The new owner of Sterling Financial Corp. announced Monday it will cut up to 59 percent of local jobs at what had been the third-largest banking company in the county.

PNC Financial Services Corp., which finalized a deal April 4 to acquire Sterling, the owner of Bank of Lancaster County, said it will cut between 325 and 425 workers from the firm's 725-person work force in the county.

The cuts will come from Sterling's former headquarters at North Pointe Business Park and administrative services center in East Petersburg.

"We expect those affected to be displaced at or around the conversion to PNC in August," Fred Solomon, a PNC spokesman, said Monday.

Solomon said the job cuts would come mostly from accounting-related positions that duplicate duties performed by existing PNC employees.

"There will no cuts from branches; in fact we're recruiting bank tellers and people in branch positions in the (Lancaster) area," Solomon said.

It is the latest shock wave caused by a $200 million fraud scheme allegedly committed by workers at Lititz-based Equipment Finance, EFI, a former Sterling subsidiary.

Sterling executives had taken measures to save the company but ultimately determined that the increased debt created by the scandal made the sale unavoidable.

Sterling, which had employed 1,100 workers in three states, in July agreed to be purchased by PNC for $535 million, after a "sophisticated loan scandal" was discovered at EFI, a logging equipment financing affiliate, unhinged Sterling's financial structure.

An internal investigation at Sterling disclosed in February found that two executives at EFI were largely responsible for a scheme that approved fraudulent loan applications, forcing the bank to take charges of $200 million and sparking dozens of lawsuits.

Though the U.S. Attorney's Office, Securities and Exchange Commission and other authorities have been investigating the fraud, no charges have been filed.

"We don't have anything on that right now," Patricia Hartman, spokeswoman for the U.S. Attorney's Office in Philadelphia, said Monday.

A Feb. 6 filing with the SEC states that the fraud was allegedly orchestrated by EFI chief operating officer, Joseph M. Braas, Lititz, and EFI executive vice president, Michael J. Schlager, Lancaster.

Braas and Schlager were fired, along with three other EFI employees. EFI's president, George W. Graner, left his job voluntarily.

The fraud involved concealed credit delinquencies, falsified financial contracts and other documents.

Solomon said PNC could not comment on the investigation of EFI.

As for PNC's future plans in Lancaster County, Solomon said the company wants to open a business-loan office here later this year.

The business-loan office will handle loan renewals. Solomon said the office will start with about 10 employees and the staff could grow to as many as 25 workers.

It is not clear whether PNC will open a new office or incorporate it into Sterling's former headquarters.

E-mail: pburns@lnpnews.com