June 7, 2023

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Stock digging for Fatburger's father after company revealed CEO investigation

Stock digging for Fatburger’s father after company revealed CEO investigation

Pakistani customers eat at Fat Burger restaurant in Karachi, Pakistan.

Radwan Tabassum | AFP | Getty Images

shares fat brands More than 20% blew up on Tuesday morning after parent Fatburger and Johnny Rockets revealed that its CEO has been under investigation for months.

In a regulatory filing, Fat Brands said the US Attorney’s Office for the Central District of California and the Securities and Exchange Commission notified the company in December that they had begun an investigation of CEO Andrew Federhorn.

The government is seeking documents and materials related to Fat Brands’ merger with Fog Cutter Capital Group in December 2020 and the transactions between Wiederhorn and those entities, according to the filing. Fog Cutter Capital is the largest shareholder in Fat Brands, and Wiederhorn is the largest shareholder.

Investigators are also looking at compensation, credit extensions and other benefits that Wiederhorn or his family received. Wiederhorn’s son, Thayer serves as the company’s chief operating officer.

Detection follows Los Angeles Times report On Saturday, the allegations against Widehorn include securities and wire fraud, money laundering and attempted tax evasion. The newspaper also reported that federal agents raided the home of Thayer Federhorn and his wife Brooke – the daughter of former Beverly Hills Real Madrid star Kim Richards – in December.

“The government has notified Fat Brands of its investigation and the company is cooperating fully,” Fat Brands said in a statement to CNBC. ‘The company is not a target of investigation.’

The company said in the filing that it was unable to estimate the outcome or duration of the government’s investigations at this time.

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In a statement to CNBC, Wiederhorn’s attorney, Douglas Fuchs, said his client categorically denies the allegations and plans to prove the government has false facts.

“These loans were fully legitimate and were independently reviewed and approved,” Fox said. “In addition, Mr. Wiederhorn’s tax returns were prepared and approved by independent tax professionals, and he was making payments under an IRS approved scheme.”

Fox also said he could not comment more specifically on the allegations because the government did not provide them with a copy of the affidavit despite their requests.

The Securities and Exchange Commission did not immediately respond to a request for comment from CNBC. A representative from the US Attorney’s office declined to comment.

This isn’t the first time that Wiederhorn has been under investigation for financial crimes. In 2004, he pleaded guilty to filing a false tax return and illegal tipping to a colleague while he was driving Fog Cutter Capital. He paid a $2 million fine and spent over a year in federal prison in Oregon. During his time in prison, Fog Cutter’s board chose to pay a bonus equal to the fine and continued to pay his salary, a decision that drew widespread criticism.