A federal grand jury indicted Fat Brands, the company’s Executive Chairman Andrew Wiederhorn, former CFO Rebecca Hershinger and William J. Amon, an accountant who advised Wiederhorn, on multiple charges Thursday.

Wiederhorn and the other defendants allegedly engaged in a scheme that disguised the transfer of about $47 million from Fat Brands and Fog Cutter Capital to Wiederhorn as loans. Wiederhorn, who pleaded guilty to several charges related to a pension fraud scheme in 2004 and served a federal sentence of nearly 16 months, was also charged with possessing a firearm as a convicted felon. 

Separately, the Securities and Exchange Commission sued Wiederhorn, SVP of Finance Ron Roe and Hershinger over the loan scheme that diverted money from Fat to Wiederhorn for his personal use, court documents filed on Friday show.

Brian Hennigan of Hueston Hennigan LLP, Counsel for FAT Brands Inc. called the charges against Fat Brands relating to alleged violations of section 402 of the Sarbanes-Oxley act “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.”

According to the justice department’s indictment, Wiederhorn and Amon categorized $47 million in money given to Wiederhorn between 2010 and 2021 as “shareholder loans” for tax purposes. Wiederhorn never paid any interest on these supposed loans, which were periodically forgiven. Much of the money came from Fog Cutter Capital, but after Fat’s IPO in 2017, the indictment alleges Wiederhorn, then Fat’s CEO, began to siphon money from the multi-brand franchisor as well.

Wiederhorn allegedly concealed his personal use of cash by claiming that Fat was lending the money to Fog Cutter to cover its business expenses. Roe and Hershinger, serving at different times as CFO, signed off on the transactions and failed to disclose Wiederhorn’s personal interest in them, according to the SEC.

“These disbursements were used to fund the purchase of private-jet travel, vacations, a Rolls Royce Phantom, other luxury automobiles, jewelry, and a piano,” the federal indictment states.

By writing off the loans, Fog Cutter sustained net operating losses which could be applied to offset company tax liabilities.

“FOG’s retention of 80% ownership of defendant FAT after the IPO meant that any [net operating losses] generated by FOG could also be used by defendant FAT to lower its taxable income in the event of a merger between those two entities,” the indictment states. By the time Fog Cutter merged with Fat in 2020, the company held more than $100 million in net operating losses.

The $27 million transferred to Wiederhorn between October 2017 and March 2021 represented about 44% of Fat’s revenue, the SEC alleged in its lawsuit. The scale of those transfers left the company unable to pay its bills, and Wiederhorn instructed his son Thayer Wiederhorn — now Fat’s chief operating officer — to transfer about $9 million from 2017 to 2019 back to Fat cover expenses. 

The SEC claims “to effectuate these transactions, Wiederhorn sent funds to Thayer’s personal accounts using credit cards that were paid for by FAT.”

In 2022, the suit states that Fat’s board formed a committee to investigate the loans to Fog Cutter which confirmed the loans funded personal cash transfers to Wiederhorn, who terminated the chair of that committee in December 2022. A struggle for control of the company ensued after this discovery.

“In February 2023, the FAT executive chairman of the FAT Board, having learned of the findings of the internal investigation, told Wiederhorn that he should resign as CEO or the FAT Board would likely take action against Wiederhorn,” the suit reads.

On March 6, 2023, Wiederhorn announced he would resign as CEO in May of that year to avoid impacts to the company from pending investigations. Before resigning, however, Wiederhorn cut the majority of the company’s board and replaced them with a new slate of board members, including three of his children.

The SEC is asking the court to bar Wiederhorn, Roe and Hershinger from acting as officers or directors of publicly traded companies. The regulatory body also wants Fat and Wiederhorn to pay civil penalties and “disgorge all funds received from their illegal conduct, together with prejudgment interest.” The criminal charges against Fat, Wiederhorn, Hershinger and Amon may carry more serious penalties.

“FAT Brands will take all necessary action to defend itself, while seeking a just resolution to these charges,” Hennigan said in a statement.