Three years after a series of Long Beach Post stories detailed the tangled financial web the Queen Mary’s inexperienced operators built in an attempt to prop up their doomed venture, the U.S. Securities and Exchange Commission has charged them with defrauding investors out of more than $70 million.
The charges filed Tuesday accuse real estate firm Urban Common’s co-founders Taylor Woods and Howard Wu of running two securities fraud schemes between 2019 and 2021 that relied on concealing risky and self-serving maneuvers from investors whom they placated with false guarantees of ever-growing returns.
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An attorney for Wu denied any wrongdoing, saying the SEC’s case is based on a “lack of understanding how these transactions were structured.” Attorneys representing Woods couldn’t immediately be reached.
In the first alleged fraud, authorities say Woods and Wu promised investors a payday from the sale of their portfolio of hotels, including the Queen Mary’s lease, when, in reality, they secretly planned to retain control and list the properties in a public offering on a Singapore stock exchange.
This maneuver, according to the SEC, carried “significantly greater risk” that Woods and Wu concealed.
When the public offering collapsed amid concerns about the aging Queen Mary’s condition, the pair found more investors by pitching a plan to buy the ship’s lease and other hotel properties out of bankruptcy, the SEC alleges.
By falsely telling potential investors that they’d already secured hundreds of millions in financing, Woods and Wu managed to raise at least $1.775 million for their bid, according to the SEC.
The complaint alleges Woods and Wu misappropriated that money, “paying nearly $1 million to either themselves or to shore up their outside businesses, and using the remainder for legal and administrative expenses they had told investors they, rather than investors, would pay.”
Their bid was ultimately rejected, and the city of Long Beach, which owns the Queen Mary, was forced to take back control of the ship when nobody else sought to buy its lease out of bankruptcy.
After investing at least $45 million in repairs and improvements aboard the historic ocean liner, Long Beach says the ship has, years later, begun to turn an operating profit.
The city of Long Beach is not mentioned in the SEC’s charging papers. And questions remain about how Urban Commons spent $23 million in public money that officials provided for earlier repairs.
Unlike the investors the SEC claims were lied to about the risky Singapore stock exchange plan, Long Beach was aware and approved it.
City management signed off in 2019 after assurances that Woods and Wu would remain in control with “minimal to no disruption of the status quo.”
The SEC’s complaint is seeking the disgorgement of Woods and Wu’s allegedly fraudulent gains, civil penalties and permanent injunctions barring the two from the securities market.