No risk of sufficient irreparable harm to immediately freeze funds of ex-EHT directors: US judge

A US judge labelled some actions of former Eagle Hospitality Trust (EHT) directors Howard Wu and Taylor Woods as "purposeful and fraudulent", but ultimately decided that there was no "irreparable harm" for now.

Christopher Sontchi, a bankruptcy judge in the District of Delaware, had decided not to grant Urban Commons Queensway (UCQ) a preliminary injunction to freeze sufficient funds of Mr Wu and Mr Woods to recover US$2.4 million.

UCQ, one of the debtor companies within the EHT stable and the owner of The Queen Mary in Long Beach, had alleged that Mr Wu and Mr Woods applied for and obtained a US$2.4 million loan last year on behalf of UCQ under the US Cares Act's Paycheck Protection Programme.

UCQ alleged that not only did Mr Wu and Mr Woods lack the authority to take out this loan, they also planned in advance to have the loan proceeds "immediately transferred away from UCQ's bank account the moment the loan was funded".

According to a newly released transcript of the hearing, Judge Sontchi allowed that not granting the injunction might mean the debtor companies are eventually unable to collect the funds owed to them.

Granting the injunction, however, would interfere with the ability of Mr Wu and Mr Woods to participate in the ongoing sale process of several hotels in EHT's portfolio.

He added that if there is some risk of insolvency among Mr Wu and Mr Woods, then the issue of a preliminary injunction could be revisited.

Judge Sontchi is also considering referring the matter to federal prosecutors for further investigation for "possible criminal conduct" - something he said he has done twice in his 15-year tenure on the bench.