## Facts

- Bucyrus-Erie Co. filed for Chapter 11 reorganization amid substantial debt and complex creditor and equity interests.
- John G. Gellene, a bankruptcy partner at a law firm retained as debtor’s counsel, filed sworn disclosures required for approval and compensation as counsel under Federal Rule of Bankruptcy Procedure 2014.
- The disclosures omitted significant firm “connections” to major parties in interest, including a senior secured creditor group and related entities, and ties to a large equity holder and related entities.
- The evidence showed multiple sworn submissions that repeated the omissions despite the disclosure requirement to list all relevant connections.
- A federal grand jury charged Gellene with two counts of bankruptcy fraud for knowingly and fraudulently making a materially false declaration in a bankruptcy case (18 U.S.C. § 152) and one count of perjury for using a document under oath knowing it contained a materially false declaration (18 U.S.C. § 1623).
- A jury convicted Gellene on all counts; the district court imposed concurrent 15-month prison terms, a fine, and supervised release.
- On appeal, Gellene argued that he exercised poor judgment but lacked fraudulent intent, challenged the meaning of “fraudulently” under § 152, and disputed materiality and other trial rulings.

## Issues

1. Whether “fraudulently” in 18 U.S.C. § 152 requires a specific intent to affect the distribution of the bankruptcy estate’s assets, or whether intent to deceive is sufficient.
2. Whether omissions in sworn Rule 2014 disclosures can be materially false declarations supporting convictions under § 152 and § 1623, and whether the evidence was sufficient to prove knowledge, fraudulent intent, and materiality.
3. Whether asserted instructional, evidentiary, or argument-related errors warranted reversal or a new trial.

## Decision

- The court affirmed the convictions and sentence.
- It held that, for § 152, a false statement is made “fraudulently” if made with intent to deceive; the government need not prove a separate intent to change creditor distributions or divert estate assets.
- It held that omissions of required information in bankruptcy filings can be materially false because they impair the bankruptcy court’s ability to assess disinterestedness and conflicts and to supervise the case.
- It concluded the evidence permitted a rational jury to find Gellene acted knowingly and with intent to deceive, given repeated sworn omissions involving central parties in interest and the circumstances supporting an inference of motive to avoid disqualification and loss of fees.
- It rejected remaining challenges to the trial and found no basis for acquittal or a new trial.

## Legal Principles

- Under 18 U.S.C. § 152, “fraudulently” encompasses intent to deceive in relation to a bankruptcy proceeding; proof of intent to alter estate distributions is not required.
- A knowingly false or incomplete sworn disclosure filed in a bankruptcy case may satisfy § 152 when the falsity is material to the court’s administration of the proceeding.
- Materiality in this context includes information the bankruptcy court relies on to evaluate professional retention, disinterestedness, and conflicts; omissions can be as obstructive as affirmative misstatements.
- Repeated sworn nondisclosures of significant connections may support an inference of knowledge and intent to deceive, even where the defendant characterizes the conduct as mistake or poor judgment.

## Conclusion

The Seventh Circuit sustained criminal liability for intentional nondisclosure in sworn bankruptcy-court filings, ruling that bankruptcy fraud under § 152 is established by a knowing, material falsehood made with intent to deceive the bankruptcy court or parties, even absent proof of an intent to manipulate distribution of estate assets.


United States v. Gellene, 182 F.3d 578 (7th Cir. 1999)