reported that federal brokers raided the house of Thayer Wiederhorn and his spouse Brooke — daughter of former Actual Housewives of Beverly Hills star Kim Richards — in December.
“The federal government has knowledgeable FAT Manufacturers of its investigation and the Firm is absolutely cooperating,” Fats Manufacturers stated in a press release to CNBC. “The Firm isn’t a goal of the investigation.”
The corporate stated within the submitting that it’s not in a position to estimate the result or period of the federal government investigations at the moment.
In a press release to CNBC, Wiederhorn’s legal professional Douglas Fuchs stated that his shopper categorically denies the allegations they usually plan to show that the federal government has its information fallacious.
“These loans have been fully legit and have been independently reviewed and accepted,” Fuchs stated. “As well as, Mr. Wiederhorn’s tax returns have been ready and accepted by impartial tax professionals and he has been making funds underneath a plan accepted by the IRS.”
Fuchs additionally stated he could not remark extra particularly on the allegations as a result of the federal government hasn’t supplied them with a replica of the affidavit regardless of their requests.
The SEC didn’t instantly reply to a request for remark from CNBC. A consultant from the U.S. Legal professional’s workplace declined to remark.
This is not Wiederhorn’s first time underneath investigation for monetary crimes. In 2004, he pled responsible to submitting a false tax return and paying an unlawful gratuity to an affiliate whereas main Fog Cutter Capital. He paid a $2 million wonderful and spent greater than a 12 months in federal jail in Oregon. Throughout his time in jail, Fog Cutter’s board opted to pay him a bonus equal to the wonderful and continued paying his wage, a call that attracted widespread criticism.