Just weeks after Fat Brands announced Andrew Wiederhorn would resign as the company’s CEO, Wiederhorn purged most of the company’s independent board and installed a slate of new directors, including his three sons and his former father-in-law.
Fat Brands disclosed Tuesday that “the holder of a majority of the voting power” — that would be Wiederhorn — “took action to remove” the company’s five outside directors.
The new directors include his sons Thayer, Taylor and Mason Wiederhorn, all senior executives at Fat Brands. Donald Berchtold is also a new director; he is the stepfather of Wiederhorn’s ex-wife. The moves were detailed in a filing with the Securities and Exchange Commission.
Wiederhorn pleaded guilty in 2004 to paying an illegal gratuity and failure to pay taxes after his Portland-based finance company, Wilshire Financial Services Group, collapsed amid charges of fraud and illegal payoffs. After serving 14 months in prison, he left Portland for Los Angeles and bought a fast-food burger chain, which he grew into Fat Brands, a publicly traded owner of several restaurant chains.
Facing a new federal investigation, Wiederhorn agreed to resign as CEO earlier this year but remained in the position place this week. He also remains on the board and owns a majority of Fat Brands stock.
Wiederhorn declined to comment. Erica Mandzik, a Fatburger spokesperson, said Wiederhorn still intends to resign as CEO of Fat Brands in May.
Fat Brands confirmed last October that Wiederhorn is being investigated by the U.S. Department of Justice. One of the topics of interest to the feds are the approximately $16 million in loans Wiederhorn took out from his companies. Fat Brands later forgave the debt.
When the company announced Wiederhorn would resign as CEO, it said he had agreed to do so in part “to eliminate the distraction of the previously announced government investigation tied to him, and allow senior management to focus on continuing to drive shareholder value.”
The current investigation started in the fall of 2021. Documents obtained by The Oregonian/OregonLive show that a grand jury was convened in January 2022. Potential witnesses were subpoenaed shortly thereafter.
Andrew Wiederhorn is no stranger to criminal investigations. He pleaded guilty to charges of paying an illegal gratuity and failure to pay taxes in 2004 and was sentenced to 18 months in federal prison. He was one of more than 10 people indicted. Union workers from Portland to Salt Lake City to Denver lost at least $160 million in the case.
Wiederhorn’s three oldest sons serve in senior roles at Fat Brands. Thayer is chief operating officer, his twin brother Taylor is chief development officer, and Mason serves as creative director.
The three brothers, all in their early 30s or late 20s, got raises in the range of 60%-70% in 2022 over the prior year, the company disclosed in its 2022 10-K filing. Taylor Wiederhorn made $1.7 million. Thayer got paid $1.6 million, and Mason got $1.3 million in 2022.
Besides Wiederhorn’s three sons and Berchtold, the new directors include Tyler Child, half-sister of Tiffany Wiederhorn, Andrew Wiederhorn’s ex-wife; and Kenneth Kepp, who worked with Wiederhorn at Wilshire; and Carmen Vidal, Fat Brands’ top lawyer.
The company also disclosed Tuesday that it had hiked directors’ compensation from $80,000 to $120,000 a year.
The New York Stock Exchange and Nasdaq exchanges generally require companies whose stock is traded on their systems to have a majority of directors who are independent and don’t work for the company. Fat Brands trades on the Nasdaq Capital Market exchange.
Fat Brands said Tuesday it is recategorizing itself as a “controlled company,” which the company said has a more lenient standard of what constitutes an acceptable board of directors.
— Jeff Manning; jmanning@oregonian.com
