Two Eagle Hospitality shareholders could face jail time for fraudulent PPP loan

By Sarah Lizee

Olympia, Wash., Nov. 15 – The judge overseeing Eagle Hospitality Real Estate Investment Trust unit EHT US1, Inc.’s Chapter 11 bankruptcy case called two of the company’s shareholders “fraudsters,” saying they obtained a $2.4 million PPP loan on behalf of the debtor without authority and “absconded with the proceeds, leaving either the debtor or the United States to pay back the lender,” according to an opinion filed Monday with the U.S. Bankruptcy Court for the District of Delaware.

The investors were sued by the debtor, and after notice and a hearing, the court entered into a summary judgement against them and their company, and enjoined them from dissipating their assets.

In addition, the court ordered a detailed accounting.

So far, they haven’t provided a sufficient accounting and have “baldly stated” that they plan to dissipate their assets, judge Christopher S. Sontchi said.

“The court cannot countenance [the] defendants’ willful refusal to comply with its injunction to the detriment of the debtor’s creditors,” Sontchi said.

Sontchi said he finds the investors in contempt of the preliminary injunction, and will convene a hearing on Friday to consider what sanction to impose, including whether to place the investors in custody.

“The court does not take this step lightly, but the actions of [the] defendants in derogation of a court order entered after notice and a hearing leave no alternative,” Sontchi said.

Singapore-based Eagle Hospitality owns a portfolio of corporate, leisure and airport hotels across the United States. U.S. affiliate EHT US1 filed Chapter 11 bankruptcy on Jan. 18, 2021 under case number 21-10036.

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