Eagle Hospitality: Court orders daily fines for two shareholders

By Sarah Lizee

Olympia, Wash., Dec. 15 – The judge overseeing Eagle Hospitality Real Estate Investment Trust unit EHT US1, Inc.’s Chapter 11 bankruptcy case has ordered two of the company’s shareholders to pay daily fines for failing to comply with a previous order, according to a sanction order filed Tuesday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the court had called the two 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.”

The investors were sued by the debtor, and after notice and a hearing, the court entered into a summary judgment against them and their company, and enjoined them from dissipating their assets. In addition, the court ordered a detailed accounting.

“One would have thought the issuance of the contempt order and the sanction order would serve to make it clear to [the investors] that continued fraudulent behavior would not be tolerated by the court and it was time to make a complete and forthright accounting,” judge Christopher S. Sontchi said in the sanction order.

“Clearly, [the investors] have not gotten the message. Their purported attempt to satisfy the terms of the [preliminary injunction] order is woefully insufficient and ripe with fraudulent inconsistencies. It is clear to the court that sanctions are necessary.”

According to Tuesday’s sanction order, starting on Jan. 1, the two investors will each be fined $250 per day, until they post a cash bond in the amount of $2.4 million.

Previously, Sontchi had considered placing the investors in custody if he found them in contempt of the preliminary injunction. However, Sontchi noted that the investors have made progress in providing accounting, although further disclosure is required.

“Nonetheless, incarceration is not necessary at this time,” 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.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.