During a recent conference call with shareholders in parent company FAT Brands, CEO of Fatburger Andrew Wiederhorn made it clear that he believes the recent criminal tax investigation into his family is based at least partially on his past run-ins with the federal government.
Wiederhorn’s history of past offenses is well-documented. However, it is clear from the general behavior of the IRS in other cases that a target’s history of noncompliance or criminal tax violations will play a role in determinations of government action.
At the Tax Law Offices of David W. Klasing, our Dual Licensed Tax Lawyers and CPAs stay apprised of all developments in IRS or Department of Justice, Tax Division, behavior so that our clients are best prepared for any eventuality. To discuss how our services could benefit you today, reach out to our offices at (800) 681-1295.
Fat Brands Exec Says He Was “Not Surprised” by Government Actions
On a recent earnings call with shareholders of FAT Brands, Andrew Wiederhorn made his first public comments on the impending federal government investigation into him and his family for alleged financial crimes. Wiederhorn, who has spent time living in both Los Angeles and Portland, Oregon, indicated to shareholders that he was not surprised about the investigation, given his past dealings with the federal government as part of an alleged Ponzi scheme that resulted in his conviction in 2004.
FAT Brands and Fog Cutter Background
Wiederhorn currently serves as the CEO and President of both FAT Brands and subsidiary Fatburger, a fast casual restaurant chain with locations in the western United States and Canada as well as several other countries, including the United Kingdom, China, Japan, India, Saudi Arabia, and Singapore. Most recently, the brand announced that the chain would be expanding into several locations in Texas.
Fatburger is a subsidiary of FAT Brands, whose other holdings include Johnny Rockets, Buffalo’s Café, and Marble Slab Creamery. Fat Brands is publicly traded as a Class A security with an estimated annual revenue of $30 million.
Wiederhorn also founded Fog Cutter Capital Group. Fog Cutter was the controlling stockholder in FAT Brands up until December of 2020, when the two entities announced plans to merge.
Wiederhorn’s “Personal History”
When Wiederhorn referenced his “personal history” on the call with investors, he was likely referring to his previous conviction for tax evasion almost 20 years ago. Wiederhorn pled guilty to charges of filing a false tax return and providing an illegal gratuity.
The charges stemmed from Wiederhorn’s operation of Wilshire Financial Services Group; a corporate entity that was at one point valued at $2 billion. Wiederhorn and his partner allegedly borrowed over $93 million from Wilshire, only to have the company forgive the loan later. Wiederhorn also invoked the ire of other Wilshire investors for allegedly embezzling as much as $160 million from Wilshire for his own personal use.
Wiederhorn served 15 months in prison and was ordered to pay a $2 million fine. However, the board of Fog Cutter Capital Group voted to award Wiederhorn a bonus equal to the amount of the fine, in addition to honoring his annual salary while he was serving his prison sentence. In a corresponding action, NASDAQ delisted Fog Cutter in 2005.
When Wiederhorn took FAT Brands public in 2017, he publicly stated that he never acted with any intent to break any laws and blamed his earlier conviction from 2004 on “mistaken legal advice.”
New Allegations
As part of a regulatory filing, FAT Brands announced in February that Wiederhorn, its CEO, was under investigation by the Securities and Exchange Commission (SEC) and the U.S. Attorney’s Office for the Central District of California. In the disclosure, FAT Brands claimed that it had no reason to suspect that the corporation itself was the target of any investigations. Still, the stock price dropped nearly 30% in the days immediately following the news.
At the onset of the investigation, government agents conducted an early morning raid of the homes of Wiederhorn’s son, Thayer. Thayer is married to Brooke Wiederhorn, daughter of “The Real Housewives of Beverly Hills” star Kim Richards. According to court documents, the warrant required agents to collect “clothing, digital devices, backpacks, wallets, briefcases, purses, and bags.”
The investigation concerns allegations of tax evasion, securities fraud, conspiracy to commit wire fraud, and money laundering. The scope is large enough to include any transfers of monetary assets or “anything of value” that involve the relevant corporate entities such as FAT Brands and Fog Cutter and Andrew Wiederhorn, Thayer Wiederhorn, current or former spouses or in-laws, romantic partners, parents, children, or siblings.
Wiederhorn and his family members face accusations of using FAT Brands accounts to pay for luxury expenditures, including a $183,500 purchase at Graff Diamonds in London, a $150,000 down payment on a Rolls-Royce, and payments to a prominent Beverly Hills divorce attorney totally more than $100,000, as well as family vacations to Aspen, Colorado and Saint Tropez, France.
Takeaways from Wiederhorn’s Statements on New Allegations and Federal Investigation
Whatever Wiederhorn may or may not have done, it is clear that the IRS has a long memory and is not quick to forget tax improprieties, even those that may have occurred over two decades ago. Therefore, it is important for taxpayers to understand the ramifications of a criminal tax conviction, especially when considering a plea agreement.
If you find yourself as the defendant in a criminal tax case, the government may offer you a plea deal, whereby you might reduce the charges against you or obtain lighter sentencing recommendations. One of the critical dangers of a plea agreement, however, is that you are cementing a tax offense on your official record. This will undoubtedly make the IRS more curious in any situation where there are issues with your tax return filings.
Questions About How Past Tax Issues May Affect You in the Future? Call the Tax Law Offices of David W. Klasing
You deserve the help of our seasoned Dual Licensed Tax Attorneys and CPAs. If you are facing a government audit or investigation, call the Tax Law Offices of David W. Klasing as soon as possible at (800) 681-1295.
