He can either say no because he knows that B is lying or say yes and get some free sats from the failed payment. However, if B cannot forward an HTLC to C later, then C cannot have a failed payment and cannot earn any money from the upfront payment scheme. Even though there is still a positive incentive for continuing the lie, C decides to keep the lie going for his benefit. D, the payee, cannot tell that it's a lie when it reaches her. If C wants to tattle, he needs to blame B instead of himself to avoid payers assuming that the liquidity deficit is with C rather than B.