Former Chili’s owner pleads guilty to bank fraud
The former president of a failed restaurant group pleaded guilty Tuesday to federal charges that could land him in prison for 30 years.
Ken Hatzenbeller, 65, pleaded guilty in federal court to bank fraud for lying to a Utah bank about how he intended to spend the $500,000 loan granted to him in September 2014. His sentencing is set for May 18, where he could potentially be sentenced to 30 years in prison and given a $1 million fine.
Hatzenbeller testified before U.S. District Court Judge Brian Morris in his own change-of-plea hearing, reversing one of his not guilty pleas made in late November of last year. To the other three charges — false oath in bankruptcy proceedings, money laundering and a second bank fraud charge — Hatzenbeller did not enter new pleas but admitted to each offense before Morris. Those charges were dropped following a plea agreement signed earlier this month.
Former Montana Chili’s owner faces criminal charges
Hatzenbeller to plead guilty in federal court
As part of the plea agreement, Hatzenbeller also agreed to pay at least $1,077,866 in restitution.
Hatzenbeller also told the judge he began taking anti-depressant medication last year around the same time the federal indictment was filed against him.
The hearing on Tuesday focused on the transactions of a $500,000 loan Hatzenbeller acquired from Zions Bank in Utah. Hatzenbeller told loan officers he would spend the funds on furniture and equipment for several of the company’s Chili’s restaurants, which were located in Montana, Idaho and Washington. Items listed in the commercial security agreement Hatzenbeller signed included light fixtures, large white vinyl letters reading “BABY BACK RIBS” and “GOT MY RIBS,” as well a collection of images to be placed on restaurant walls, among many others.
But, when approved for the loan, Hatzenbeller gave Zions Bank the account information for Penner Brokerage. Hatzenbeller in court on Tuesday testified that Penner Brokerage is a fake firm and the account provided to Zions Bank was the personal account of his daughter and her husband, Heather and Justin Penner.
Hatzenbeller testified that his daughter knew nothing of the scheme traversing through her financial accounts at the time. According to court documents, he insisted she keep about $5,000 of the loan for her trouble. The remaining amount was spent on company expenses.
When Hatzenbeller filed for bankruptcy in February of last year, he testified that the $490,000 transferred from his daughter’s account to his was a personal loan from his daughter’s family.
Hatzenbeller on Tuesday said when he initiated the process of obtaining the loan, it really was going to be for furniture and equipment. But as the approval drew nearer, he realized he needed money to pay his employees.
“I needed money for pay,” Hatzenbeller told the judge. “So in a desperate thing, I used the money for payments.”
Hatzenbeller told Morris he knew when he obtained the loan that there would be no collateral purchased with the funds. He still owes Zions Bank approximately $496,000.
Hatzenbeller on Tuesday was granted supervised release until his sentencing hearing in May. He is also facing civil and criminal charges at the District Court level. In the criminal case, Hatzenbeller is facing multiple charges alleging he engaged in fraudulent transactions as an unregistered securities broker. Charging documents state he took nearly $3 million in loans from 15 individuals, and now owes almost $2 million to 13 of them.
In several District Court cases, Greg Tierney, John Bloemendaal and Dennis Conner are listed as co-defendants with Hatzenbeller. All but Conner filed for personal bankruptcy in February 2016, and as a result obtained a court-ordered protection from legal action from the banks. Conner, however, is still unprotected in those civil suits.
An earlier version of this story reported Hatzenbeller's age to be 52. Hatzenbeller was born in 1952, making his age 65.