FAT Brands CEO Andy Wiederhorn and a family member are being investigated by federal authorities as part of an investigation into allegations of securities and wire fraud, money laundering and attempted tax evasion, by a Los Angeles Times report published on Friday.
According to search warrant records filed in court and reviewed by The Times, Wiederhorn’s son, Thayer, and stepdaughter, Brooke Wiederhorn, had their California home in Beverly Grove raided by federal agents in December.
Brooke Wiederhorn, the daughter of “Real Housewives of Beverly Hills” star Kim Richards, was not named in court records. But filings show officers took tax documents, phones, digital storage devices and other documents from the residence.
Federal investigators also asked a judge for permission to search Andy Wiederhorn’s Beverly Hills home, although, according to The Times, court documents did not reveal whether this took place.
In a November affidavit, an FBI special agent alleges that Andy Wiederhorn “conceived and executed a fraudulent scheme” to avoid paying taxes. The agent, who focuses on complex financial crimes, according to the Times, also alleges that Andy Wiederhorn received “millions of dollars in fictitious loans”.
A FAT Brands spokesperson said RSQ Monday in a statement: “The government has informed FAT Brands of its investigation and the Company is cooperating fully. The Company is not the target of the investigation.”
Andy Wiederhorn attorney, Douglas Fuchs of Gibson, Dunn & Crutcheralso shared a statement with RSQ, saying, “Mr. Wiederhorn categorically denies these allegations and we will demonstrate in due course that the government is factually wrong. These loans were completely legitimate and were independently reviewed and approved. In addition, Mr. Wiederhorn’s tax returns were prepared and approved by independent tax professionals and he made payments under an IRS-approved plan.
“We are unable to comment more specifically on the allegations because despite our requests, the government has refused to provide us with a copy of the affidavit,” Fuchs added.
The status of the investigation is unclear, the Times said. No charges have been filed against any individual or FAT marks.
Laura Eimiller, spokeswoman for the FBI office in Los Angeles, told the Times she could not confirm or deny an investigation.
The Affidavit describes a series of credit card purchases by Andy Wiederhorn and members of his family, including $150,000 apparently for a down payment on a Rolls-Royce and $183,500 at a London jeweler, according to The Times. The affidavit alleges that these purchases were “paid for primarily” from accounts held by a subsidiary of FAT Brands. Additionally, he alleges that Andy Wiederhorn generated millions of American Express reward points by funneling the company’s money through his son’s PayPal account.
The FBI special agent went on to say that there was probable cause that Andy Wiederhorn “engaged in the following criminal conduct,” listing tax offenses, misrepresentation to investors, and fraud offenses” relating to personal expenses that Wiederhorn charged FAT”. says the Times.
Part of the investigation also looked into whether Andy Wiederhorn filed a false tax return. According to court documents, his 2018 tax return showed income of $403,311. In 2017, $395,508.
Yet, according to The Times, car loan and home purchase applications in 2018 showed he was making $200,000 a month, or about $2.4 million a year.
Wiederhorn has entered into multiple “installment agreements” to repay taxes, the publication added. Filings indicate he was complying with the process, but as of November 2021, he owed nearly $3 million in personal income taxes, penalties and interest.
In the affidavit, the FBI agent also alleges that Andy Wiederhorn “converted” money from FAT Brands and its affiliates via credit cards showing purchases made at Dolce & Gabbana, Giorgio Armani and Restoration Hardware, the Times reported.
From October 2017 (FAT Brands IPO) to May 2019, approximately $5 million from the company or its subsidiaries was used to cover various Wiederhorn credit card balances, according to the court filing.
FAT Brands was one of the most active restaurant groups of 2021. The company made headlines over the summer when it announced the purchase of Global Franchise Group for $442.5 million.
At the time, it was the second-largest restaurant deal of 2021, second only to the $801 million bankrupt sale of NPC International to franchisees of Wendy’s and Flynn Restaurant Group (the largest in 2021 was l purchase of Firehouse Subs by RBI for $1 billion). Soon, the FAT Brands portfolio grew to 14 brands with the addition of Round Table Pizza, Marble Slab Creamery, Great American Cookies, Pretzelmaker and Hot Dog on a Stick.
Two months later, FAT Brands announced an agreement to purchase a sports bar Twin Peaks for $300 million, and two months later struck a deal to buy Fazoli’s for $130 million. The company ended the timeline with a $20 million acquisition of Native wings and grills of 23 units.
In total, FAT Brands spent nearly $900 million in five months. By the end of the year, it had a platform with 17 concepts, 2,300 franchised and company-operated locations worldwide, and system-wide sales of approximately $2.3 billion. dollars. The company operates in 40 countries and 48 states and partners with 800 franchisees, half of which are multi-unit operators. In addition to those 2,300 stores, FAT Brands claims a pipeline of about 800 restaurants that are expected to open in the next four to five years.
Before the end of 2021, the company spent $25 million in September 2020 to buy Johnny Rockets, a move that doubled FAT Brands’ footprint.
In 2004, Andy Wiederhorn pleaded guilty in U.S. District Court in Oregon to paying an illegal gratuity to an associate and filing a false tax return. He served 15 months in federal prison in Sheridan, Oregon, and paid a $2 million fine.
Andy Wiederhorn told The Times in 2017 that he “categorically denied doing anything intentionally wrong.”
“I’m very grateful for that. I felt like I paid the fine. I made time. I did everything I was supposed to do to make it go away and put it behind me,” he told the publication.
A shareholder lawsuit was also filed in 2021 against FAT Brands and Fog Cutter Capital Group. The lawsuit alleges that Fog Cutter used funds borrowed from FAT Brands to produce $27 million in multi-year cash advances. He claimed Fog Cutter owed FAT Brands $38.7 million and said the capital group forgave loans to Andy Wiederhorn before FAT Brands merged with the company. In January, a Delaware judge ruled the trial could continue.