Commission Charges CEO with Looting His Firm

Internal controls are key to helping ensure that the funds raised by corporate entities are used for a proper purpose. Those controls, if properly configured and implemented, help the firm account for the money obtained from investors and other sources. Absent proper and fully implemented controls, the company may not be in a position to properly account for the funds obtained from investors or other sources. The Commission’s most recent case in this area centers on a CEO, Director and founder who looted his firm, taking millions of dollars for himself over a period of years, SEC v. Fat Brands Inc., Civil Action No. 2:24-cv-03913 (C.D. Ca. Filed May 10, 2024).

Named as defendants in the case are: the firm, a holding company that owns 17 restaurant brands, including Fatburger, Johnny Rockets and Twin Peaks; Andrew Wiederhorn, the chief executive officer of FAT and Fog Cutter Capital Group, Inc. (“FCCG”) which eventually merged with FAT; Ron Roe, CFO of FAT for a period; and Rebecca Hershinger, also a CFO of FAT for a time.

Beginning in October 2017, and continuing for the next four years, Defendant Wiederhorn, the controlling shareholder of FAT, took almost $27 million of FAT’s cash. The funds were used for his personal expenses. Mr. Wiederhorn lied to the company board of directors and investors, repeatedly telling them that neither he nor his family had any direct or indirect interest in FAT cash.

The impact on FAT was significant. Mr. Wiederhorn took about 40% of the firm’s cash during the period. This impaired the ability of the company to pay its creditors. To facilitate the scheme Mr. Wiederhorn enlisted the assistance of Ron Roe, the CFO of FAT. The complaint alleges violations of Securities Act Section 17(a)(2) and Exchange Act Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), 13(k) and 14(a). The U.S. Attorney’s Office for the Central District of California announced parallel criminal charges have been filed against Mr. Wiederhorn, FAT, Ms. Hershinger, and another individual. See Lit. Rel. No. 26001 (May 10, 2024).