United States Court of Appeals

For the First Circuit

No. 15-2269 

IN RE: PATRICK J. HANNON; ELIZABETH HANNON, 

Debtors. 

PATRICK J. HANNON, 

Plaintiff, Appellant, 

v. 

ABCD HOLDINGS, LLC; ABC&D RECYCLING, INC.; 

WARE REAL ESTATE, LLC, 

Defendants, Appellees. 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF MASSACHUSETTS 

[Hon. Denise J. Casper, U.S. District Judge] 

Before 

Kayatta and Barron, Circuit Judges, 

McAuliffe,* District Judge. 

Matthew R. Johnson, with whom Joshua M. Wyatt and Devine, 

Millimet & Branch, P.A. were on brief, for appellant. 

Joel E. Faller, with whom McLaughlin Brothers, P.C. was on 

brief, for appellees. 

October 7, 2016 
_____________________ 

 *Of the District of New Hampshire, sitting by designation.
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McAULIFFE, District Judge. Patrick J. Hannon ("Hannon") 

appeals from the entry of summary judgment denying his petition 

for a discharge in bankruptcy. See 11 U.S.C. § 727(a)(4)(A). The 

bankruptcy court denied the discharge after concluding that Hannon 

made false material statements with respect to disbursements made 

on his behalf by third parties during the bankruptcy proceeding. 

The district court affirmed the bankruptcy court's entry of summary 

judgment, and we affirm as well. 

I. Background 

A. Factual Background 

 In May of 2012, Hannon and his wife, Elizabeth, sought 

protection from their creditors by filing a voluntary bankruptcy 

petition under Chapter 11 of the Bankruptcy Code.1 The Hannons 

reported total assets of about $6 million, and liabilities of 

approximately $10.4 million, which included a disputed tax debt of 

more than $7 million.

 Hannon owned and operated a recycling and scrap metal 

company, ABC&D Recycling, Inc. ("ABC&D Recycling"), as well as a 

real estate company, Ware Real Estate, LLC ("Ware Real Estate"), 

which held title to the land on which ABC&D Recycling was located. 

 1 On January 2, 2013, the case was converted to a 

Chapter 7 proceeding, upon motion of the United States Trustee. 
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The Hannons estimated that monthly expenses necessary to support 

their family during the bankruptcy process would average about 

$13,180, and noted that the income required to pay those expenses 

would come from ABC&D Recycling's ongoing operations while Hannon 

served as debtor-in-possession. 

ABC&D Recycling and Ware Real Estate 

 Hannon bought ABC&D Recycling and Ware Real Estate with 

the help of an attorney named George McLaughlin, Esq., who had 

previously represented Hannon. McLaughlin owned a financing 

company, Bright Horizon Finance, LLC ("Bright Horizon"), which 

loaned Hannon the necessary funds. Bright Horizon's loan terms 

included warrant rights, affording it the option to purchase a 

50.1 percent interest in each company. On June 21, 2012, after 

the Hannons filed for bankruptcy protection, Bright Horizon 

assigned its warrant to ABCD Holdings, LLC ("ABCD Holdings"), 

another company controlled by McLaughlin, and, on July 17, 2012, 

ABCD Holdings exercised those warrant rights, thereby obtaining a 

50.1 percent ownership interest in both Ware Real Estate and ABC&D 

Recycling. 

 A few weeks earlier, on June 27, 2012, McLaughlin, 

suspecting that business funds were being diverted by Hannon for 

unauthorized purposes, obtained an ex parte temporary restraining 
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order from the Suffolk County Superior Court. That order 

temporarily barred Hannon from ABC&D Recycling's premises. On 

July 2, 2012, however, that order was modified to allow Hannon to 

resume operational control over the business. A short time later, 

on July 18, 2012, ABCD Holdings removed Hannon as an officer of 

Ware Real Estate and appointed McLaughlin to replace him. Hannon, 

however, continued to operate ABC&D Recycling until 

February 6, 2013, when ABCD Holdings removed him as an officer and 

director of that company as well. On March 13, 2013, the 

bankruptcy court approved the sale of Hannon's remaining minority 

interest in both Ware Real Estate and ABC&D Recycling to ABCD 

Holdings. 

Hannon's Monthly Operating Reports 

 Hannon was required to file monthly operating reports 

("MORs") on a standardized form with the United States Trustee's 

office. He did so from May through September of 2012. Hannon 

says that he provided his counsel with bank statements from the 

debtor-in-possession accounts and, based on those statements, 

counsel completed the necessary forms for him. Hannon then 

reviewed the forms and signed a certification on each MOR which 

declared "under penalty of perjury" that the report was true and 

correct "to the best of [his] knowledge and belief." 
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 The MOR forms require, among other things, that a debtor 

affirmatively disclose whether funds have been disbursed for the 

debtor's benefit from any account other than a debtor-inpossession account, and, if so, to provide an explanation for such 

payments. Here, that would include disclosure of disbursements 

made by ABC&D Recycling and Ware Real Estate for Hannon's benefit. 

The MOR form also instructs the debtor to report the amount of 

estate disbursements made by outside sources. On all of the 

relevant MORs, Hannon reported that funds had been disbursed for 

his and his wife's benefit from an account other than a debtorin-possession account. In May and June of 2012, for example, 

Hannon's MORs identified $1,407.24 and $2,830.30, respectively, as 

"payments from ABC&D for rent and utilities." Hannon's September 

MOR also disclosed that funds had been disbursed from "ABC&D for 

rent and utilities," but reported that no amount ("0") had been 

disbursed for the estate's benefit from outside sources. Hannon's 

July and August MORs contained no reference to disclosable payments 

from ABC&D Recycling, and reported "0" estate disbursements made 

by outside sources. 

Companies Object to Discharge 

 On July 12, 2013, ABCD Holdings, ABC&D Recycling, and 

Ware Real Estate (the "Companies") filed an adversary complaint 
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against Hannon in the bankruptcy proceeding, objecting to his 

discharge in bankruptcy. Based upon a forensic accounting 

analysis of the books and records of ABC&D Recycling and Ware Real 

Estate, the Companies alleged that while Hannon was in control of 

the businesses, he diverted a substantial amount of business 

revenue to his own benefit, without authority. According to the 

Companies, business funds were diverted by means of: (1) Hannon's 

use of business accounts to pay Hannon's entirely personal 

expenses; (2) Hannon's withdrawal of funds from business bank 

accounts for entirely personal use; and (3) Hannon's and his family 

members' use of business debit cards to cover entirely personal 

expenses. The Companies asserted that Hannon did not disclose 

receipt of the majority of those diverted funds on his MORs, as 

required. They charged that Hannon diverted approximately $99,000 

from ABC&D Recycling and Ware Real Estate between May and September 

of 2012, during which period he only identified approximately 

$4,200 in disbursements made on his behalf on the MOR forms.

 On November 21, 2013, the Companies moved for partial 

summary judgment on their claim that, because Hannon made a false 

oath or filed a false account in connection with his bankruptcy 

proceeding, he should be denied a discharge. 11 U.S.C. 
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§ 727(a)(4)(A). Hannon, acting pro se,2 opposed the motion but 

did not deny that the disbursements identified by the Companies 

actually occurred. Instead, he contended that virtually all of 

the identified expenditures were made for business purposes, and 

not for his personal benefit. And, he argued, some expenditures 

that appeared to be for his personal benefit were actually made 

by, or on behalf of, other employees. 

Hannon's Proffered Defenses 

 A hearing was held in the bankruptcy court on the 

Companies' motion. The bankruptcy court questioned Hannon about 

the transactions at issue. Hannon denied that the identified 

disbursements were made for his personal benefit, stating that 

nearly all of them ("99.9 percent of them") had a business purpose. 

The bankruptcy court took the matter under advisement, but offered 

Hannon the opportunity to "spell out in detail" his defenses to 

the multiple diversion claims. 

 Hannon then retained new legal counsel, who filed a 

further brief in opposition to the Companies' motion for partial 

 2 Hannon initially had the benefit of retained counsel to 

assist him in navigating the bankruptcy process, but was unable to 

maintain that representation. The bankruptcy court allowed 

counsel to withdraw by order dated July 13, 2013, after which 

Hannon acted pro se. He then retained new counsel after a hearing 

on the Companies' motion for partial summary judgment.
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summary judgment. Hannon retreated from his earlier claim that 

99.9 percent of the disbursements had a business purpose, but 

included an affidavit in which he declared that many of the 

disbursements and withdrawals from business accounts actually had 

a business purpose. He also filed an affidavit by Jeffrey M. 

Dennis, CPA, in which Dennis opined that laypersons (like Hannon, 

who had a high school education) typically lack the necessary 

training to accurately complete MORs. Finally, Hannon provided 

the court with an unsworn attachment to his memorandum, in the 

form of a spreadsheet, detailing his explanations for each of the 

disbursements challenged by the Companies. Hannon's explanations 

were divided into three categories: 1) those expenditures that 

Hannon "believe[d] were incurred for his benefit," 2) those that 

he "believe[d were] incurred for legitimate business purposes," 

and 3) those that he claimed were incurred for both a personal and 

a business purpose. 

 Hannon conceded that $19,323.22 in business 

disbursements were "incurred for his benefit." Those transactions 

included eleven cash withdrawals, which Hannon labeled as 

"Stipends to Joint Debtor" (his wife); two paychecks to Hannon 

from ABC&D Recycling; $7,500 in rent payments made to Hannon's 

landlord; $1,500 in payments to a boat storage facility in Maine; 
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retail purchases for groceries, clothing, and entertainment; and 

video game and music purchases made by Hannon's daughters on a 

business debit card.3

 Hannon identified $77,155.91 of the challenged 

disbursements as having a business purpose, including substantial 

cash withdrawals used to make cash payments for scrap metal, 

expenses related to business travel, and expenses associated with 

transporting and feeding ABC&D Recycling employees.4 He included 

within that category costs associated with two of his homes, one 

in Wells, Maine, and another in Truro, Massachusetts. According 

to Hannon, those vacation homes were used for entertaining 

potential ABC&D clients, so costs associated with maintaining 

those homes, as well as monies spent entertaining clients while in 

residence, qualified as business expenses. Disbursements were 

made to cover costs for utilities, landscaping, local hardware and 

liquor store purchases, and meals at nearby restaurants. 

 3 Hannon stated that he "believe[d]" the stipends to the 

Joint Debtor and his paychecks were reported on the MORs. 

4 The bankruptcy court pointed out that Hannon included 

within the "business expense" category three disbursements he had 

previously listed on his Addendum to the May and June MORs as paid 

by ABC&D Recycling: a $97.84 payment to Dish Network, a $355.76 

payment to NSTAR Electric, and a $178.89 payment to a Hannaford 

grocery store. Hannon cryptically described those payments as 

business expenses relating to "client guest house," "company 

utility," and "ABC&D grocery," respectively.
- 10 - 

 Finally, Hannon identified $2,849.99 of the questioned 

disbursements as having both a personal and a business purpose. 

He included within that final category utility payments related to 

his Wells and Truro homes. 

 Hannon had previously given testimony concerning his 

Wells and Truro homes at a June 6, 2012, meeting of creditors. In 

response to questioning by counsel to the United States Trustee, 

Hannon said that he and his family used the Wells home only 

occasionally and during the day, and that it needed significant 

work (as a result of major leaks and a dysfunctional heating 

system) to make it rentable. The Truro vacation home, he said, 

was used only "once in a while" and otherwise remained unoccupied. 

He did not mention any marketing or other business entertainment 

uses of either property. 

B. Procedural History 

 On June 10, 2014, after fully considering the matter, 

the bankruptcy judge granted summary judgment in favor of the 

Companies and declined to grant Hannon a discharge in bankruptcy. 

11 U.S.C. § 727(a)(4)(A). The court found, as Hannon admitted, 

that over $19,000 in payments by ABC&D Recycling or Ware Real 

Estate were made for Hannon's personal benefit, and that the 

majority of those payments were not disclosed on the MORs, as 
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required. The bankruptcy court found that Hannon's affidavit 

explanations for the claimed business expenditures related to his 

Wells and Truro homes were directly contradicted by his earlier 

testimony at the creditors' meeting, and that Hannon provided no 

explanation for the substantive change. Accordingly, the 

bankruptcy court determined that Hannon failed to raise a genuine 

issue of material fact with respect to whether the business 

payments relating to his Wells and Truro houses were "in fact 

incurred solely for his personal benefit." 

 The bankruptcy court took note of the extent and 

frequency of Hannon's omissions, as well as the fact that Hannon 

had partially disclosed payments made for his benefit by ABC&D 

Recycling in his May and June MORs. From the undisputed facts, 

the bankruptcy court determined that the "only plausible 

conclusion is that [Hannon] acted with reckless indifference to 

the truth when filing his MORs." The court decided that it was 

unnecessary to consider the additional disbursements at issue, 

because Hannon admitted sufficient unreported payments made on his 

behalf to resolve the motion for summary judgment. 

 Hannon appealed to the district court. The district 

court affirmed the bankruptcy court's order on September 22, 2015. 

This appeal followed. 
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II. Standard of Review 

 As recently noted in Rok Builders, LLC v. 2010-1 SFG 

Venture, LLC, (In re Moultonborough Hotel Group, LLC), "[a]lthough 

we constitute the second tier of appellate review in this case 

arising out of a decision by the bankruptcy court in an adversary 

proceeding, 'we cede no special deference to the determinations 

made by the . . . district court' and instead 'assess the 

bankruptcy court's decision directly.'" 726 F.3d 1, 4 (1st Cir. 

2013) (quoting City Sanitation, LLC v. Allied Waste Servs. of 

Mass., LLC (In re Am. Cartage, Inc.), 656 F.3d 82, 87 (1st Cir. 

2011)). Our review of the bankruptcy court's order granting 

summary judgment is de novo. Desmond v. Varrasso (In re Varrasso) 

37 F.3d 760, 763 (1st Cir. 1994) (citations omitted); see also 

Daniels v. Agin, 736 F.3d 70, 78 (1st Cir. 2013). 

 The bankruptcy court entered summary judgment under 

Federal Rule of Bankruptcy Procedure 7056, which expressly 

"incorporates into bankruptcy practice the standards of Rule 56 of 

the Federal Rules of Civil Procedure." In re Varrasso, 37 F.3d 

at 762. Accordingly, the "legal standards traditionally 

applicable to motions for summary judgment . . . apply without 

change in bankruptcy proceedings." In re Moultonborough Hotel 

Grp., LLC, 726 F.3d at 4 (citations omitted). Summary judgment 
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in bankruptcy proceedings, then, should be granted "only when no 

genuine issue of material fact exists and the movant has 

successfully demonstrated an entitlement to judgment as a matter 

of law." In re Varrasso, 37 F.3d at 763. "[A]ll reasonable 

inferences from the facts must be drawn in the manner most 

favorable to the nonmovant." Id. 

III. Discussion 

We begin with a basic principle. "Under [11 U.S.C.] 

§ 727(a)(4)(A), [a] debtor can be refused his discharge only if he 

(i) knowingly and fraudulently made a false oath, (ii) relating to 

a material fact." Boroff v. Tully (In re Tully), 818 F.2d 106, 

110 (1st Cir. 1987). As the moving parties, the Companies must 

establish that there is no genuine dispute about any material fact, 

and that they are entitled to judgment as a matter of law, because: 

(1) Hannon made a false statement under oath in the course of his 

bankruptcy proceeding; (2) he did so knowingly and fraudulently; 

and (3) the false statement related to a material fact. Perry v. 

Warner (In re Warner), 247 B.R. 24, 26 (B.A.P. 1st Cir. 2000). As 

we have previously recognized: 

[11 U.S.C. § 727], by its very nature, invokes 

competing considerations. On the one hand, bankruptcy 

is an essentially equitable remedy. As the [Supreme] 

Court has said, it is an "overriding consideration that 

equitable principles govern the exercise of bankruptcy 
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jurisdiction." Bank of Marin v. England, 385 U.S. 99, 

103 (1966). In that vein, the statutory right to a 

discharge should ordinarily be construed liberally in 

favor of the debtor. Matter of Vickers, 577 F.2d 683, 

687 (10th Cir. 1978); In re Leichter, 197 F.2d 955, 959 

(3d Cir. 1952), cert. denied, 344 U.S. 914 (1953); 

Roberts v. W.P. Ford & Son, Inc., 169 F.2d 151, 152 (4th 

Cir. 1948). "The reasons for denying a discharge to a 

bankrupt must be real and substantial, not merely 

technical and conjectural." Dilworth v. Boothe, 69 F.2d 

621, 624 (5th Cir. 1934). 

On the other hand, the very purpose of certain 

sections of the law, like 11 U.S.C. § 727(a)(4)(A), is 

to make certain that those who seek the shelter of the 

bankruptcy code do not play fast and loose with their 

assets or with the reality of their affairs. The 

statutes are designed to insure that complete, truthful, 

and reliable information is put forward at the outset of 

the proceedings, so that decisions can be made by the 

parties in interest based on fact rather than fiction. 

As we have stated, "[t]he successful functioning of the 

bankruptcy act hinges both upon the bankrupt's veracity 

and his willingness to make a full disclosure." [Matter 

of] Mascolo, 505 F.2d [274,] 278 [(1st Cir. 1974)]. 

In re Tully, 818 F.2d at 110 (parallel citations omitted). With 

these principles in mind, we turn to Hannon's arguments on appeal. 

A. False Oath

The bankruptcy court, invoking the principle that "an 

unsworn declaration made under penalty of perjury is the equivalent 

of a verification under oath," determined that, because Hannon 

signed the MORs under penalty of perjury, his statements on those 

forms were made under oath. 28 U.S.C. § 1746; Smith v. Grondin 

(In re Grondin), 232 B.R. 274, 276 (B.A.P. 1st Cir. 1999). Hannon 
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challenges that determination on appeal, arguing that the 

certification required by MORs is not the type of certification 

covered by § 1746, which contemplates a certification as "true and 

correct," and not one based on a subjective understanding. 

Therefore, he argues, his MOR certifications were not made under 

"oath," as necessary to support a false oath claim. 

Hannon concedes that he presents the argument for the 

first time on appeal. "[T]herefore, we can consider the argument 

waived." Hoover v. Harrington (In re Hoover), 828 F.3d 5, 11 (1st 

Cir. 2016) (quoting Net-Velazquez v. Wiscovitch-Rentas (In re NetVelazquez), 625 F.3d 34, 40 (1st Cir. 2010) ("[A]bsent the most 

extraordinary circumstances, legal theories not raised squarely in 

the lower court cannot be broached for the first time on 

appeal.")). However, even if Hannon had presented the argument 

to the bankruptcy court, it would have likely failed. The 

verification language used on the MOR is nearly identical to the 

verification language used on debtor bankruptcy schedules.5 Other 

 5 The MOR certification reads: "I declare under penalty 

of perjury (28 U.S.C. Section 1746) that this report and all 

attachments are true and correct to the best of my knowledge and 

belief." 

The "Declaration Concerning Debtor's Schedules" reads: "I 

declare under penalty of perjury that I have read the foregoing 

summary and schedules, consisting of ___ sheets, and that they are 
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circuit courts that have addressed the point have consistently 

found the language used on the debtor schedules sufficient to 

constitute a verification under oath for purposes of 

§ 727(a)(4)(A). See, e.g., Retz v. Samson (In re Retz), 606 F.3d 

1189, 1196 (9th Cir. 2010) ("A false statement or an omission in 

the debtor's bankruptcy schedules or statement of financial 

affairs can constitute a false oath.") (quoting Khalil v. 

Developers Sur. & Indem. Co. (In re Khalil), 379 B.R. 163, 172 

(B.A.P. 9th Cir. 2007)); Beaubouef v. Beaubouef (Matter of 

Beaubouef), 966 F.2d 174, 178 (5th Cir. 1992) ("False oaths 

sufficient to justify the denial of discharge include . . . a false 

statement or omission in the debtor's schedules") (internal 

quotations omitted) (quoting 4 Collier on Bankruptcy ¶ 727.01[1], 

at 727–59 (15th ed. 1992); Chalik v. Moorefield (In re Chalik), 

748 F.2d 616, 618 n.3 (11th Cir. 1984) ("A knowing and fraudulent 

omission from a sworn Statement of Affairs or schedule may 

 

true and correct to the best of my knowledge, information and 

belief." 
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constitute a false oath.") (citing Farmers Coop. Ass'n v. Strunk, 

671 F.2d 391, 395 (10th Cir. 1982)).6

We do not discern any principled basis upon which to 

draw a meaningful distinction between the certification language 

used on the MOR form from that used on a debtor's schedules, and 

think the nearly identical language used on the MOR form would 

likely constitute a verification under oath for § 727(a)(4)(A) 

purposes. "Sworn statements filed in any court must be regarded 

as serious business. In bankruptcy administration, the system 

will collapse if debtors are not forthcoming." In re Tully, 818 

F.2d at 112. So, while it is unlikely that Hannon would prevail, 

the issue is forfeited in this case due to Hannon's failure to 

raise it below. 

B. "Knowingly and Fraudulently"

Hannon's main argument on appeal relates to the 

bankruptcy court's determination that there was no genuine issue 

of material fact with respect to his state of mind when he filed 

the MORs. Hannon asserts that the bankruptcy court incorrectly 

 6 While the point seems not to have been directly 

confronted by this court, it has been assumed, for purposes of 

§ 727(a)(4)(A), that omissions and false statements on a debtor's 

schedules constitute statements made under oath. See, e.g., In 

re Tully, 818 F.2d at 110. 
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concluded that the undisputed facts established his knowing and 

fraudulent state of mind as a matter of law. Relying upon our 

decision in In re Varrasso, 37 F.3d at 764, he argues that the 

undisputed facts here--as in In re Varrasso--do not point to only 

one conclusion about his state of mind, but instead support 

"conflicting yet plausible inferences--inferences that are capable 

of leading a rational factfinder to different outcomes in a 

litigated matter depending on which of them the factfinder draws." 

Id. Because the undisputed facts require a choice between two 

plausible, and conflicting, inferences (reckless conduct or merely 

careless conduct), he argues, summary judgment was improper. 

Hannon says the undisputed facts support an inference 

that he acted carelessly, but not recklessly. He stresses that 

he had no reason to conceal the business disbursements made for 

his personal benefit because, even including those disbursements, 

his actual monthly expenses were still significantly lower than 

the monthly support amount he estimated would be needed at the 

outset of the bankruptcy proceeding. So, no harm, and no intent, 

given no evident reason for him to conceal those disbursements. 

He also notes that his formal education ended with high school, 

and he could well have misinterpreted the complicated bankruptcy 

forms. Moreover, he points out that he relied on legal counsel 
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to prepare the forms. Those facts should render a culpable mental 

state doubtful, he contends. 

Hannon also points to his "good faith" participation in 

the bankruptcy process, and his improved reporting practices over 

time, which also should tend to negate any inference of an intent 

to deceive. Finally, Hannon argues that accurate MOR reporting 

was necessarily hampered by his lack of access to underlying 

financial documentation about the businesses. Files and records 

were missing, he says, after the brief hiatus between the issuance 

of the temporary restraining order and his resumption of control 

over ABC&D's operations when the restraining order was modified. 

All of which, Hannon argues, would readily support a legal 

conclusion that he acted carelessly, but did not act with reckless 

indifference to the truth. 

A debtor "knowingly and fraudulently" makes a false oath 

if he "knows the truth and nonetheless willfully and intentionally 

swears to what is false." Lussier v. Sullivan (In re Sullivan), 

455 B.R. 829, 837 (B.A.P. 1st Cir. 2011) (internal quotation marks 

and citations omitted). "[R]eckless indifference to the truth" 

has "consistently been treated as the functional equivalent of 

fraud for purposes of § 727(a)(4)(A)." In re Tully, 818 F.2d at 

112 (citations omitted); accord In re Grondin, 232 B.R. at 277. 
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We of course recognize that it has been repeatedly 

emphasized, and remains true today, that "[c]ourts use special 

caution in granting summary judgment as to intent. Intent is 

often proved by inference, after all, and on a motion for summary 

judgment, all reasonable inferences must be drawn in favor of the 

nonmoving party." Daniels, 736 F.3d at 83. But, "[s]ummary 

judgment may be warranted even as to such elusive elements as a 

defendant's motive or intent where the non-moving party rests 

merely upon conclusory allegations, improbable inferences, and 

unsupported speculation." Santiago v. Canon U.S.A., Inc., 138 

F.3d 1, 5 (1st Cir. 1998) (quotations and citations omitted). 

Here, there are no genuine disputes regarding material facts, and 

construing the undisputed facts and all reasonable inferences 

arising from those facts in favor of Hannon, it is still clear 

that the entry of summary judgment was proper. 

First, Hannon's reliance on In re Varrasso, 37 F.3d 760, 

is misplaced, because the undisputed facts here do not support 

plausible opposing inferences. Hannon concedes that he did not 

report at least $8,500 in business payments made for his personal 

benefit on the MORs he filed in May through September of 2012.7 

 7 Hannon takes issue with the bankruptcy court's 

categorization of some of the questioned expenditures as personal 
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His explanation for those omissions amounted to little more than 

assertions that, either he did not understand his obligation to 

truthfully report those disbursements, or he failed to accurately 

 

and unreported on the MORs. He argues that the bankruptcy court 

calculated the undisputed and unreported personal expenditures as 

totaling $23,555.54, but $10,092.98 of that amount was factually 

disputed. Actually, the bankruptcy court recognized that Hannon 

reported $4,237.54 of ABC&D Recycling's payments on his MORs, so 

the amount unreported on the MORs was "over $19,000." Hannon says 

he believed that $4,037 in cash stipends to Elizabeth Hannon were 

reported on the MORs, because they were included in deposits to 

Elizabeth Hannon's bank account, and so were recorded in bank 

statements attached to the MORs. The MORs, however, do not 

identify any such deposits as "stipends" or income from the 

business. 

Hannon further argues that the expenditures of $3,205.09 and 

$2,849.99 relating to his Wells and Truro homes were "business" or 

"business and personal" expenses. That argument is equally 

unavailing. Hannon's affidavit is plainly inconsistent with his 

prior testimony at the creditors' meeting, and he offers no 

adequate explanation for the dramatic change. See Colantuoni v. 

Alfred Calcagni & Sons, Inc., 44 F. 3d, 1, 4–5 (1st Cir. 1994) 

("When an interested witness has given clear answers to unambiguous 

questions, he cannot create a conflict and resist summary judgment 

with an affidavit that is clearly contradictory, but does not give 

a satisfactory explanation of why the testimony is changed."). 

But, even if we accepted Hannon's contentions, he cannot 

escape the fact that he admitted to receiving at least $12,830.97 

from ABC&D Recycling and Ware Real Estate between May and September 

of 2012. He reported only $4,237.54 on his MORs. Hannon cannot, 

and does not, dispute that he failed to report over $8,500 in 

reportable payments that ABC&D Recycling and Ware Real Estate made 

for his personal benefit on the MORs he submitted between May and 

September 2012. 
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report them because he was merely careless. Neither explanation 

is supported by the factual record. 

To be sure, "a debtor's honest confusion or lack of 

understanding may weigh against an inference of fraudulent 

intent." Robin Singh Educ. Servs., Inc. v. McCarthy (In re 

McCarthy), 488 B.R. 814, 827 (B.A.P. 1st Cir. 2013). But, Hannon 

did properly report some business disbursements made for his 

personal benefit in May and June of 2012. As the bankruptcy court 

recognized, those May and June disclosures "demonstrate[] that 

[Hannon] understood his duty to report such transactions, and was 

able to obtain the necessary information to do so." As the 

bankruptcy court also recognized, the "magnitude of the omissions 

belies the Debtor's assertions that he merely overlooked" 

reporting a few small personal transactions. In this case Hannon 

reported a few modest personal transactions; it was the multiple 

and substantial disbursements made for his benefit that did not 

make it to the MORs. Moreover, unlike the debtors in Varrasso, 

Hannon did not rectify the omissions as soon as the creditors' 

questioning brought them to light. In re Varrasso, 37 F.3d at 

764. 

At issue here is not a simple failure to report minor 

expenditures for miscellaneous expenses. Rather, Hannon 
- 23 - 

repeatedly failed to report thousands of dollars diverted from the 

businesses for his benefit, while he controlled those businesses. 

He cannot plausibly contend that he did not know that the 

businesses paid for his personal rent, clothing, and groceries, as 

well as his daughters' clothing and entertainment, over a fivemonth period. Considered in context, "[t]he amounts here render 

reckless errors that arguably may have been only negligent if they 

had concerned less significant items." Daniels, 736 F.3d at 85. 

Hannon's claim that he relied in good faith on legal 

counsel to accurately prepare the forms also founders. As Hannon 

himself concedes, "reliance on the advice of counsel is no defense 

when the deficiency 'should have been evident to the debtor.'" 

Appellant's Br. at 20 (quoting Tully, 818 F.2d at 111). Hannon's 

argument is undermined both by his demonstrated knowledge of what 

was required to be disclosed, and his undeniable knowledge that 

substantial sums spent on his behalf were not disclosed on the 

forms filled out by counsel--forms that he reviewed and signed 

under oath. 

Hannon also asserts that a reasonable factfinder could 

well conclude that he lacked the financial acumen to understand 

and appreciate the MORs deficiencies. But, as discussed above, 

in May and June of 2012 Hannon did properly report disbursements 
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made for his benefit. He plainly demonstrated personal awareness 

of what disclosures were required, and clearly was not unaware 

that business disbursements made for his benefit had to be 

reported. It, therefore, "should have been evident" to Hannon 

that the July, August, and September MORs did not disclose 

substantial business expenditures made for his benefit. 

Appellant's Br. at 20 (quoting In re Tully, 818 F.2d at 111). As 

we have warned, "[a] debtor cannot, merely by playing ostrich and 

burying his head deeply enough in the sand, disclaim all 

responsibility for statements which he has made under oath." In 

re Tully, 818 F.2d at 111.8 

While Hannon has no formal training in financial 

reporting, still, he is hardly unsophisticated. Until recently, 

he owned and successfully operated two businesses. He entered 

bankruptcy having accumulated assets of nearly $6 million. 

Moreover, this is not Hannon's first experience with bankruptcy 

filings and reports. Hannon acknowledges that he was "previously 

 8 As the bankruptcy court pointed out, Hannon testified 

that he "provid[ed] counsel with statements from [his] debtor-inpossession accounts, and then reviewed the report prepared by 

counsel." But no evidence suggests that he provided counsel with 

full access to relevant financial information, including 

information regarding payments made by the businesses on his 

behalf.
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the principal of Embassy Realty, LLC, which had operated as a 

debtor-in-possession." Hannon's business experience and his past 

experience with the bankruptcy process undermine his claimed 

inability to accurately and truthfully complete the MORs due to a 

lack of financial sophistication. 

Finally, Hannon's passing contention that his ability to 

accurately and truthfully disclose all business expenditures made 

for his benefit was hampered by missing financial documentation is 

also implausible. Hannon did not provide any explanation as to 

how access to the allegedly missing business records was a 

necessary predicate to his truthfully reporting substantial 

disbursements made on his behalf. Hannon, of course, did have 

access to all the financial records of ABC&D Recycling and Ware 

Real Estate through at least the end of June, 2012, yet still did 

not accurately and truthfully report disbursements made for his 

benefit on the May and June MORs. "The record in this case shows, 

at the very least, cavalier indifference and a pattern of disdain 

for the truth. Meaningful disclosure was accorded much too low a 

priority." In re Tully, 818 F.2d at 112. 

Reviewing the matter de novo, we recognize this case as 

one of those uncommon situations in which summary judgment is 

appropriate notwithstanding that intent, or state of mind, is at 
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issue. We concur in the bankruptcy court's determination that 

Hannon's proffered explanations for his significant omissions are 

so implausible that they do not give rise to a genuine dispute of 

material fact with respect to his intent.9

C. Materiality

The final critical element, that the debtor's statement 

be materially related to the bankruptcy case, is "satisfied if the 

statement bears a relationship to the debtor's business 

transactions or estate, or concerns the discovery of assets, 

business dealings, or the existence and disposition of property." 

In re Sullivan, 455 B.R. at 829 (quotations omitted). 

Neither party disputes on appeal that Hannon's omissions 

were material. We agree. As the bankruptcy court noted, because 

Hannon's omissions "prevented parties in interest from accurately 

assessing the viability of a reorganization or understanding the 

Debtor's true financial condition," they were material. 

IV. Conclusion 

 9 On these same grounds, we reject Hannon's argument that 

the bankruptcy court should not have granted summary judgment 

because the MORs were verified "to the best of his knowledge and 

belief," and the record would support a finding that he 

subjectively believed that the information was accurate. As 

discussed above, the record does not support that inference.
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Summary judgment is not commonly available in cases 

featuring intent as a necessary element, but, as this case 

illustrates, there are exceptions. Material statements made in 

the course of judicial proceedings implicate serious interests, 

and must be as complete and reliable as studied caution will allow. 

Reckless indifference cannot be countenanced and will provide no 

protection from sanctions imposed for making false statements 

under oath. 

For the reasons stated above, we affirm the bankruptcy 

court's denial of Hannon's discharge pursuant to § 723(a)(4)(A).