In Re: Money Centers of America, Inc. et al.

Filing 13

MEMORANDUM OPINION Signed by Judge Colm F. Connolly on 11/16/2020. (nmf)

Case 1:19-cv-01392-CFC Document 13 Filed 11/16/20 Page 1 of 33 PageID #: 870

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
IN RE MONEY CENTERS OF AMERICA,
et al.,

Chapter 11
Bankr. No. 14-10603 (CSS)
(Jointly Administered)

Debtors.
CHRISTOPHER M. WOLFINGTON,

Chapter 7
Adv. Proc. No. 16-51030 (CSS)

Appellant,
v.
ANDREW R. VARA, Acting United States
Trustee,

Civ. No. 19-1392-CFC

Appellee.

Christopher M. W olfington, Philadelphia, PA.

Pro Se Appellant
Andrew R. Vara, T. Patrick Tinker, Robert J. Schneider, Jr., Department of Justice,
Office of the United States Trustee, Wilmington, Delaware; Ramona D. Elliot, P.
Matthew Sutko, Department of Justice, Executive Office for U.S. Trustees,
Washington, D.C.

Counsel for Appellee
MEMORANDUM OPINION

November 16, 2020
Wilmington, Delaware

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CONNOLLY, UNITED STA~ DISTRICT JUDGE

I.

INTRODUCTION
Pro se appellant Christopher M. W olfington ("Appellant") has appealed the

Judgment entered by the United States Bankruptcy. Court for the District of
Delaware ("Bankruptcy Court") on July 2, 2019 (Adv. D.I. 139) which denied
Appellant discharge of his debts in his Chapter 7 case pursuant to 11 U.S.C. §§
727(a)(2) and (a)(4). The Judgment was accompanied by the Bankruptcy Court's
Findings of Fact and Conclusions of Law (Adv. D.I. 138), issued pursuant to
Federal Rule of Bankruptcy Procedure 7052. Neither party disputes that the
Bankruptcy Court had the judicial power to enter the Judgment as a final order.
For the reasons set forth herein, the Court affirms the Judgment.

II.

BACKGROUND
A.

MCA's Chapter 11 Case

Prior to the bankruptcy, Money Centers of America, Inc. ("MCA") and its
subsidiaries generally entered into contracts with casinos to provide cash-access
services. Litigation ensued in multiple courts, including litigation by Native
American tribes in Minnesota and Wisconsin, alleging that MCA did not repay
funds advanced by the casinos. This litigation resulted in millions of dollars in
judgments against MCA in September and December of 2013. MCA filed for
Chapter 11 protection in the Bankruptcy Court on March 21, 2014.

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Appellant was the Chairman, CEO, and largest stockholder of MCA. (A273,
A277). 1 MCA's statement of financial affairs, which was signed by Appellant
under penalty of perjury, disclosed that during the portion of 2014 leading up to the
filing ofMCA's Chapter 11 petition, MCA paid Appellant $75,000. (A265-66,
A275).
Approximately one month after MCA filed its bankruptcy case, a Chapter 11
Trustee was appointed under § 1104(a) of the Bankruptcy Code, replacing
Appellant as management of MCA. (A79). At the time of the Chapter 11
Trustee's appointment, the Bankruptcy Court found (i) "there was a lack of
credibility of [MCA' s] witnesses"; (ii) "the testimony [of MCA' s witnesses] was
inconsistent" and "intentionally vague"; and (iii) "Chris Wolfington I found to be
the least reliable." (A335, Tr. at 91 :8-12.3).

B.

Appellant's Chapter 7 Case

Appellant, represented by counsel, filed his individual Chapter 7 petition on
September 16, 2015 ("Petition Date") in the Eastern District of Pennsylvania,
where his Chapter 7 case remained pending at the time of the Judgment. (A98).
Appellant's schedules of assets and liabilities did not disclose ownership of any

1

The appendix filed in support of the UST's answering brief (D.I. 9) is cited herein
as "A_." The docket of the adversary proceeding, Vara v. Wolfington, Adv. No.
16-51030 (CSS) (Bankr. D. Del.), is cited herein as "Adv. D.I. _," and the docket
of the Chapter 11 case, In re Money Centers ofAmerica, Inc., et al., No. 14-10603
(CSS) (Bankr. D. Del.), is cited herein as "Bankr. D.I. _."
2

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website domain names. (A106-Al07, Al23). Appellant's statement of financial
affairs disclosed that during 2014, Appellant received $60,000 in gross income
from employment or operation of a business, $50,000 from consulting, and
$75,000 from a retirement account withdrawal. (A125-26, A133).
At the meeting of creditors held under§ 341(a) in his individual Chapter 7
case, Appellant testified regarding two websites, finpay .net and
chriswolfington.com. (A311, Tr. at 131:9-24; A313-A314, Tr. at 56:13-57:19);

see also 11 U.S.C. § 343 ( debtor must testify under oath at meeting of creditors).
Appellant acknowledged he was the "registrant" of finpay .net but denied owning
that domain name. (A3 ll, Tr. at 131: 12-24 ). Appellant acknowledged that he
owned the domain name chriswolfington.com, which he described as "a website
that has information about [him]." (A3 l 4, Tr. at 57: 11-19; see also A316).
After the meeting of creditors, Appellant filed an amended statement of
financial affairs disclosing that his 2014 employment income was $75,000 not
$60,000. (A135, Al43).

C.

Objection to Discharge

On January 4, 2016, the United States Trustee ("UST") filed an adversary
proceeding against Appellant in his Chapter 7 case seeking a denial of discharge of
Appellant's debts. The complaint alleged that Appellant had violated§§ 727(a)(2)
(based on failure to disclose assets consisting of website domain names) and
727(a)(4) (based on false disclosure of Appellant's 2014 income from MCA).
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(A41-A48). The adversary proceeding was ultimately transferred to the Delaware
bankruptcy judge assigned to MCA's Chapter 11 case. (A24; Adv. D.I. 39).
Proceeding pro se, Appellant filed a summary judgment motion in which he
sought to dismiss the complaint. (A63-A76). The UST filed a response including
exhibits showing Appellant had signed MCA's statement of financial affairs under
penalty of perjury disclosing that MCA had paid him $75,000 in 2014, and that at
the meeting of creditors in his own Chapter 7 case Appellant had acknowledged
being the registrant of finpay.net and the owner of chriswolfington.com. (A266,
A311, Tr. at 131:12-124 & A314, Tr. at 57:11-19). The UST also attached a
transcript from the hearing at which the Bankruptcy Court appointed the Chapter
11 Trustee in MCA's Chapter 11 case and found that Appellant was not a reliable
witness. (A335, Tr. at 91:8-12). '
In an order entered October 24, 2018, the Bankruptcy Court granted
summary judgment in favor of Appellant as to some counts. (A352-A354). The
Bankruptcy Court found that the uncontested facts included: (i) that Appellant was
the registered owner of finpay .net and chriswolfington.com, yet failed to disclose
his interest in those domain names (A354); and (ii) that the Bankruptcy Court had
previously found Appellant to be an unreliable witness when it ordered a Chapter
11 Trustee to be appointed in MCA's case (id.)
On March 6, 2019, the parties filed their pretrial briefs. (Adv. D.I. 134,
13 5). The UST requested that the Bankruptcy Court take judicial notice of certain
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opinions and judgments issued in other litigation against MCA and Appellant.
(See Adv. D.I. 134 at 19). 2 Appellant did not take issue with the Trustee's judicial

notice request with respect to those documents. (See A666).
On March 11, 2019, the Bankruptcy Court held a trial, at which Appellant,
appearing pro se, produced documentary evidence, produced and questioned two
witnesses, and personally testified at length. (A521-A663 (transcript of March 11,
2019 trial)). Regarding ownership of the domain name finpay.net, witness
Edmund Moore, Jr., a board member and investor in FinPay, LLC, testified that his
company, Clutch Holdings, had procured the domain name finpay .net and
"transferred the domain management to FinPay, LLC." (A538, Tr. at 18:9-19;
A549-A55 l, Tr. at 29:25-31 :8). Lauren Anderson, Vice President of Operations at
FinPay, LLC, also testified that FinPay, LLC owned finpay.net. (A584-A585, Tr.
at 64:19-65:10). Additionally, Appellant testified that he did not own finpay.net at

2

On September 9, 2013, the Ho-Chunk Nation obtained a stipulated judgment
against MCA in the amount of $4,780,000 in an action pending before the HoChunk Nation Trial Court entitled Ho-Chunk Nation v. Money Centers ofAmerica,
Inc. and MCA of Wisconsin, CV 10-54. (See Adv. D.I. 134 at Exh. Y). On
December 2, 2013, the Corporate Commission of the Mille Lacs Band of Ojibwe
Indians obtained a judgment against MCA in the amount of $5,623,690.83 in an
action pending in the United States District Court for the District of Minnesota,
Case No. 12-cv-01015. (See Adv. D.I. 134 at Exh. V). Appellant is a named
defendant in that case. By opinion and order dated February 18, 2014, the
Minnesota District Court denied a summary judgment motion brought by
Appellant. (See Adv. D.I. 134 at Exh. W). Further prosecution of the case was
stayed first by the MCA Chapter 11 case and then by Appellant's Chapter 7 case.

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the time of his bankruptcy filing, but only "manage[ d] the finpay .net domain
name." (A594, Tr. at 74:11-13, A603, Tr. at 83:4).
Regarding ownership of the domain name chriswolfington.com, Appellant
testified that he owned chriswolfington.com, but he described it as a "social media
page" that "just contains pictures and information about" him, which he decided
was not "appropriate" to include on his schedule of assets. (A628-A629, Tr. at
108:1-109:2).
Regarding the MCA income disclosure, Appellant testified that he calculated
the 2014 MCA income disclosed in his initial statement of financial affairs by
multiplying the $20,000 monthly salary he thought he received times three. (A623,
Tr. at 103:8-10). He further testified that the $15,000 he did not disclose was
attributable either to an extra pay period or loan interest payments made to him by
MCA. (Id., Tr. at 103:13-18). Although he testified that he could not determine
the exact amount he received in 2014 due to his inability to access MCA's records,
he also testified that MCA's payments to him were made by direct deposit. (Id.,
Tr. at 103:6-7, A625, Tr. at 105:2-3).

D.

Judgment and Appeal

On July 2, 2019, the Bankruptcy Court issued its Findings of Pact and
Conclusions of Law along with the Judgment denying Appellant's discharge.
(A664-A688). While the Bankruptcy Court ruled in Appellant's favor as to several
of the UST' s allegations, the Bankruptcy Court exercised its discretion to deny
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discharge pursuant to§§ 727(a)(2) and (a)(4) based on other allegations. The
Bankruptcy Court ruled that Appellant's omission of his ownership interests in two
web addresses violated 11 U.S.C. §§ 727(a)(2) and 727(a)(4) and that his
misrepresentation of his 2014 income from MCA violated 11 U.S.C. § 727(a)(4).
Appellant filed a timely motion to extend the time to appeal under 28 U.S.C.
§ 158(c)(2) and Bankruptcy Rule 8002(a) and (d), which the Bankruptcy Court
granted on July 23, 2019. On July 26, 2019, Appellant filed a timely notice of
appeal. (D.I. 1). The appeal is fully briefed. (D.I. 8, 9, 12). The Court did not
hear oral argument because the facts and legal arguments are adequately presented
in the briefs and record, and the Court's decisional process would not be aided by
oral argument.

III.

JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Court's Judgment denying Appellant a discharge of his
debts under 11 U.S.C. § 727(a)(2) and (a)(4) was final and immediately
appealable. See Serio v. DiLoreto (In re DiLoreto), 266 F. App'x 140, 142 (3d Cir.
2008). This Court has jurisdiction over the appeal under 28 U.S.C. § 158.
The Bankruptcy Court's legal conclusions are reviewed de novo, its factual
findings for clear error, and its exercises of discretion for abuse. See In re
Michael, 699 F.3d 305, 308 n.2 (3d Cir. 2012). A factual finding is clearly

erroneous only if it "either is completely devoid of minimum evidentiary support
displaying some hue of credibility or bears no rational relationship to the
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supportive evidentiary data." Fellheimer, Eichen & Braverman, P. C. v. Charter

Techs., Inc., 57 F.3d 1215, 1223 (3d Cir. 1995) (internal quotation marks omitted).
When there are multiple ways to view the evidence, "the [bankruptcy court's]
choice between them cannot be clearly erroneous." Anderson v. City ofBessemer

City, 470 U.S. 564, 574 (1985).
The denial of a debtor's discharge under 11 U.S.C. § 727(a) is reviewed for
abuse of discretion. See Meridian Bank v. Alten, 958 F.2d 1226, 1230 (3d Cir.
1992) (reviewing denial of discharge for abuse of discretion). A court abuses its
discretion when it "bases its opinion on a clearly erroneous finding of fact, an
erroneous legal conclusion, or an improper application of law to fact. " In re

Prosser, 777 F.3d 154, 161 (3d Cir. 2015) (internal quotation omitted).

IV.

ANALYSIS
The filing of a Chapter 7 petition creates a bankruptcy estate, which includes

"all legal or equitable interests of the debtor in property as of the commencement
of the case." 11 U.S.C. § 541(a)(l). A debtor in bankruptcy must file a schedule
of assets and liabilities in which the debtor must identify its assets and debts. 11
U.S.C. § 521(a)(l)(B)(i); Fed. R. Bankr. P. 1007(b)(l)(A). Debtors also must file a
statement of financial affairs in which they must disclose all income, whether from
employment or otherwise, received during the two years prior to the year the
petition was filed. 11 U.S.C. § 52l(a)(l)(B)(iii); Fed. R. Bankr. P. 1007(b)(l)(D).
These schedules and statements must be signed under penalty of perjury. Fed. R.
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Banla. P. 1008; see also 28 U.S.C. § 1746. A debtor must also testify under oath
at a meeting of creditors as to "the acts, conduct, or property or to the liabilities
and financial condition of the debtor, or to any matter which may affect the
administration of the debtor's estate, or to the debtor's right to a discharge." 11
U.S.C. §§ 34l(a), 343; Fed R. Banla. P. 2004(b). A debtor has an obligation to
disclose all assets even those assets which a debtor subjectively believes to have
little to no value. See Miqueo-Elian v. Elian (In re Elian), 2014 WL 276 295
(Banla. D.N.J. July 1, 2014), ajf'd 2015 WL 5164796 (D.N.J. Sept. 2, 2015), ajf'd
659 Fed. App'x 104 (3d Cir. 2016).
Third Circuit authority holds that§ 727 should be "construed liberally in
favor of the debtor" and that a total bar to discharge is "an extreme penalty."

Rosen v. Beezner, 996 F.2d 1527, 1534 (3d Cir. 1994). That said, a discharge is
allowed under 11 U.S.C. § 727(a) only to an "honest but unfortunate debtor." See

Grogan v. Garner, 498 U.S. at 287. As a result, the Banlauptcy Code provides
numerous grounds for denying a discharge to dishonest debtors. See, e.g., Farould
v. Emirates Bank Int'l, Ltd., 14 F.3d 244,249 (4th Cir. 1994) (stating that "certain
provisions of§ 727(a] prohibit discharge for those who play fast and loose with
their assets or with the reality of their affairs"). Only one ground need be
established to deny discharge. Id. at 250 (explaining that a "party objecting to
discharge need prove only one of the grounds for non-dischargeability under §
727(a) because the provisions of§ 727(a) are phrased in the disjunctive").
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Because the UST presented a prima facie case as to each count, the burden
of proving that the discharge should not be denied as to each count shifted to
Appellant. See Meridian Bank, 985 F.2d at 1232 ("At trial, the party objecting to a
discharge has the burden of proving the objection. But once that party meets the
initial burden by producing evidence establishing the basis for his objection, the
burden shifts to the debtor(.]") (internal quotation omitted); see also In re Steiker,
380 F.2d 765, 767 (3d Cir. 1967) (identifying the "well-settled principle[]" that in
discharge objections "the burden of proof is on the objecting (party] to make out a
prima facie case, but once he has done so the burden shifts to the bankrupt")
(internal quotation omitted).
Here, the Bankruptcy Court denied Appellant a discharge of his debts on two
separate and independent grounds. The Bankruptcy Court denied Appellant's
discharge under§ 727(a)(2) of the Bankruptcy Code based on findings that
Appellant had concealed his ownership of the finpay .net and chriswolfington.com
domain names - which constitute property of the bankruptcy estate -

after filing

his Chapter 7 petition with the intent to hinder, delay, or defraud creditors and the
Chapter 7 trustee. Alternatively, the Bankruptcy Court denied Appellant's
discharge under§ 727(a)(4) of the Bankruptcy Code based on findings that
Appellant had knowingly and fraudulently made false oaths in or in connection
with his Chapter 7 case with respect to the domain names and his 2014 income
from MCA.
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On appeal, Appellant argues that the Bankruptcy Court erred in applying the
preponderance of evidence standard in denying the discharge and should have
applied a clear and convincing standard of proof. (D.I. 8 at 29-31). Appellant cites
no authority in support of his argument. (Id. at 12, 15, 26, 27 & 28). As the UST
correctly points out, the Third Circuit has acknowledged that the "preponderance
of the evidence" is the correct standard of proof under§ 727(a) of the Bankruptcy
Code. See, e.g., Cho v. Park (In re Park), 682 F. App'x 88, 92 (3d Cir. 2017);

Serio v. DiLoreto (In re DiLoreto), 266 F. App'x 140, 144 (3d Cir. 2008); Georges
v. Georges (In re Georges), 138 F. App'x 471, 472 (3d Cir. 2005). 3 The Court
therefore rejects Appellant's argument on this point.
Appellant further argues that the Bankruptcy Court erred in denying his
discharge based on his failure to list chriswolfington.com as an asset (D.I. 8 at 1417); his failure to list his interest in finpay.net as an asset (see id. at 17-19); and the
discrepancy in prepetition income reported on his schedules and the transfers that
MCA reported on its schedules (see id. at 17-19). Appellant further argues that the
UST improperly used extrinsic evidence to attack Appellant's credibility and that
the Bankruptcy Court exhibited improper bias against the Appellant. (See id. at

The Third Circuit's holding is consistent with the holdings of other circuit courts
of appeals. See, e.g., Barclays/Am. Bus. Credit, Inc. v. Adams (In re Adams), 31
F.3d 389,394 (6th Cir. 1994); Farouki, 14 F.3d at 249 n.17; Beaubouef v.
Beaubouef (In re Beaubouef), 966 F.2d 174, 178 (5th Cir. 1992); First Nat'! Bank
of Gordon v. Serafini (In re Serafini), 938 F.2d 1156, 1157 (10th Cir. 1991).
3

11

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19-24). Finally, Appellant argues that the Bankruptcy Court erred in limiting
Moore's testimony. (Id. at 28-30). The Court addresses each argument in tum.

A.

Denial of Discharge Pursuant to § 727(a)(2)

Under§ 727(a)(2)(B) of the Bankruptcy Code, Appellant cannot receive a
discharge of his debts if he concealed assets after filing his Chapter 7 case with the
intent to hinder, delay, or defraud creditors or the case trustee. 11 U.S.C. §
727(a)(2)(B). To make a prima facie case under§ 727(a)(2)(B), the UST had to
show that Appellant (i) concealed (ii) an asset of the bankruptcy estate (iii) after
his bankruptcy petition was filed (iv) with the intent to hinder, delay, or defraud
creditors or the Chapter 7 case trustee. On appeal, Appellant mainly disputes that
the UST established these elements or that the Bankruptcy Court provided any
rationale for determining that Appellant acted with requisite the intent.
The Bankruptcy Court did nor err in concluding that Appellant concealed the
domain names by not including them on his schedule of assets. "Debtors have an
absolute duty to report whatever interests they hold in property, even if they
believe their assets are worthless or are unavailable to the bankruptcy estate." In re

Yonikus, 974 F.2d 901, 904 (7th Cir. 1992). Appellant's arguments that the
Bankruptcy Court should have excused his failure to disclose finpay .net because he
thought "it could not be sold even if [he] had some type of interest" (D .I. 8 at 19)
and his failure to disclose chriswolfington.com because he thought it was "a
valueless asset" (id. at 17) are meritless here. The Third Circuit has defined
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"concealment" as not only "to secrete or hide away" but also "to prevent the
discovery of or to withhold knowledge of' an estate asset. In re Von Kiel, 550 F.
App'x 105, 108 (3d Cir. 2013) (internal quotations omitted) (emphasis added).
Appellant concealed his interests in the domain names when he failed to include
them on his schedule of assets. See Gronlund v. Anderson (In re Gronlund), 656 F.
App'x 851, 852 (9th Cir. 2016) (affirming denial of discharge under§ 727(a)(2)(B)
because the debtor's "failure to specifically list the property interest in his
schedules ... amounted to acts of concealment").
Second, the Bankruptcy Court did not err in determining that the domain
names are assets of Appellant's bankruptcy estate. Property of the bankruptcy
estate includes "all legal or equitable interests of the debtor in property as of the
commencement of the case." See 11 U.S.C. § 541(a)(l). A domain name of which
the debtor is the registered owner is "a species of property" of the debtor's
bankruptcy estate, "[a]nd as such, it must be reported on a debtor's bankruptcy
schedules." Panda Herbal Int'l, Inc. v. Luby (In re Luby), 438 B.R. 817, 829-30
(Banlcr. E.D. Pa. 2010); see also Partners for Health & Home, L.P. v. Seung Wee

Yang, 488 B.R. 109, 119 (C.D. Cal. 2012) ("[D]omain names are assets which a
debtor must list on his asset schedules."); King Louie Mining, LLC v. Comu (In re

Comu), 2014 WL 3339593, at *11 n.208 (Banlcr. N.D. Tex. July 8, 2014)
("Domain names are assets that must be disclosed in bankruptcy.").

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It is undisputed that chriswolfington.com is property of the bankruptcy estate
because Appellant admitted to owning that domain name. (A314, Tr. at 57:11-19;
A628, Tr. at 108:20-21). Although Appellant argues that the site is "social media"
similar to Facebook and Linkedln (D.I. 8 at 14-17), the Bankruptcy Court
determined that it is distinguishable because, while a domain name controls and can buy and sell, or use however he wants -

which he

is Appellant's property,

a social media page is not. See In re CTLI, LLC, 528 B.R. 359,367 (Bankr. S.D.
Tex. 2015) (holding that an individual's social media page is not property of the
individual's bankruptcy estate). As a result, the chriswolfington.com domain name
is property of Appellant's bankruptcy estate that he was required to disclose.
Although Appellant disputed owning finpay.net (A594, Tr. at 74:11-14),
Appellant did not deny that he was its the "registrant," (A31 l, Tr. at 131: 12-24),
which means he was finpay.net's registered owner. See Jubber v. Search Mkt.

Direct, Inc. (In re Paige), 413 B.R. 882, 891 (Bankr. D. Utah 2009), aff'd sub
nom., Search Mkt. Direct, Inc. v. Jubber (In re Paige), 443 B.R. 878, 898 (D. Utah
2011), aff'd in part, rev 'din part on other grounds, 685 F.3d 1160 (10th Cir. 2012)
("Paige remained the registered owner of the Domain Name (also known as the
registrant)[.]"). As a result, the finpay.net domain name is also property of
Appellant's estate that had to be disclosed on his schedule of assets.
Third, the failure to disclose assets on a debtor's schedules constitutes the
postpetition concealment of estate assets for purposes of section 727(a)(2)(B). See,
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e.g., Gronlund, 656 F. App'x 852; Montedonico v. Beckham (In re Beckham),
2009 WL 1726526, at *8 (B.A.P. 6th Cir. June 19, 2009). More specifically, the
failure to disclose internet domain names registered to a debtor constitutes
postpetition concealment for purposes of§ 727(a)(2)(B). Luby, 438 B.R. at 8293 0. As a result, Appellant engaged in postpetition concealment of finpay .net and
chriswolfington.com when he failed to disclose them on his schedules.
Fourth, the requisite intent under§ 727(a)(2)(B) need only be to "hinder" or
"delay" creditors and the Chapter 7 trustee by keeping them from learning of the
domain names' existence, and not necessarily to "defraud" them. See Retz v.

Samson (In re Retz), 606 F.3d 1189, 1200 (9th Cir. 2010). The intent required for
§ 727(a)(2)(B) is determined from "surrounding circumstantial evidence," so it
"must be gleaned from inferences drawn from a course of conduct." Rosen v.

Bezner, 996 F.2d 1527, 1534 (3d Cir. 1993). "[A] debtor's pattern of concealment
and nondisclosure, along with his reckless disregard for the truth, can support a
finding that he acted with [the requisite] intent" under section 727(a)(2)(B). In re

Rahmi, 535 B.R. 655,661 (Bankr. N.D. W. Va. 2015).
Here, the Bankruptcy Court found that Appellant failed to disclose two
domain names. The Bankruptcy Court further noted that Appellant did not give a
straight answer about finpay.net during his meeting of creditors. (A618, Tr. at
98:17-22 ("You didn't answer the question. You said something non-responsive
which was you managed it. You didn't actually deny ownership. You didn't
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admit ownership, but you said you managed it. You didn't actually answer the
question that he asked you."). The Bankruptcy Court also made these findings in
the wake of its previous findings in the MCA case that the witness testimony
presented by Appellant evinced "a lack of credibility" and "was inconsistent" and
"intentionally vague" -

and that Appellant was "the least reliable" witness of all.

(A335, Tr. at 91:8-12).
Having met the initial burden by producing evidence establishing the basis
for his objection, the burden shifted to Appellant to rebut UST's evidence.
Appellant presented witness testimony that he did not own finpay.net. (A538, Tr.
at 18:9-19; A549-A551, Tr. at 29:25-31 :8; A584-A585, Tr. at 64:19-65:10; A594,
Tr. at 74:11-13; A603, Tr. at 83:4). Appellant also testified that he did not think it
was appropriate to include chriswolfington.com on his schedules. (A628- A629,
Tr. at 108:1-109:2). Appellant produced no other evidence as to the value of
either domain name. See Schott v. Mclear (In re Larry Koenig & Assocs., LLC),
2004 WL 3244582, at *6 (Bankr. M.D. La. Mar. 31, 2004) ("The right to use a
domain name can have significant value, in much the same way that a unique
telephone number can for a business."). As a result, the Court finds no basis for
Appellant's assertion that he lacked the requisite intent because the domain names
were not marketable. (See D.I. 8 at 15-19).
The Bankruptcy Court found, based on all of the documents and testimony
presented as a whole, that Appellant possessed the requisite intent when he
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concealed the domain names by failing to disclose them on his schedules.
Although Appellant disagrees with that finding, it was not clearly erroneous.
Anderson v. City ofBessemer City, 470 U.S. at 575-76 (holding that a factual

finding based on the credit given witness testimony by the trial court "can virtually
never be clear error").
Appellant has failed to show that the Bankruptcy Court based its decision on
a clearly erroneous finding of fact, an erroneous legal conclusion, or an improper
application of law to fact. The UST made a prima facie showing that Appellant
concealed estate assets post-petition with the intent to hinder, delay, or defraud
creditors and the Chapter 7 case trustee, which Appellant did not successfully
rebut. Therefore, the Court finds not basis to conclude that the Bankruptcy Court
abused its discretion or otherwise erred in denying Appellant's discharge under§
727(a)(2)(B), and the Judgment may be affirmed on that basis alone.

B.

Denial of Discharge Pursuant to§ 727(a)(4)

The Bankruptcy Court determined that Appellant violated§ 727(a)(4) based
on his (i) "omission of his ownership interests in two web addresses" and (ii)
"misrepresentation ofhis 2014 MCA income." (A688). Section 727(a)(4)
"imposes affirmative duties upon a debtor to disclose the existence of all assets and
his ownership interest in property and to answer all questions fully and honestly for
the benefit of his or her creditors and other parties with an interest in the proper
administration of the debtor's bankruptcy case who are entitled to a truthful
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statement of the debtor's financial condition." In re Henderson, 134 B.R. 147, 159
(Bankr. E.D. Pa. 1991) (internal quotations and citation omitted). Appellant
should receive a discharge of his debts unless he knowingly and fraudulently made
a false oath in or in connection with the bankruptcy case. 11 U.S.C. §
727(a)(4)(A). "According to the plain language of§ 727(a)(4)(A), all that is
required for a denial of discharge is a single false oath or account." See Smith v.

Grondin (In re Grondin), 232 B.R. 274,277 (B.A.P. 1st Cir. 1994) (internal
quotation omitted).
The parties appear to agree that to make a prima facie case, the UST had to
show that: (i) Appellant made one or more false oaths in or in connection with his
bankruptcy case; (ii) the false oaths were material; (iii) the false oaths were
knowingly made; and (iv) the false oaths were made with fraudulent intent. (See
D.I. 8 at 11-12 (citing In reKisberg, 150 B.R. 354,356 (Bankr. M.D. Pa. 1992);

Henderson, 134 B.R. at 159; In re Ward, 92 B.R. 644, 647 (Bankr. W.D. Pa.
1988); see D.I. 9 at 25 ( citing Retz, 606 F.3d at 1197)).
The UST argues that there can be no dispute that Appellant made several
false oaths in or in connection with this bankruptcy case because his schedules and
initial statement of financial affairs did not disclose the finpay .net and
chriswolfington.com domain names or his accurate 2014 MCA income. See Elian,
659 F. App'x at 106 (finding that failure to disclose assets in schedules was a false
oath); Retz, 606 F.3d at 1196 ("A false statement or an omission in the debtor's
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bankruptcy schedules or statement of financial affairs can constitute a false oath.")
(internal quotation omitted). Appellant's contentions on appeal center on the latter
three elements.
"Whether a debtor has made a false oath within the meaning of section
727(a)(4)(A) is a question of fact." Williamson v. Fireman's Fund Insurance Co.,
828 F.2d 249,251 (4 th Cir. 1987); In re Roe, 146 F.2d 266,267 (3d Cir. 1944).
Accordingly, the Bankruptcy Court's findings with respect to this issue may not be
set aside unless clearly erroneous. See Williamson, 828 F .2d at 251; Meridian

Bank, 1991 WL 333927 at *3.
1.

Materiality

Appellant argues that the UST did not establish that Appellant's failure to
disclose the websites and the $15,000 discrepancy in MCA income were material,
and takes issue with the Bankruptcy Court's observation that Appellant should
have recalled the $15,000 transfer because $15,000 was "7.5% of [Appellant's
total income, 20% of his employment or business operations income, and 12% of
all income less 40l(k) withdrawals" (A678). (See D.I. 8 at 11-12, 20-22).
Appellant argues that the Bankruptcy Court's estimation of his yearly income was
incorrect, and that the $15,000 in income represents only "two tenths of one
percent of the $7,214,628,20, which is the amount of debts that [Appellant] had
reported." (D.I. 8 at 21). Appellant argues materiality is not met here as his
personal website its valueless, his interest in finpey.net disputed, and the $15,000
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discrepancy, while not an insignificant sum, "is less significant to an executive
earning several hundred thousands of dollars a year with a debt load in excess of
seven million dollars than it would be to someone regularly earning an annual
income of $60,000 with expenses." (Id. at 21-22).
Appellant's argument misses the mark. Appellant's false oaths were
material, because they "bear[ ] a relationship to [his] business transactions or his
estate, ... or concern[ ] the discovery of [his] assets, business dealings, and
relations ... , the existence and disposition of his property and debts and the like."

Steiker, 380 F.2d at 768 (internal citation and quotation omitted). Contrary to
Appellant's argument regarding the value of the undisclosed assets (D.I. 8 at 1424 ), "materiality is not defeated by the fact that the undisclosed property interests
are determined to be without value." US. Trustee v. Garland (In re Garland), 417
B.R. 805, 814-15 (B.A.P. 10th Cir. 2009); see also Premier Capital, LLC v.

Crawford (In re Crawford), 841 F .3d 1, 8 (1st Cir. 2016) ("Like many of our sister
courts, we have rejected the notion that valuation determines materiality."). It is
also irrelevant that the Chapter 7 case trustee will not administer the undisclosed
assets, as courts "need not analyze ... whether creditors could recover from the
asset[s]." Crawford, 841 F.3d at 9. As the false oaths concerned Appellant's
assets and income, they were material.

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2.

Whether the False Oaths Were Knowingly Made

Appellant argues that his false oaths were not made knowingly and with the
requisite intent under § 72 7(a)(4) because he was represented by counsel when he
completed his schedules and statement of financial affairs (see D.I. 8 at 16-17 &
22-23). However, nothing in the record before the Bankruptcy Court established
that Appellant disclosed to his bankruptcy counsel either his actual 2014 MCA
income or his interests in finpay .net and chriswolfington.com. The mere fact that
he had engaged counsel is irrelevant; as the UST correctly points out, advice of
counsel is only a defense as to legal advice rendered by counsel that has been fully
informed by the debtor of the relevant facts. See Zizza v. Harrington (In re Zizza),
875 F.3d 728, 732-33 (1st Cir. 2017) (rejecting advice of counsel defense in
section 727(a)(4) proceeding where debtor did not advise counsel of pending
lawsuits); Darwin (Huck) Spaulding Living Trust v. Carl (In re Carl), 517 B.R. 53,
70-71 (Bankr. N.D.N.Y. 2014) (rejecting advice of counsel defense in section
72 7(a)( 4) proceeding where "vital factual information was withheld from Debtor's
counsel"). The Bankruptcy Court did not err by not finding something Appellant
never sought to prove. See Shoemaker v. United States Trustee (In re Shoemaker),
2019 WL 2774265, at *15 (B.A.P. 9th Cir. July 1, 2019) (affirming denial of
discharge under section 727(a)(2) and (a)(4) where there was no evidence that
counsel had advised debtor not to disclose assets).

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Appellant's false oaths were knowingly made, as he knew of the existence of
the undisclosed domain names and his 2014 income from MCA yet made false
statements to the contrary under penalty of perjury. Steiker, 380 F.2d at 767
(identifying the "well-settled principle[]" that "it is sufficient that the bankrupt
knows what is true and, so knowing, willfully and intentionally swears to what is
false"). The fact that Appellant was represented by counsel when he prepared his
schedules and statement of financial affairs does not protect him from having his
discharge denied.

3.

Fraudulent Intent

Making a false oath, rather than making accurate disclosures, warrants an
inference that the false oath was made with the intent to defraud creditors. See

Steiker, 380 F.2d at 767 (identifying the "well-settled principle[]" that "the
making of a false oath is sufficient to justify an inference of an intent to defraud
creditors"). In addition, "[r]eckless indifference to the truth is the functional
equivalent of fraud for the purpose of denying a discharge to a debtor under
727(a)(4)." Elian, 659 F.3d at 106.
As to chriswolfington.com, Appellant argues this personal media website
had no commercial value, and he thus had no motive to fraudulently conceal it.
(D.I. 8 at 16). Appellant further argues that the Bankruptcy Court offered no
explanation as to why Appellant's failure to list his personal website was
fraudulent concealment, "as opposed to [Appellant] not realizing it would be
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considered an asset or simply being a valueless asset that was inadvertently missed
in attempting to list all of his assets where the logical and understandable focus of
both [Appellant] and his legal counsel would be on assets [that] had some potential
value." (Id. at 17).
With respect to finpay.net, Appellant argues that the UST devoted no time to
establishing fraudulent intent, and the Bankruptcy Court "inexplicably" ruled that
Appellant was obligated to list finpay.net as an asset on his schedules despite the
Bankruptcy Court's determination that, in light of testimony regarding alleged
interests in the website held by FinPay, LLC, "alienability rights" with respect to
finpay .net were not apparent - "it is not obvious who has the right to order the
site's sale." (A680). Appellant argues that "one cannot be found to have
intentionally and fraudulently concealed an asset when one does not believe that
they own the asset[,] especially when another party claims to own the asset ... "

(Id. at 19). Appellant argues that the Bankruptcy Court offered no rationale in
support of its finding that finpay.net was intentionally and fraudulently concealed.
Finally, with respect to the $15,000 discrepancy between the amount of
"employment income" that Appellant reported as having received in 2014 from
MCA and the amount of "all payments" that MCA reported having made to
Appellant during 2014, Appellant argues that UST failed to meet his burden of
establishing that Appellant acted with fraudulent intent in disclosing those sums.
Appellant argues his testimony establishes that he did not have access to MCA's
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records and that he estimated his prepetition earning for 2014 prior to being
replaced by the Chapter 11 Trustee of MCA based on the salary he recalled earning
of about $20,000 per month. Appellant testified that he believed the reason for the
$15,000 discrepancy between the income reported on his schedules and the
transfers reported in the MCA schedules was related to interest payments that
MCA made to him in connection with loans he previously made to MCA.
According to Appellant, this testimony does not support a finding of fraudulent
intent or reckless indifference to his reporting obligations.
The Court disagrees. The Bankruptcy Court's finding that Appellant
exhibited, at the very least, a "reckless indifference" to providing accurate
information on his schedules and statement of financial affairs (A679), was
supported by the evidence as a whole and was not clearly erroneous. Appellant
testified that he did not disclose finpay.net because, although admitting to be the
registrant of the domain name, he did not think he had an interest that had to be
disclosed. Appellant similarly testified that he did not disclose
chriswolfington.com because he thought it had no value. However, "debtors have
an uncompromising duty to disclose whatever ownership interest they hold in
property, and they must disclose everything, rather than make decisions about what
they deem important enough for parties in interest to know." Garland, 417 B.R. at
815 (internal quotations and alteration omitted).

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With regard to his 2014 income from MCA, Appellant did not disclose it
regardless of whether it was salary income or interest income, both of which must
be disclosed in the statement of financial affairs. (Al25-A126, A135-Al36).
Although Appellant attributed his failure to accurately report his MCA income to
the fact that he had no access to MCA's records (D.I. 8 at 20-22), that does not
explain why he did not simply look up his own bank records -

after all, he

testified that he received payments from MCA by direct deposit (A625, Tr. at
105:2-3). Looking up his own bank records would have definitively answered how
much MCA deposited into his account during January through March of 2014.
Appellant's failure to take that simple step before preparing his statement of
financial affairs and signing it under penalty of perjury evinces his reckless
indifference to disclosing his 2014 income. As the Bankruptcy Court noted that,
" [c] laims of ignorance or good faith error are further belied by the fact that
[Appellant] had earlier been able to determine his 2014 MCA income" in preparing
MCA's statement of financial affairs, which "manifests his reckless indifference to
the truth, the kind that constituted fraudulent intent under§ 727[(a)(4)]." (A679
(internal quotation omitted)).
In sum, Appellant made several false oaths in connection with his
bankruptcy case because his schedules and initial statement of financial affairs did
not disclose the finpay.net and chriswolfington.com domain names or his accurate
2014 MCA income. (D.l. 9 at 25-26). See Elian, 659 F. App'x at 106 (finding that
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failure to disclose assets in schedules was a false oath); Retz, 606 F .3d at 1196 ("A
false statement or an omission in the debtor's bankruptcy schedules or statement of
financial affairs can constitute a false oath.") (internal quotation omitted). The
record supports, at the very least, "a pattern of extreme carelessness and
indifference" (A670 at n. 29) which "is the functional equivalent of fraud for the
purpose of denying a discharge to a debtor under § 72 7(a)(4). " Elian, 6 59 F. 3d at
106. Appellant has failed to show that the Bankruptcy Court based its decision on
a clearly erroneous finding of fact, an erroneous legal conclusion, or an improper
application of law to fact. Therefore, the Court finds no basis to conclude that the
Bankruptcy Court abused its discretion in denying Appellant's discharge under§
727(a)(4), which constitutes an additional basis to affirm the Judgment.

C.

Testimony of Moore

Appellant argues that the Bankruptcy Court erred in limiting the testimony
of Moore. (Id. at 28-30). As the UST correctly points out, reviewing courts grant
considerable deference to the lower court's decision to exclude witness testimony.

See DCK TTEC, LLC v. Postel Indus., Inc., 602 F. App'x 895, 897-98 (3d Cir.
2015) (affirming lower court's decision to exclude testimony of a witness who was
not disclosed during discovery). (D.I. 9 at 34). The testimony Appellant sought to
elicit would purportedly have addressed FinPay, LLC, which was one of the
businesses the UST argued Appellant should have disclosed on his schedule of
assets and statement of financial affairs. (A540-A546, Tr. at 20:24-26:9).
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However, in responding to discovery, Appellant failed disclose Moore as an
investor in FinPay, LLC (A538-A540, Tr. at 18:17-20:22). Accordingly, the
Bankruptcy Court determined that the UST "never had an opportunity to depose
this witness because he had no idea he was related to your case" (A542, Tr. at
22:2-4). Appellant ultimately agreed to limit his questioning of Moore to matters
other than FinPay, LLC. (A545-A546, Tr. at 25:25-26:9). The Court agrees that
the limitation of Moore's testimony did not adversely affect Appellant. Indeed,
Appellant prevailed below on the issue regarding which Appellant was not allowed
to testify. (A676 ("There is insufficient evidence to show that [Appellant] owned
FinPay.")). As for the matters on which he was allowed to testify, Moore provided
testimony beneficial to Appellant regarding finpay.net. (A538, Tr. at 18:9-19;
A549-A551, Tr. at 29:25-31 :8). Appellant has failed to establish that Moore could
have provided any additional testimony regarding finpay .net, or any testimony at
all regarding chriswolfington.com or Appellant's 2014 income from MCAwhich are the only parts of the Bankruptcy Court's decision relevant to this appeal.
Appellant has not shown that there is any testimony Moore could have
presented, but was not allowed to present, that would have changed the result with
regard to the issues on appeal. The Court agrees with the UST that any error the
Bankruptcy Court made in limiting his testimony was mere harmless error, not
reversible error. See United States v. Evdokimow, 726 F. App'x 889, 896 (3d Cir.
2018) (error in evidentiary ruling is harmless where it "did not prejudice the
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defendant" because "it is highly probable that the error did not affect the result")
(internal quotations omitted); see also Fed. R. Civ. P. 61 (made applicable by Fed.
R. Banla. P. 9005) ("At every stage of the proceeding, the court must disregard all
errors and defects that do not affect any party's substantial rights.").

D.

Consideration of Appellant's Credibility in MCA Proceeding

Finally, Appellant argues that the Banlauptcy Court's consideration of its
prior experience with him as a witness in MCA's Chapter 11 case was "improper"
and evinced "bias" requiring the banlauptcy judge to recuse himself. (D.I. 8 at 23

& 24-28). Conversely, the UST argues that Appellant never objected to this
evidence being considered by the Banlauptcy Court, so the issue has been forfeited
and cannot be raised for the first time on appeal. See Williams v. Borough of

Highland Park, 707 F. App'x 72, 76-77 (3d Cir. 2017) (holding that an issue not
raised below is forfeited).
Appellant responds that the issue has not been waived. Appellant argues
that he "filed a request for a telephone conference on February 19, 2019 [D.I. 129]
on the very issue of . . . the UST overreaching on the pretrial order including the
Banlauptcy Court's determination on a different matter in the MCA banlauptcy
case that Appellant had been found not to be credible." (See D.I. 12 at 16).
However, Appellant does not cite any "filed request" addressing this issue.

(See id.) The document cited by Appellant-Adv. D.I. 129 - is merely a notice
advising that a telephonic status conference would be held on February 22, 2019
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regarding the "proposed pre-trial order." No transcript of that telephonic status
conference is available on the docket nor has one been provided to the Court.
Appellant has failed to identify that transcript in the record on appeal (see D.I. 3)
or cite any portion of the record where his objection to use of the April 24, 2014
transcript was raised.
The Bankruptcy Court determined that it could take judicial notice of the
April 24, 2014 hearing transcript excerpt under Federal Rule of Evidence 201.
(Adv. D.I. 132 at 119(c)). The Pre-Trial Order identified, under the category of
"facts not subject to genuine dispute, or subject to dispute that the identified
document is authentic and admissible," the following:

1. The Court's finding in the MCA Chapter 11 (14-10603) case that
[Appellant] was not a reliable witness: "I thought there was a lack of
credibility of the witnesses. The testimony was inconsistent. It was, I
believe, intentionally vague, and that applies to all of the witnesses,
albeit, [Appellant] I found to be the least reliable."
m. The Court's finding that in the MCA Chapter 11 case that
[Appellant] ran MCA as his own company: "There was a disregard, I
think, of accountability and really the company was really used as
[Appellant]' s personal piggy bank."
(Adv. D.I. 132 at 6,121 (1)-(m) (citing Adv. D.I. 104-19 & 104-22)). At the
hearing, Appellant simply notes that the "Bankruptcy Court overruled Appellant's
objection to use of this proper evidence." However, without supporting
documents, the Court cannot conclude that this issue was raised by Appellant.

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Even if the issue has not been waived, the UST argues, the Bankruptcy
Court did not abuse its discretion or otherwise err by recalling its past experience
with Appellant reliability as a witness in a related proceeding when considering
whether to credit his testimony here. The Bankruptcy Court had broad discretion
in deciding the admissibility of evidence -

including evidence regarding

Appellant's reputation for truthfulness pursuant to Federal Rule of Evidence 608(a)
-

and, on appeal, a reviewing court "will not disturb a trial court's exercise of

discretion unless no reasonable person would adopt the [trial] court's view."
Stecyk v. Bell Helicopter Textron, Inc., 295 F.3d 408, 412 (3d Cir. 2002).
The Bankruptcy Court's consideration of its past experience with Appellant
as a witness was not unreasonable. In making its determination under§
727(a)(2)(B), the Bankruptcy Court was allowed to consider Appellant's pre- and
post-petition pattern of behavior. See In re Zhang, 463 B.R. 66, 85-86 (Bankr.
S.D. Ohio 2012) (reviewing debtor's prepetition actions to determine requisite
intent in denying discharge under§ 727(a)(2)(B)). The Bankruptcy Court did not
abuse its discretion or otherwise err by considering all of the circumstances that
\
exhibit Appellant's pattern of behavior. The Bankruptcy Court not only observed
Appellant's testimony in MCA's Chapter 11 case, it observed his testimony here.
"When findings are based on determinations regarding the credibility of witnesses,
[Fed. R. Civ. P.] 52(a) demands even greater deference to the trial court's findings;
for only the trial judge can be aware of the variations in demeanor and tone of
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voice that bear so heavily on the listener's understanding of and belief in what is
said." Anderson v. City ofBessemer City, 470 U.S. at 575.
Finally, the Court finds no basis for the Bankruptcy Court to recuse itself
due to bias. "The judge who presides at a trial may, upon completion of the
evidence, be exceedingly ill disposed toward the defendant, who has been shown
to be a thoroughly reprehensible person. But the judge is not thereby recusable for
bias or prejudice, since his knowledge and the opinion it produced were properly
and necessarily acquired in the course of the proceedings[.]" Liteky v. United
States, 510 U.S. 540, 550-51 (1994); see also id. at 551 ("Also not subject to
deprecatory characterization as 'bias' or 'prejudice' are opinions held by judges as
result of what they learned in earlier proceedings."); In re Shusterman, 394 F.
App'x 888, 890 (3d Cir. 2010) (recusal not required even though judge, at plea
withdrawal hearing, referred to defendant as "one of the most specially-talented
liars that I've ever met in my life.").

V.

CONCLUSION
In support of his objection to discharge, the UST established a prima facie

case under§§ 727(a)(2) and (a)( 4), which Appellant failed to rebut. Appellant has
failed to show that the Bankruptcy Court based its opinion on a clearly erroneous
finding of fact, an erroneous legal conclusion, or an improper application of law to
fact. Therefore, the Court finds no basis to conclude that the Bankruptcy Court
abused its discretion in denying Appellant's discharge under§§ 727(a)(2) and (4).
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The Court will issue a separate Order consistent with this Memorandum
Opinion.

32