Oh, I have no idea whether he lied or not. But if he put "yes" on 12b, I think that would answer the question as to why he was denied. Even if he answered "no" in good faith (I have to admit I'm not sure myself about what the "information/formally accused" part means exactly), whoever evaluated the application may have found out about the arrest and assumed that an indictment or formal accusation had taken place as well.
At the very least, the evaluator should have suspected that given the arrest, an indictment or accusation is likely forthcoming, and an applicant shouldn't be able to game the system by trying to squeak a 4473 in-between the arrest and the indictment/accusation.
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