A former Queen Mary operator testified in Delaware bankruptcy court on Friday that he made a “clerical mistake” when he applied for $2.4 million in COVID-19 relief aid under the ship’s name and doesn’t have the personal funds to pay back the federal government after losing his fortune in the pandemic.

Urban Commons founder Taylor Woods, who is facing multiple fraud lawsuits for his financial dealings, fought back tears on the witness stand as he explained that he was forced to sell his family home in Laguna Beach and now owes millions of dollars to former friends, investors, ex-employees and business partners.

“For three decades I’ve run a successful business and never had financial trouble (before the pandemic),” Woods said. “I wouldn’t sleep at night feeling like there was someone that I had a responsibility to without having a commitment to take care of that. I hope to rebuild my good name and good reputation, just the same as it was.”

Woods and his business partner Howard Wu both appeared in court on Friday after U.S. Bankruptcy Court Judge Christopher Sontchi found them in contempt this week for violating a preliminary injunction to freeze their assets and show how they spent $2.4 million in Paycheck Protection Program (PPP) loans that were meant to help Queen Mary employees in the pandemic.

Sontchi in a blistering ruling called Woods and Wu “fraudsters” for obtaining a PPP loan on behalf of their former company, Urban Commons Queensway, without consent and then absconding with the proceeds. 

The judge in his earlier ruling had threatened to order the pair into custody for contempt, but on Friday, he appeared to soften somewhat after the testimony and said he’ll consider what sanctions to impose. He’s expected to issue a ruling next week.

“We’re not here to put people in prison because they can’t pay their bills, that is not a good use of the court system,” he said.

Woods in court said he made a clerical error due to confusion over two different employee payrolls and didn’t realize he was applying for the loan money under the Urban Commons Queensway name.

“As soon as we identified it was in error, we wanted to make sure it was corrected,” he said. 

Regardless of whether the move was an error, Nicholas Bassett, a lawyer representing Urban Commons Queensway, said Woods and Wu have yet to pay back the company.

“Since July 2020 they’ve been asking for the funds to be repaid and not a dime has come back,” he said. “It’s all talk and no action, and none of it can be believed.”

Woods and Wu said about $1 million of the funds were paid to the city of Long Beach for back rent and taxes, while the rest was paid to Urban Commons to reimburse the company for Queen Mary expenses.

The pair said they plan to use equity from New York City’s Wagner Hotel, which they partly own, to pay back the loan money.

Wu on Friday said his net worth is negative $39 million.

“I”ve had to borrow from family members to survive during this hard time,” he said.

While Urban Commons has attributed their problems to the pandemic, lawsuits and public records show their financial problems had begun at least a year before the pandemic shutdowns devastated the hotel and tourism industries.

Urban Commons took over the lease for the Queen Mary in 2015 with a grand vision to develop the land surrounding the ship into an entertainment destination.

The city in 2016 issued $23 million in bonds and Tidelands funds to Urban Commons for urgent repairs on the ship, but the money was spent before most projects were completed and City Auditor Laura Doud in a report released Monday said she can’t verify how the funds were spent.

Urban Commons declared bankruptcy in January and later gave up its lease, giving control of the Queen Mary back to the city of Long Beach.