Fog Cutter reappoints CEO after federal prison release

Fog Cutter reappoints CEO after federal prison release
- PORTLAND, Ore. - The founder of Fog Cutter Capital Group has been reappointed chairman and CEO after his release from federal prison.

After more than 14 months in federal custody, Andrew Wiederhorn returned to Portland this week and was immediately reappointed to the helm of the merchant banking company.

Wiederhorn will be allowed to work at Fog Cutter during the day but must live at a halfway house until Nov. 22, said Kris Southards, administrator of the federal community corrections program in Seattle.

Wiederhorn declined comment when contacted Wednesday by The Oregonian. In a written statement issued by the company, Wiederhorn thanked co-workers and family for their support.

"It's great to be back," he said. "I appreciate the hard work, dedication and support from the company's management, board of directors, shareholders, my family and other friends and colleagues during my leave of absence."

Wiederhorn went to prison for his role in the Capital Consultants scandal. The defunct money management firm concealed massive loan losses from its clients for nearly two years with the help of a Ponzi-like scheme devised by Jeffrey Grayson, former Capital Consultants chief executive.

Capital Consultants clients, primarily union pension and benefit funds, lost about $350 million.

Wiederhorn played no role in the scheme. But his former company, Wilshire Credit, defaulted on a $160 million debt to Capital Consultants.

After a five-year investigation, Wiederhorn pleaded guilty in June 2004 to filing a false tax return and giving an illegal gratuity to Grayson, who pleaded guilty to fraud charges. Before Grayson was sentenced, he suffered a debilitating stroke.

Fog Cutter made headlines in 2004 when the board of directors voted to retain Wiederhorn and keep him on full compensation despite his guilty plea. He was named the company's chief strategic officer and awarded a $6 million compensation package, though not all of that was immediately paid to him and some of it was in restricted Fog Cutter stock.

The Nasdaq stock exchange delisted Fog Cutter shortly after the details of Wiederhorn's compensation package began to emerge.

Marc Blackman, Wiederhorn's criminal defense lawyer, repeated his criticism of federal prosecutors, who Blackman said relied on a federal "anti-gratuity" law he described as "obscure" and "morally bankrupt" because it does not require prosecutors to prove clear criminal intent.

Lance Caldwell, the assistant U.S. attorney who led the prosecution against Wiederhorn, dismissed the criticism, saying the anti-gratuity statute has been on the books for four decades.

"It is a federal law originally enacted by Congress over 40 years ago which imposes a higher standard on those who are responsible for protecting the retirement funds of working people," Caldwell said.

(Copyright 2005 by The Associated Press. All Rights Reserved.)