Corporate Governance's Silent Killer: How Credit Card Misconduct Exposes Executive Malfeasance

The integrity of corporate governance is the bedrock of investor confidence. Yet, when executives abuse the very tools meant to serve the company—such as corporate credit card rewards programs—the consequences can be catastrophic. This article examines how seemingly small misuses of corporate credit can signal systemic governance failures, using FAT Brands as a cautionary case study. For investors, recognizing these red flags is critical to avoiding exposure to firms with unethical leadership.

The FAT Brands Case: A Blueprint for Disaster

FAT Brands, a publicly traded restaurant company, has become synonymous with executive greed and regulatory recklessness. Between 2018 and 2021, Chairman Andrew Wiederhorn and his son Thayer (then COO) orchestrated a scheme to siphon $27 million in corporate funds for personal use—private jets, luxury vacations, and mortgage payments. The duo allegedly used corporate American Express cards to channel money into a PayPal account controlled by Thayer, generating $250,000 in fees for transactions with no legitimate business purpose. These actions not only diverted capital from operations but also stripped the company of 40% of its revenue during the period, leaving it cash-strapped and vulnerable to collapse.

Regulatory and Legal Fallout

The SEC and DOJ have aggressively pursued Wiederhorn and his associates. In June 2023, the SEC charged him with securities fraud, wire fraud, and misappropriation, alleging that the company's public disclosures omitted these material facts. A class action lawsuit filed in March 2022 accused FAT Brands of misleading investors, while a second suit in June 2024 seeks to hold executives accountable under the Crime Victim Rights Act. A criminal trial is now scheduled for October 2025, with potential fines, penalties, and even imprisonment on the line.

The stock, which traded at $3.50 in early 2020, plummeted to $0.85 in late 2022 as the scandal unfolded, reflecting investor distrust. While it recovered slightly to $1.20 by mid-2025, the volatility underscores the long-term reputational damage of such misconduct.

Why Credit Card Abuse Signals Broader Governance Failures

The misuse of corporate credit rewards is not an isolated incident but a symptom of deeper governance flaws:
1. Weak Internal Controls: FAT Brands' failure to detect $27 million in unauthorized transactions reveals a lack of oversight.
2. Related-Party Transactions: The Wiederhorns' use of family accounts to launder corporate funds highlights conflicts of interest.
3. Compliance Gaps: The company ignored red flags, such as the Los Angeles Times' 2022 report on money-laundering investigations, delaying corrective action.

Investor Due Diligence: Spotting the Red Flags

To avoid FAT Brands' fate, investors should scrutinize:
- SEC Filings: Look for disclosures of material risks, legal actions, or internal investigations.
- Executive Compensation: Excessive perks or unrelated-party transactions may signal self-dealing.
- Audit Reports: Frequent changes in auditors or qualifications in financial statements can indicate mismanagement.
- News and Legal Alerts: Track lawsuits, regulatory actions, or media reports on executive misconduct.

Investment Advice: Proceed with Caution

Firms with documented governance lapses like FAT Brands should be approached with extreme skepticism. While the stock may appear cheap, the legal and operational risks—such as fines, declining revenue, and reputational harm—often outweigh potential gains. Until there is evidence of a full governance overhaul (new leadership, independent audits, and compliance reforms), investors are better served steering clear.

Conclusion: Trust Is Fragile—Protect It

The FAT Brands saga underscores that corporate governance is not just about board composition but about accountability in everyday decisions. When executives misuse corporate credit cards, it's a loud whisper of larger ethical failures. Investors must prioritize due diligence, using tools like SEC filings and stock performance analysis, to avoid being caught in the crossfire of executive greed. In a world where transparency is currency, companies that abuse it deserve no second chances.

Final Take: Avoid FAT Brands and similar firms until credible governance reforms are proven. For other companies, monitor credit misuse, related-party deals, and regulatory actions closely—their silence might just be the loudest warning.