Fatburger parent’s stock craters after company discloses investigation into CEO

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Pakistani clients eat at a Fatburger outlet in Karachi, Pakistan.

Rizwan Tabassum | AFP | Getty Photographs

Shares of Fat Brands closed down practically 23% on Tuesday after the mum or dad of Fatburger and Johnny Rockets disclosed that its CEO has been underneath investigation for months.

In a regulatory submitting, Fats Manufacturers stated the U.S. Legal professional’s Workplace for the Central District of California and the Securities and Change Fee advised the corporate in December that that they had begun investigating CEO Andrew Wiederhorn.

The federal government is looking for paperwork and supplies associated to Fats Manufacturers’ merger with Fog Cutter Capital Group in December 2020 and transactions between Wiederhorn and people entities, in line with the submitting. Fog Cutter Capital is the biggest shareholder of Fats Manufacturers, and Wiederhorn is its majority shareholder.

Investigators are additionally trying into compensation, extensions of credit score and different advantages that Wiederhorn or his household might have obtained. Wiederhorn’s son Thayer serves as chief working officer of the corporate.

The disclosure adopted a Los Angeles Times report on Saturday that the allegations towards Wiederhorn embody securities and wire fraud, cash laundering and tried tax evasion. The newspaper additionally reported that federal brokers raided the house of Thayer Wiederhorn and his spouse Brooke — daughter of former “Actual Housewives of Beverly Hills” star Kim Richards — in December.

“The federal government has knowledgeable FAT Manufacturers of its investigation and the Firm is totally cooperating,” Fats Manufacturers stated in a press release to CNBC. “The Firm just isn’t a goal of the investigation.”

Fats Manufacturers stated within the submitting that it’s not capable of estimate the result or period of the federal government investigations presently.

In a press release to CNBC, Wiederhorn’s legal professional Douglas Fuchs stated his shopper categorically denies the allegations and so they plan to exhibit that the federal government has its details unsuitable.

“These loans had been fully authentic and had been independently reviewed and permitted,” Fuchs stated. “As well as, Mr. Wiederhorn’s tax returns had been ready and permitted by impartial tax professionals and he has been making funds underneath a plan permitted by the IRS.”

Fuchs additionally stated he could not remark extra particularly on the allegations as a result of the federal government hasn’t offered them with a duplicate of the affidavit regardless of their requests.

The SEC didn’t instantly reply to a request for remark from CNBC. A consultant from the U.S. Legal professional’s workplace declined to remark.

This is not Wiederhorn’s first time underneath investigation for monetary crimes. In 2004, he pled responsible to submitting a false tax return and paying an unlawful gratuity to an affiliate whereas main Fog Cutter Capital. He paid a $2 million advantageous and spent greater than a 12 months in federal jail in Oregon. Throughout his time in jail, Fog Cutter’s board opted to pay him a bonus equal to the advantageous and continued paying his wage, a choice that attracted widespread criticism.

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