Loans

Ex-Queen Mary operators to pay daily fine in alleged PPP loan fraud

Ex-Queen Mary operators to pay daily fine in alleged PPP loan fraud
Written by Publishing Team

A federal bankruptcy judge has issued a $250-a-day fine to former Queen Mary operators accused of stealing $2.4 million in a COVID-19 relief loan intended to pay their employees during the pandemic.

A judge’s order arrives Tuesday amid bankruptcy proceedings related to how a real estate company maintained the aging ship as part of a lease agreement with the city of Long Beach, which owns the ship and a plot of land around the port. Urban Commons set its sights on refurbishing a retired British ocean liner as a cruise destination, but within five years of the company’s acquisition of the lease, the real estate investment company it created had filed for bankruptcy, leaving a trail of debt.

As of 2016, Urban Commons has held a 66-year lease to operate the Queen Mary and develop the surrounding land. Eagle Hospitality Real Estate Trust was set up as an investment entity to generate revenue from the Queen Mary’s role as a hotel and from other hospitality projects, but in January of this year, the fund filed for bankruptcy protection with nearly $500 million in debt.

Queen Mary is in poor condition. This year, the city of Long Beach regained control of the ship after the Eagle Hospitality Trust filed for bankruptcy. A recent report estimated that it could cost the city $175 million to maintain the ship and $190 million to sabotage or sink it. A 2017 report estimated that $289 million in renovations and modernizations were required to keep the ship afloat.

At the center of the bankruptcy proceedings are Urban Commons CEOs Howard Wu and Taylor Woods. In court filings, U.S. bankruptcy judge Christopher S. Sunchi called the two “crooks”.

Documents filed in bankruptcy proceedings allege that Woods and Wu applied for two federal loans that were earmarked for Queen Mary employees’ payroll. Instead, according to the documents, the executives emptied their company’s bank accounts once they got the loan and transferred the money to several other accounts.

Wu Woods argued that they made a mistake in the loan application and in court documents they said they did not intend to apply under Urban Commons Queensway, which they no longer represent.

In November, Sunchi Woods and Wu were held in contempt for not properly accounting for nearly $2.4 million received from the Federal Paycheck Protection Program loan and for not having their assets frozen.

On Tuesday, in a 13-page penalty order, Sunchi ordered the men to pay $250 a day starting Jan. The fine is aimed at forcing the men to comply with a previous court order on their financial accounts.

The court order states that Woods was “opaque” about his bank accounts and that Wu made transfers to his wife’s bank account via Zelle’s payment instrument, despite the two men claiming to have been frank about their assets. Several other financial projections on the men’s assets were examined by the court.

“One would have thought that issuing a contempt and sanctions order would make it clear to Mr. Woods and Mr. Wu that continued fraudulent behavior would not be condoned by the court, and it was time for a full and explicit injunction to be issued,” Sunchi wrote. “It is clear that the defendants did not understand the letter.”

Lawyers for Wu Woods did not immediately respond to requests for comment.

About the author

Publishing Team

Leave a Comment