U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 26001 / May 10, 2024
Securities and Exchange Commission v. FAT Brands Inc., Andrew A. Wiederhorn, Ron Roe, and Rebecca D. Hershinger, Civil Action No. 2:24-CV-03913 (C.D. Cal. May 10, 2024)
SEC Charges Restaurant Group FAT Brands Inc., its Chairman and Former CEO, and its Two Former CFOs with Defrauding Investors
The Securities and Exchange Commission announced today that it filed fraud charges against FAT Brands Inc. (“FAT”), its founder, former CEO, and current Chairman, Andrew Wiederhorn (“Wiederhorn”), and its former CFOs, Ron Roe (“Roe”) and Rebecca Hershinger (“Hershinger”) concerning FAT’s disclosures about related person transactions with Wiederhorn and his family.
According to the SEC’s complaint, FAT owns restaurant brands, including Fatburger, Johnny Rockets, and Twin Peaks. The complaint alleges that, from October 2017 through March 2021, Wiederhorn used almost $27 million of FAT’s cash on his personal expenses, including private jets, first-class airfare, luxury vacations, his rent and mortgage payments, shopping, and jewelry. Wiederhorn, with Roe’s assistance, allegedly engaged in deceptive acts and made false and misleading statements to make it appear that the millions of dollars of FAT’s money he was spending on himself and on his family each year were company loans to FAT’s affiliate, Fog Cutter Capital Group, Inc. (“FCCG”), another company Wiederhorn controlled, for its business expenses. According to the complaint, Wiederhorn used his control over FCCG to take—in the form a personal loan that he wrote off at his sole discretion and never repaid—the money that FCCG was receiving from FAT and spend it on himself. The complaint further alleges that Wiederhorn misled FAT’s board of directors and FAT’s auditors, leading them to believe that FAT’s loans to FCCG were being used solely for FCCG’s business expenses and pre-existing liabilities. The SEC alleges that Wiederhorn’s fraudulent scheme stripped FAT of approximately 40 percent of its revenue, often leaving the Company with insufficient cash to pay its own bills. Wiederhorn allegedly instructed his son to wire over $9 million into FAT, concealing that Wiederhorn used millions of FAT’s funds for his own personal spending and that FAT was otherwise unable to pay its own bills.
In addition, the complaint alleges that both the FAT funds transferred to FCCG and used for Wiederhorn’s personal expenses, as well as the wires from his son to FAT, were reportable related person transactions that required disclosure, and that Wiederhorn, Roe, and Hershinger fraudulently made false and misleading statements in FAT’s SEC filings that all reportable related person transactions had been disclosed.
The SEC’s complaint, filed in the U.S. District Court for the Central District of California, charges FAT with violating Section 17(a)(2) of the Securities Act of 1933 (“Securities Act”) and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(k), and 14(a) of the Securities and Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5(b), 12b-20, 13a-1, 13a-13, 14a-3, and 14a-9 thereunder. It also charges Wiederhorn with violating Securities Act Sections 17(a)(1) and (3) and Exchange Act Sections 10(b), 13(b)(5), and 14(a) and Rules 10b-5, 13a-14, 13b2-1, 13b2-2, 14a-3 and 14a-9 thereunder, and with aiding and abetting FAT’s primary violations of Securities Act Section 17(a)(2), Exchange Act Sections 13(a), 13(b)(2)A, 13(b)(2)(B), and 13(k) and Rules 12b-20, 13a-1, and 13a-13 thereunder. The complaint charges Roe with violating Exchange Act Section 10(b) and Rules 10b-5(b), 13a-14, and 13b2-2 thereunder, with aiding and abetting Wiederhorn’s primary violations of Securities Act Sections 17(a)(1) and (3), and Exchange Act Section 10(b) and Rules 10b-5(a) and (c) thereunder, and aiding and abetting FAT’s primary violations of Exchange Act Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(k), and Rules 12b-20 and 13a-1 thereunder. The complaint charges Hershinger with violating Exchange Act Section 10(b) and Rules 10b-5(b), 13a-14, and 13b2-2 thereunder, and aiding and abetting FAT’s primary violations of Securities Act Section 17(a)(2) and Exchange Act Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and Rules 12b-20 and 13a-1 thereunder. 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.
Separately, in a parallel investigation, the U.S. Attorney's Office for the Central District of California announced criminal charges against Wiederhorn, FAT, Hershinger, and another individual. Members of the public are reminded that an indictment is merely an accusation; the defendants are presumed innocent unless proven guilty.
The SEC’s investigation was conducted by L. James Lyman, Matthew Montgomery, and Carol Kim of the Los Angeles Regional Office and supervised by Robert Conrrad. The litigation will be led by Stephen Kam and supervised by Douglas M. Miller.