Brief Fact Summary.
When John Gellene (Defendant) was convicted violating federal statute by fraudulently making a false material declaration in a bankruptcy, he argued that although the false statement was actually made, it was not fraudulent since it was not made with intent to defraud.
Synopsis of Rule of Law.
Under the federal Bankruptcy Statute, if a statement is made with intent to deceive it is fraudulent, even if not made with intent to defraud.
When a defendant is charged with a specific intent crime, the government may present other acts evidence to prove intent.View Full Point of Law
John Gellene (Defendant), an attorney who represented Bucyrus-Erie Company in its Chapter 11 bankruptcy, filed a sworn declaration in the bankruptcy court that was to include all his firm’s connections to the debtor, creditors, and any other parties in interest.Â However, the declaration did not list everyone it should have and Defendant was charged with two counts of knowingly and fraudulently making a false material declaration in the bankruptcy case and one count of using a document while under oath, knowing that it contained a false material declaration thereby violating federal statute.Â The jury found Defendant guilty on all three counts. Â Defendant appealed
Under the federal Bankruptcy Statute, if a statement is made with intent to deceive is it fraudulent, even if not made with intent to defraud?
(Ripple, J.)Â Yes.Â Under the federal Bankruptcy Statute, if a statement is made with intent to deceive it is fraudulent, even if not made with intent to defraud.Â This court rejects Gellene’s (Defendant) argument that to commit bankruptcy fraud the defendant must have a specific intent to alter or to impact the distribution of a debtor’s assets and not merely to impact the integrity of the legal system, as argued by the government.Â This court rejects Defendant’s narrow and limited definition of â€œintent to defraudâ€ or â€œfraudulently.â€Â The plain wording of the statute punishes making a false statement â€œknowingly and fraudulently.â€Â The common understanding of the term â€œfraudulentlyâ€ includes the intent to deceive.Â The expansive scope of the statute reaches beyond the wrongful confiscation of a debtor’s property and also includes the knowing and fraudulent making of false oaths or declarations in the context of a bankruptcy proceeding.Â In this case, Defendant does not deny that the applications were sworn declarations in a bankruptcy case that were false and made knowingly.Â When material information is omitted in a bankruptcy filing, as in this case, it hinders a bankruptcy court in fulfilling its responsibilities just as much as an explicitly false statement.Â Therefore, whether the deception at issue is aimed at thwarting the bankruptcy court or the parties to the bankruptcy, the fraud provision of the statute is designed to protect the integrity of the administration of a bankruptcy case.Â Defendant’s failure to reveal his representation of a major secured creditor of the debtor was highly material.Â In addition, the government established Defendant’s knowledge of his statutory duty to disclose.Â Affirmed
As the Gellene decision makes clear, materiality in the context of the bankruptcy statute does not require harm to or adverse reliance by a creditor, nor does it require a realization of a gain by the defendant.Â Instead, it requires that the false oath or account relate to some significant aspect of the bankruptcy case or proceeding.Â There is no doubt that a misstatement in a bankruptcy petition about other affiliations creates a material misrepresentation.