Triple Bogey for Golf Course Investor: “Reasonable Reliance” for Nondischargeability Under Section 523(a)(2)(B)
An investor in a golf course provided his partner with an incomplete financial statement with the knowledge that the partner would use the financial statement to shop around for a loan to the golf course. The investor claimed that he believed that the partner would fill in the missing parts of his financial statement (notably, the missing parts related to additional undisclosed liabilities, not undisclosed assets). The partner was successful in obtaining a loan, with the investor as the borrower. The golf course operations ultimately could not service the loan. When the investor was pursued for payment, he filed a voluntary Chapter 7. The bank that had relied on the incomplete financial statement objected to discharge.
By Non-dischargeability and Intent to Defraud
The 6th Circuit Bankruptcy Appellate Panel has addressed what constitutes the intent to defraud for purposes of establishing non-dischargeability under Section 523(a)(4) of the Bankruptcy Code. The president of a car dealership appealed the determination that a $2.4 million debt owed to his lender was non-dischargeable as embezzlement.