PORTLAND, Ore. — Before his reputation spectacularly soured, Andrew Wiederhorn was one of Portland's business luminaries. Now, two decades after a scandal and criminal conviction, he's back in the news for eerily similar accusations in California.
With the new federal indictment, Wiederhorn is accused of taking millions of dollars in bogus loans over the course of decades from companies he controlled — loans which were later forgiven. The government argues that the money was income he should have paid taxes on, but he did not. His lawyers claim that he did nothing wrong.
A promising young man
Wiederhorn was a Portland wunderkind. He grew up in the Rose City, the son of a single mom, becoming a self-made millionaire at a young age.
Oregonian reporter Jeff Manning covered Wiederhorn during his rise and fall in Portland.
"Boy, I can tell you a lot more than you'd ever want to know," Manning told The Story's Pat Dooris. "I've been following him since, believe it or not, the early '90s. And, uh ... he's a newsmaker. You've got to give that to him."
Manning said he recalls that Wiederhorn went to Lincoln High School, and has told stories of being either a busboy or a waiter at a long-shuttered restaurant in Northwest Portland.
"He liked the buzz. He liked the people that he helped order," Manning said. "He was really, really brilliant. And he started a company in his 20s and built it into a multimillion-dollar operation. It was called Wilshire Financial, and for a while, it seemed like the real deal."
Eventually, Wiederhorn and his wife bought a mansion in Portland's West Hills, pouring millions of dollars into renovations. When it was done, it included a full-sized basketball court for his six kids.
Manning clearly remembers when Wiederhorn's bubble burst in the early 2000s, and he was indicted by the feds.
"Many of the same allegations: that he was loaning himself money out of the corporate treasury and not paying it back," Manning said. "But there was a twist on that first one, in that he was charged with paying an illegal gratuity to his co-conspirator, Jeff Grayson."
Grayson was a prominent finance manager in Portland, and he allegedly aided Wiederhorn in the scheme. Grayson would loan Wiederhorn money, Manning said, and Wiederhorn would return the favor in kind.
"And the only problem with the whole scheme, the point of it was to hide the fact that Jeff had loaned Andy $160 million dollars — or at least to their company — and they didn't pay it back," Manning said. "And Grayson hid it from his clients ... and then it all came out and it was a huge scandal."
Wiederhorn was convicted of paying an illegal gratuity to Grayson and filing a false tax return. While Wiederhorn continued to insist that he'd done nothing wrong, he went to federal prison for 14 months.
But the controversy followed Wiederhorn into prison, when the board of a company he ran, Fog Cutter Capital, decided to pay him a bonus of $2 million — the same amount he'd been fined by the federal government. Fog Cutter also kept Wiederhorn on salary while he was locked up.
When he got out of prison, Wiederhorn and his family moved to Southern California, where he became the CEO and controlling shareholder of a publicly traded company called FAT Brands, Inc. They run the California hamburger chain Fatburger, among other things.
"They pick up and leave Portland and go to LA, and he starts anew," Manning said. "And you've really got to hand it to him — he is motivated and ingenious, and he was able to claw together enough money to start buying these small, struggling restaurant chains. It all started with Fatburger, which I'm told was a really popular burger joint in urban Los Angeles ... and from there, he just went on this buying spree — everything from Round Table Pizza to Hot Dog on a Stick."
Back on the take, allegedly
Manning's latest story on Wiederhorn in The Oregonian covers the new federal indictment, which gives some hint of the government's case against Wiederhorn. In the indictment, the feds allege that Wiederhorn has a pattern of hiding payments to himself in the form of shareholder loans from his company — starting way back in his Portland days, some 30 years ago.
The indictment notes that loans totaled $65 million during that Portland era. It also accuses Wiederhorn of forgiving himself those debts, essentially waving his hand and eliminating any need to pay them back to the company. That is, until Wiederhorn was indicted and went to prison.
According to the feds, Wiederhorn started the process anew by 2010 with two companies. Over 11 years, they accuse him of taking bogus loans totaling $47 million for his personal benefit. That income, the government says, should have been reported to the IRS and the taxes paid.
Wiederhorn decided the amount, timing and form of extensions on these loans, according to the indictment, as well as when they were forgiven.
Finally, the indictment alleges that Wiederhorn used the money from these bogus loans to pay for travel on a private jet, vacations, a Rolls-Royce Phantom luxury car, other high-end automobiles, jewelry and a piano.
The U.S. Attorney for Central California said that "instead of looking out for shareholders, the defendant allegedly treated the company as his personal slush fund."
"The allegations contained in the indictment against Mr. Wiederhorn show that he is a serial tax cheat," The IRS Special Agent in Charge for LA added.
Wiederhorn is charged with wire fraud and other financial crimes, and was separately indicted for being a felon in possession of a firearm. He's entered an initial plea of not guilty.
The U.S. Securities and Exchange Commission filed its own civil lawsuit against Wiederhorn, his company and two other executives.
"We look forward to making clear in court that this is an unfortunate example of government overreach, and a case with no victims, no losses and no crimes," Wiederhorn's attorney said in a statement.