Family behind Fatburger under investigation for alleged fraud, money laundering, records show

Federal authorities have been investigating Andrew Wiederhorn, chief government of the corporate that owns the Fatburger and Johnny Rockets restaurant chains, and analyzing one in every of his member of the family’s actions as a part of an inquiry into allegations of securities and wire fraud, cash laundering and tried tax evasion, court docket information present.

In the course of the probe, federal brokers in December raided the Beverly Grove house of Wiederhorn’s son Thayer and daughter-in-law Brooke Wiederhorn, in keeping with search warrant information filed in court docket.

Brooke just isn’t named in court docket information reviewed by The Instances. She’s the oldest daughter of actress and erstwhile “Actual Housewives of Beverly Hills” star Kim Richards, and her 2014 nuptials to Thayer had been chronicled on the Bravo actuality TV present.

Brokers hauled away telephones, digital storage gadgets, tax paperwork and different information from the couple’s residence, in keeping with court docket filings.

Federal investigators additionally sought a decide’s permission to go looking the elder Wiederhorn’s Beverly Hills mansion, though court docket filings don’t point out whether or not that raid happened. In addition they monitored him strolling his canine by the property final 12 months.

In a November affidavit outlining the investigation, a particular agent for the FBI specializing in advanced monetary crimes alleged that Wiederhorn, 56, had “devised and executed a fraudulent scheme” to keep away from paying taxes and obtained “tens of millions of {dollars} in sham loans” by means of his firms.

The affidavit identifies years of bank card purchases by Wiederhorn, his kids, and different family members — $183,500 at a London jeweler; $150,000 apparently for a down fee on a Rolls-Royce; greater than $100,000 to a Beverly Hills divorce legal professional — and alleges they had been “paid primarily” out of accounts held by an affiliate of the publicly traded FAT Manufacturers.

The submitting additionally alleges that Wiederhorn generated tens of millions of American Specific rewards factors by routing firm cash by means of his son’s PayPal account.

The agent concluded there was possible trigger that Wiederhorn “engaged within the following felony conduct,” together with tax offenses, misrepresentations to traders, and fraud offenses “relating to private bills that Wiederhorn triggered FAT … to pay.”

The standing of the investigation is unclear. No fees have been filed in opposition to any particular person or in opposition to FAT Manufacturers, of which Wiederhorn is the most important shareholder.

His legal professional, Douglas Fuchs of Gibson, Dunn & Crutcher, stated in a press release late Friday that “Mr. Wiederhorn categorically denies these allegations and on the applicable time we are going to show that the federal government has its info mistaken.”

“These loans had been utterly reliable and had been independently reviewed and authorized. As well as, Mr. Wiederhorn’s tax returns had been ready and authorized by impartial tax professionals and he has been making funds beneath a plan authorized by the IRS,” Fuchs stated within the assertion.

“We’re unable to remark extra particularly on the allegations as a result of regardless of our requests, the federal government has refused to offer us with a replica of the affidavit.”

A spokesman for the U.S. legal professional’s workplace declined to remark. Laura Eimiller, a spokeswoman for the FBI workplace in L.A., stated she couldn’t affirm or deny an investigation.

Beverly Hills-based FAT Manufacturers stated late Friday: “The federal government has knowledgeable FAT Manufacturers of its investigation and the Firm is absolutely cooperating.”

The inquiry comes practically twenty years after Wiederhorn was first ensnared in monetary crimes. In 2004, he pleaded responsible in U.S. District Court docket in Oregon to fees of paying an unlawful gratuity to an affiliate and to submitting a false tax return. He spent 15 months in federal jail in Sheridan, Ore., and paid a $2-million tremendous.

The day earlier than he pleaded responsible, the corporate he led, Fog Cutter Capital, awarded him a $2-million bonus and agreed to maintain paying him throughout his incarceration.

The association prompted New York Instances columnist Nicholas Kristof to bestow on Wiederhorn his inaugural “award for greed,” writing: “I can’t consider a board that has ever so disgraced the rules of company governance by overpaying a CEO whilst he sits in jail.”

As soon as launched, Wiederhorn launched into a public relations marketing campaign to revive his and his household’s reputations, together with an look on “Undercover Boss” at a Fatburger restaurant in Mesa, Ariz.

“I’ve at all times adamantly denied doing something mistaken deliberately,” Wiederhorn instructed The Instances in 2017. “I’m very grateful for it. I felt like I paid the tremendous. I did the time. I did all the pieces I used to be purported to do to make this go away and put it behind me.”

That interview got here simply earlier than Wiederhorn took FAT Manufacturers public, with the objective of increasing from practically 300 eating places to 500 within the U.S. and abroad. The corporate has since grown to greater than 2,000 shops — largely as franchises — by buying sports activities bar Twin Peaks, Italian restaurant chain Fazoli’s, Spherical Desk Pizza and Marble Slab Creamery, amongst different manufacturers.

Wiederhorn even thought-about buying Del Taco, however determined “that was simply going to be a variety of work,” he instructed a meals service podcast final 12 months.

The aggressive enlargement has taken place amid a backdrop of some investor ire. In June 2021, a shareholder lawsuit filed in opposition to FAT Manufacturers in Delaware accused Wiederhorn of “looting” the corporate and “bleeding it of its money.” The swimsuit referenced loans issued to him that had been later forgiven and quite a few members of Wiederhorn’s household who had been on the payroll incomes six-figure salaries.

Attorneys for Wiederhorn and the corporate have countered that the swimsuit didn’t allege that they had executed something mistaken.

It’s unclear what prompted the latest investigation by the FBI, whose brokers seem to have pored over Wiederhorn’s banking, mortgage and tax information.

A part of the inquiry outlined within the affidavit examined whether or not Wiederhorn filed a false tax return, citing discrepancies between mortgage purposes. His 2018 tax return listed revenue of $403,311 and, in 2017, revenue of $395,508, in keeping with the court docket submitting.

However in purposes for a automobile mortgage and residential buy in 2018, he reported incomes $200,000 per thirty days, or about $2.4 million per 12 months.

The affidavit makes ample references to Wiederhorn’s “luxurious life-style” — a $24,739 invoice at Lodge Byblos in Saint-Tropez and $29,913 at Lodge Arts Barcelona — whereas the Inner Income Service has clamored for unpaid revenue taxes during the last decade.

Wiederhorn has entered into a number of “installment agreements” to pay again taxes. The submitting notes he was complying together with his present installment plan, however as of November 2021, he owed practically $3 million in private revenue taxes, penalties and curiosity.

The FBI agent additionally outlined how he believes Wiederhorn “transformed” cash from FAT Manufacturers and its associates by way of bank cards that present purchases at Dolce & Gabbana, Giorgio Armani and Restoration {Hardware}.

Certainly one of Wiederhorn’s playing cards had subaccounts for bank cards issued to his six kids, his mom, private family workers, his ex-wife and others. Their fees embody “important bills, which seem like private in nature,” resembling physician payments, clothes, footwear, mattresses, groceries, tutoring providers and pet care.

From October 2017 — the date of FAT Manufacturers’ preliminary public providing — to Could 2019, about $5 million from the corporate or its subsidiaries went to cowl varied Wiederhorn bank card balances, in keeping with the court docket submitting.

Thayer Wiederhorn, an government at FAT Manufacturers, is referenced particularly in reference to an alleged scheme to route tens of millions of {dollars} of firm cash by means of American Specific fees to a PayPal account bearing his identify. The FBI agent suggests the obvious objective was to generate bank card rewards factors for his father.

The court docket information describe the scheme as “round-trip transactions,” with cash touring from the youthful Wiederhorn’s PayPal account, to his private Financial institution of America accounts, and again to FAT or its subsidiaries.

The FBI agent tabulated a value greater than $250,000 in charges to PayPal out of about $9 million that traveled “spherical journey.”

These $250,000 in charges had been spent “for no reliable company function,” the FBI agent wrote, however “to additional Wiederhorn’s fraudulent scheme.”

Instances researcher Cary Schneider contributed to this report.