has no trouble staying "fat"
By Al Lewis, Business Columnist
Friday, March 24, 2005
Two weeks before former Qwest executive Marc Weisberg was arraigned on fraud charges, he opened the first Fatburger restaurant in New York state.
"Now that Fatburger is coming to town, New Yorkers will no longer have to settle for second best," said Weisberg in a Feb. 11 news release announcing his new store in West Nyack. "I look forward to introducing Fatburger's fresh, lean burgers, homemade onion rings and milkshakes made with real ice cream to hungry New Yorkers."
Then on Feb. 25, Weisberg, 47, pleaded not guilty to 11 federal charges of wire fraud and money laundering. His case is slated for a status hearing in Denver's U.S. District Court on Monday.
Prosecutors allege that Weisberg made $2.9 million in illegal profits at Qwest. They say he used his corporate position to stuff his pockets with hot IPO stock. Startup companies that wanted to do business with Qwest gave Weisberg low-priced stock and options before they went public, and Weisberg didn't disclose it, prosecutors allege.
If convicted, Weisberg faces up to 20 years in prison, and he may have to forfeit the $2.9 million and a house on Grand Cayman Island. But Weisberg is accused of doing what many executives did in the boom times. It's clearly unethical. It's not so clearly illegal.
The Weisberg matter does, however, answer two important questions.
1) How was Qwest, which has settled civil charges with federal regulators, able to perpetrate a $2.5 billion accounting fraud with so many executives involved? Because guys like Weisberg were too busy enriching themselves to notice anything else that seemed awry.
2) When investors lose money in an IPO, where does that money go? It goes to insiders like Weisberg, which is probably why he can afford the Fatburger rights for the entire state of New York.
Weisberg has announced plans to develop and operate at least 50 Fatburgers in New York over the next seven years. Startup costs for a single Fatburger restaurant range from $361,000 to $685,000, including a $40,000 franchise fee, according to Fatburger's website.
That would put the price tag for developing Weisberg's 50-store burger empire between $18 million and $34 million.
Must be nice to be a disgraced former Qwest executive.
Weisberg got into Fatburger after meeting talk-show host Montel Williams, who owns the rights for all Colorado Fatburgers. And if Weisberg is convicted for his dealings at Qwest, he may still be able run his privately held franchise from prison.
"He's the owner, and he would continue being the owner, whatever might occur," said Dan Pittman, spokesman for Santa Monica, Calif.-based Fatburger.
Besides, the CEO of the investment company that owns Fatburger is already in the pokey. Andrew Wiederhorn, 39, of Portland, Ore.-based Fog Cutter Capital Group Inc., began an 18-month federal prison sentence in August.
Wiederhorn is a key figure in the demise of Capital Consultants, a Portland-based investment company whose collapse cost pension funds hundreds of millions of dollars. Wiederhorn pleaded guilty to felony charges of filing a false tax return and giving an illegal gratuity to Capital Consultants' CEO.
Fog Cutter, which owns controlling interest in Fatburger, has agreed to keep Wiederhorn on the payroll as he serves his time. According to documents Fog Cutter filed with regulators, Wiederhorn will receive $4.8 million in paid leave, a bonus and reimbursement for a fine he agreed to pay.
The pay is good, but the working conditions are horrible. Wiederhorn, who has been assigned janitorial and food-service work at a federal prison in Oregon, petitioned a court earlier this month, requesting to be released a year early for health reasons.
I think Fatburger founder Lovie Yancey said it best when she named her hamburger joint 53 years ago.
According to Fatburger's website: "Back in '52, the word 'fat' meant you'd really made it. Fat City. Fat Times. Fat Cat. So when Lovie Yancey created her huge juicy hamburgers, there was only one name for them - Fatburger."
Sure beats the heck out of prison food.
Al Lewis' column appears Sundays, Tuesdays and Fridays. Reach him at 303-820-1967 or firstname.lastname@example.org .