Lexington-based Fazoli’s parent company, former CEO charged in $47m fraud scheme


Federal prosecutors in Los Angeles indicted Lexington-based Fazoli’s parent company Fat Brands and three officials in a $47 million “sham loan” scheme that defrauded shareholders.

Fat Brands, which is a publicly traded company, bought Fazoli’s in November 2021, adding to a stable of brands including Fatburger, Johnny Rockets, Hurricane Grill and Wings, Yalla Mediterranean and Ponderosa and Bonanza Steakhouses.

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It’s unclear what the indictments will mean for Fazoli’s, which has headquarters on Palumbo Drive, or the other restaurant chains. Fazoli’s was founded in Lexington as Gratzi’s in 1988 by restaurateur Kunihide Toyoda and became famous for inexpensive but tasty Italian dishes and free breadsticks.

The Securities and Exchange Commission also has filed a civil enforcement action against the company and several executives. The FBI and IRS Criminal Investigation also are investigating.

In trading after the fraud allegations announcement, Fat Brands stock shares lost about a quarter of its value.

The parent company of Fazoli’s, Fat Brands, was indicted along with former CEO and current board chair Andy Wiederhorn and other executives in a $47 million fraud scheme.The parent company of Fazoli’s, Fat Brands, was indicted along with former CEO and current board chair Andy Wiederhorn and other executives in a $47 million fraud scheme.

The parent company of Fazoli’s, Fat Brands, was indicted along with former CEO and current board chair Andy Wiederhorn and other executives in a $47 million fraud scheme.

What the Fat Brands indictments allege

According to the U.S. Attorney’s Office, former CEO and current board chair Andrew Wiederhorn, who is still controlling shareholder of Fat Brands Inc., concealed millions in payments and evaded taxes, with the help of FAT’s chief financial officer and an outside accountant who also were charged.

“This defendant, the former CEO of a publicly traded company, is alleged to have engaged in a long-running scheme to defraud investors and the United States Treasury to the tune of millions of dollars,” said United States Attorney Martin Estrada, in a news release. “Instead of looking out for shareholders, the defendant allegedly treated the company as his personal slush fund, in violation of federal law.”

Wiederhorn, of Beverly Hills, is accused of using company funds to “fund his lavish lifestyle,” according to the release, which called him “a serial tax cheat” with charges related to various companies going back for 30 years.

From 2010 through early 2021, Wiederhorn allegedly was paid approximately $47 million in sham loans for his personal use and benefit that he had no intention of repaying, paid no taxes on and used as a loss on company books.

According to the release, “defendant Wiederhorn caused millions of dollars from defendant FAT’s accounts to be disbursed to defendant Wiederhorn and his family members for their personal benefit,” according to the indictment. “These disbursements were used to fund the purchase of private-jet travel, vacations, a Rolls Royce Phantom, other luxury automobiles, jewelry, and a piano.”

What Fat Brands shareholders can do

The indictment goes on to outline several transfers of hundreds of thousands of dollars that Wiederhorn caused others at FAT to make directly from FAT accounts to pay Wiederhorn’s personal American Express credit-card debts.

Any investors who believe they were victims of the crimes alleged in the indictment are encouraged to go to https://www.justice.gov/usao-cdca/united-states-v-andrew-wiederhorn-william-j-amon-rebecca-d-hershinger-and-fat-brands-inc for further information and updates regarding this matter.

In trading after the announcement, Fat Brands stock shares lost about a quarter of its value.

Reaction from Fat Brands

In a statement, the company said the accusations are unjust.

“Today, Fat Brands was informed that it has been indicted on two violations of SOX 402 for arranging approximately $2.65 million in loans to Andy Wiederhorn,” Thomas Zaccaro, an attorney with Hueston Hennigan and counsel for Fat Brands, said in a statement. “These charges are unprecedented, unwarranted, unsubstantiated and unjust. They are based on conduct that ended over three years ago and ignore the company’s cooperation with the investigation.”

“Fat Brands will take all necessary action to defend itself, while seeking a just resolution to these charges,” he added.

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