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Restaurant franchiser FAT Brands, its former CEO, and other executives told a California federal judge Tuesday that they have reached a deal to resolve U.S. Securities and Exchange Commission civil claims alleging they ran an illegal $27 million personal loan scheme to fund the former CEO’s lavish lifestyle while the public company struggled.

In a three-page joint status report, the SEC, FAT Brands Inc., and three former top executives, former CEO Andrew A. Wiederhorn, former Chief Financial Officer Rebecca D. Hershinger, and senior vice president for finance Ron Roe, informed U.S. District Judge Mark C. Scarsi that they have reached a deal "in principle" to settle the agency’s allegations.

The parties said they are awaiting approval from the SEC’s commissioners, a process expected to take up to 90 days. In light of the pending settlement, they asked the court to keep the current stay in place until March 30.

The filing did not disclose the terms of the proposed deal. Counsel for the parties and SEC representatives did not immediately respond to requests for comment on Tuesday.

If approved, the settlement would resolve the SEC’s May 2024 lawsuit alleging FAT Brands and its leadership violated federal securities laws and the Sarbanes-Oxley Act by extending millions of dollars in company credit to Wiederhorn in the form of personal loans.

The SEC sought disgorgement of the allegedly improper loans and named Hershinger and Roe as defendants, asserting they were liable for the misconduct. The agency alleged the executives made it appear Wiederhorn’s compensation took the form of business expense loans to a FAT Brands affiliate controlled by Wiederhorn, Fog Cutter Capital Group Inc.

According to the SEC, the scheme stripped FAT Brands of roughly 40 percent of its revenue between July 2018 and December 2020, leaving the company without sufficient cash to meet its obligations. The agency alleged Wiederhorn used the loans to finance a luxury lifestyle that included a Beverly Hills property, luxury travel, and private jet flights for himself and his family.

The civil case was filed around the same time federal prosecutors indicted Wiederhorn, Hershinger, and outside certified public accountant and attorney William Amon on related criminal charges. Prosecutors alleged tax evasion, wire fraud, false statements, and filing false tax returns.

The indictment claimed Wiederhorn caused $47 million in compensation and distributions to be extended and periodically forgiven beginning in 2010, allowing him to act as both lender and borrower. FAT Brands and Fog Cutter Capital allegedly extended and forgave the loans while paying no income tax on the distributions, using them instead to generate losses that benefited FAT Brands’ tax position.

Wiederhorn’s unpaid income tax liability exceeded $7.7 million by 2021, according to prosecutors.

In a separate May 2024 indictment, Wiederhorn was also accused of illegally possessing a firearm and more than 50 rounds of ammunition after a prior felony conviction tied to an earlier federal investigation.

At the time, the U.S. Department of Justice described Wiederhorn as "a serial tax cheat" who spent securities disbursements from FAT Brands’ initial public offering on a Rolls-Royce and jewelry, while the company allegedly paid hundreds of millions of dollars toward his personal credit card debt.

In August, however, U.S. District Judge R. Gary Klausner granted the government’s request to dismiss the criminal case against FAT Brands, Wiederhorn, Hershinger, and Amon. Prosecutors said the decision reflected shifting enforcement priorities, citing internal DOJ memos emphasizing cartel-related prosecutions and other objectives.

Court records show Wiederhorn previously pled guilty in 2004 to filing a false tax return and paying an illegal gratuity.

The SEC is represented by Stephen T. Kam and Brent Wilner. FAT Brands is represented by Thomas A. Zaccaro of Hueston Hennigan. Wiederhorn is represented by Douglas M. Fuchs of Gibson Dunn & Crutcher LLP. Hershinger is represented by Michael J. Proctor of Iversen Proctor LLP. Roe is represented by Daniel V. Nixon of Byrne & Nixon LLP.

The case is SEC v. FAT Brands et al., Case No. 2:24-cv-03913, in the U.S. District Court for the Central District of California.