FAT Brands Inc, the parent company of the US restaurant chain Fatburger, has disclosed that its chief executive officer Andrew Wiederhorn is being investigated by the US Attorney’s Office for the Central District of California and the US Securities and Exchange Commission over FAT Brands’ merger with investment firm Fog Cutter Capital Group in December 2020.
According to a regulatory filing, the government is seeking documents and materials related to the merger and transactions between Wiederhorn and the merging companies.
Fog Cutter Capital is the largest shareholder in FAT Brands and Wiederhorn is the majority shareholder of Fog Cutter.
The SEC is also looking into “compensation, extensions of credit and other benefits or payments received by Mr. Wiederhorn or his family", according to the regulatory filing.
Fat Brands said it was informed of the investigation in December last year and that it is cooperating with the authorities.
“The government has informed FAT Brands of its investigation and the company is fully cooperating,” FAT Brands said in a statement to CNBC. “The company is not a target of the investigation.”
In a statement to CNBC, Wiederhorn’s attorney Douglas Fuchs said his client categorically denies the allegations and they plan to demonstrate that the government has its facts wrong.
“These loans were completely legitimate and were independently reviewed and approved,” Fuchs told CNBC. “In addition, Mr. Wiederhorn’s tax returns were prepared and approved by independent tax professionals and he has been making payments under a plan approved by the IRS.”
Wiederhorn has been investigated for financial crimes before, CNBC reported. In 2004, Wiederhorn pled guilty to filing a false tax return and paying an illegal gratuity to an associate while leading Fog Cutter Capital. He paid a US$2mln fine and spent more than a year in prison.
During his time in prison, Fog Cutter’s board paid him a bonus equal to the fine and continued paying his salary, a decision that attracted widespread criticism, according to CNBC.
FAT Brands shares were 1.47% lower at US$8.02 in pre-market trade, having closed down nearly 23% on Tuesday.