Former CEO of Lancaster County Oil & Gas Company Sentenced to 14 Years in Prison for $65 Million Bank Fraud
PHILADELPHIA – United States Attorney William M. McSwain announced that Jeffrey Lyons, 59, of Lancaster, PA was sentenced to fourteen years in prison, and ordered to pay restitution of $53 million to Fulton Bank and $550,000 to the IRS, by Judge Jeffrey L. Schmehl for orchestrating a massive bank fraud scheme over many years.
In October 2019, Lyons, the former CEO of Worley & Obetz, pleaded guilty to one count of defrauding Fulton Bank of over $65 million between 2003 and 2018. Lyons also pleaded guilty to one count of tax evasion. The defendant admitted that he, along with Worley & Obetz’s two controllers, Karen Connelly and Judith Avilez, committed bank fraud by providing Fulton Bank with dozens of fraudulent financial statements and a fraudulently altered supply agreement between Worley & Obetz and its largest customer, Giant Food. Worley & Obetz was an oil and gas company in Manheim, PA, that provided services and home heating oil, gasoline, diesel, and propane to its customers.
Lyons enlisted the help of the Worley & Obetz controllers to create the fraudulent financial statements, making it appear to the bank and the company’s owners that it had over $55 million in accounts receivable from Giant Food for purported fuel that Giant had supposedly purchased from Worley & Obetz. In truth, Giant rarely purchased fuel from Worley & Obetz after 2011, and when they did, it was in small amounts. The falsified financial statements made Worley & Obetz appear to have millions more revenue and accounts receivable than it did. Each month, for more than fifteen years, Lyons and the company controllers created false Worley & Obetz financial statements, which Lyons presented to Fulton Bank in support of his request for additional loans or extensions on existing lines of credit. Fulton Bank relied on the fraudulent financial statements when it lent Worley & Obetz over $65 million.
Lyons used the Fulton loans to pay Worley & Obetz expenses, which included his annual salary of over $500,000. He also used the borrowed money to make Worley & Obetz appear profitable when it was actually operating at a loss, to pay interest on the earlier loans he borrowed from Fulton, and to fund some of his personal expenses including real estate worth millions. Additionally, from 2012 through 2017, Lyons failed to report over $1.4 million of income to the IRS.
After Lyons’ scheme was discovered, Worley & Obetz and its related companies did not have the assets to repay the massive amount of Fulton loans that Lyons had accumulated. In June 2018, Worley & Obetz declared bankruptcy. It notified its approximately 275 employees that they no longer had jobs and, after 72 years, the family-owned company closed its doors forever. As a result of Lyons’ fraud, many in the Manheim, PA community suffered greatly – both financially and emotionally.
“The scope and duration of the fraud committed by Lyons is simply stunning,” said U.S. Attorney McSwain. “He stole tens of millions of dollars from bank lenders, all while willfully ignoring his fiduciary duty to the company and the hundreds of people who made their livelihoods working there. This case is a tragedy for the many honest, hardworking people who placed their trust in Lyons. My Office will continue to work aggressively with our law enforcement partners to protect innocent individuals and businesses from being victimized by financial fraud.”
“Over the course of 15 years, at Jeffrey Lyons’ direction, financial records were repeatedly falsified to inflate his company’s revenue,” said Michael J. Driscoll, Special Agent in Charge of the FBI’s Philadelphia Division. “This long-running scheme helped prop Lyons up both personally and professionally, as Worley & Obetz amassed millions upon millions in fraudulent loans. In the end, though, his actions bankrupted the business, cost hundreds of innocent people their jobs, and have landed Lyons in federal prison. The FBI is committed to holding accountable anyone engaged in such egregious financial fraud.”
“Mr. Lyons willfully and intentionally violated his known legal duty to file a correct tax return and pay his fair share of taxes,” said IRS Criminal Investigation Special Agent in Charge Thomas Fattorusso. “His failure to report all of his income is a violation of tax laws; one that the courts do not take lightly, as evidenced by the sentence handed down today.”
The case was investigated by the Federal Bureau of Investigation, IRS Criminal Investigations, and Northern Lancaster County Regional Police Department and is being prosecuted by Assistant United States Attorney Tiwana Wright.