(Reuters) – Two shareholders in a Singaporean real estate trust could face prison sentences over what a Delaware judge called a fraudulent scheme to obtain a loan under the government’s aid program small businesses during the COVID-19 pandemic.
U.S. bankruptcy judge Christopher Sontchi, who oversees the trust’s U.S. units Chapter 11 process, Monday called the pair, Howard Wu and Taylor Woods, “scammers” and held them in contempt for failing to freeze certain funds and adequately account for loan proceeds.
He ordered them to come to a hearing on Friday, where he will decide how to sanction them, including whether to place them “in police custody”.
Wu and Woods’ attorney, Bruce McCullough of Bodell Bové, did not immediately respond to a request for comment.
The US arm of Singapore’s Eagle Hospitality Real Estate Investment Trust, established in 2019 to lease hotels under various US hotel brands, filed for bankruptcy in January.
One of the U.S. entities, Urban Commons Queensway LLC, operates a hotel in California and alleged earlier this year that Wu and Woods took out a Payment Protection Program loan on its behalf without approval and spent the money on them. themselves.
“Woods and Wu are scammers,” Sontchi agreed in Monday’s decision. “They fraudulently obtained a PPP loan on behalf of the debtor without authorization and ran away with the proceeds, leaving either the debtor or the United States to pay the lender back.”
In August, Sontchi ordered them to freeze $ 2.4 million, the PPP loan amount, and provide accounting for the money. But Urban Commons said it had received no indication that they had frozen funds.
The couple said in court documents that they used the loan to cover Urban Commons expenses, but the judge found that explanation insufficient.
On Monday, Sontchi found them in contempt for failing to comply with his August ordinance.
Committal orders are unusual in Connecticut bankruptcy, but they can occur in rare cases. Sontchi said in his opinion that he “will not take such a drastic step without conducting an evidence hearing” on the appropriate sentence, but that there is “no doubt that the court has the power to incarcerate Messrs. Woods and Wu for civil contempt, if necessary. “
US units will seek approval of a draft liquidation plan in December.
The case is In re EHT US1 Inc, US Connecticut bBankruptcy Court, District of Delaware, No. 21-10036.
For debtors: Luc Despins, Nicholas Bassett and Alexander Bongartz by Paul Hastings; and Seth Van Aalten, David Dean and Justin Alberto from Cole Schotz
For Wu and Woods: Bruce McCullough from Bodell Bové
US-based units of Eagle Hospitality file for Connecticut bankruptcy
Report by Maria Chutchian