A bankruptcy judge threatened to send two shareholders of Eagle Hospitality Real Estate Investment Trust to jail, finding the “fraudsters” had defied court orders to account for an illicit $2.4 million government loan, WSJ Pro Bankruptcy reported. Taylor Woods and Howard Wu took out a government-backed loan on behalf of the bankrupt hotel company “without authority and absconded with the proceeds,” leaving either Eagle Hospitality or the taxpayer on the hook, according to yesterday’s ruling by Judge Christopher Sontchi of the U.S. Bankruptcy Court in Wilmington, Del. “Messrs. Woods and Wu are fraudsters,” the judge wrote in an opinion published Monday. He said that he would consider what sanctions to impose, including potential incarceration, at a hearing on Friday. The judge had previously ordered the two men to account for the government funds they received and show that they’ve not dissipated their assets. Eagle Hospitality filed for bankruptcy in January and was broken up in chapter 11, selling 14 of its hotels for $480 million and turning over the keys to 1930s ocean liner Queen Mary, which it had leased from the city of Long Beach, Calif. In May, Eagle Hospitality sued Mr. Woods and Mr. Wu, seeking to recover $2.4 million in funds it alleged they received on behalf of the Queen Mary operations under the Paycheck Protection Program, the popular program of forgivable, government-guaranteed loans designed to keep checks flowing to Americans during the COVID-19 pandemic.
