READING — Worley & Obetz's former CEO admitted in federal court here Friday, Oct. 25, that he orchestrated a 15-year fraud that ultimately wiped out the firm, costing all 200 employees their jobs.

Jeffrey B. Lyons, 58, of Lancaster, pleaded guilty to one count of bank fraud before U.S. District Judge Jeffrey L. Schmehl here.

Lyons also pleaded guilty to one count of tax evasion.

Free on $50,000 bond, Lyons was scheduled for sentencing on Feb. 18.

Assistant U.S. Attorney Tiwana Wright said she will ask the judge to impose a prison sentence of 19-1/2 years to 24 years.

As part of a plea agreement, Lyons agreed to pay restitution of $55.4 million to Fulton Bank, the victim of the fraud. After he completes his prison sentence, Lyons will be put on a payment schedule to begin whittling down that obligation. 

The fraud involved creating fake financial statements to trick Fulton into extending $74 million in loans over the years, Wright told the court.

The motive behind the scam, she said, was to get money to pay basic operating expenses, including wages and interest due on the loans, and fund expansions while the company was actually unprofitable.

"It kept the doors open," Wright told LNP after the hearing.

Discovery of the scheme unplugged Worley & Obetz's financial lifeline, triggering the Manheim-based energy company's collapse.

Lyons, a one-time winner of the Executive of the Year award from the Central Penn Business Journal, was charged by the U.S. Attorney’s Office in Philadelphia on Oct. 8.

In the charging document, prosecutors said that Lyons operated the fraud from 2003 and 2018.

The scheme began, Wright told the court, when Lyons grew concerned about unprofitable months of operations. He asked the company controller at the time, Karen Connelly, how to make the firm appear profitable.

During those years, the charging document said, Lyons “grossly inflated” Worley & Obetz’s financial statements with phony revenues, receivables and profits to convince Fulton Bank the company was a worthy borrower.

Wright gave the court one specific example of the extent of exaggeration. The fabricated financial statements showed accounts receivable (money owed by customers) of $64 million when the actual amount was $8 million.

Lyons also showed the bank a falsified version of Worley & Obetz’s contract with its biggest customer, Giant Food Stores, that he prepared to help substantiate the phony financial statements, the charging document said.

In the fraud's early years, Lyons wildly inflated the amount of fuel Giant was buying, Wright told the court.

Then in 2011, when Giant stopped buying fuel from Worley & Obetz, Lyons' financial statements showed Giant was still buying large quantities. Actually, Giant was just paying Worley & Obetz to deliver the fuel to its gas stations, she added.

Fulton Bank “relied upon” those doctored financial documents and the bogus contract in its decisions to loan more and more money, the charging document said.

Though the vast majority of the borrowed dollars went to keeping the company up and running, not all did, the charging document indicates.

Lyons tapped the fraud-enriched company coffers to pay for $1.4 million in personal expenses, Wright said.

Lyons also used Worley & Obetz funds to build a personal real-estate portfolio of a half-dozen investment and vacation properties, the trustee overseeing the company’s bankruptcy case alleges.

The bulk of Friday's 30-minute hearing was spent by U.S. District Judge Jeffrey L. Schmehl asking a series of questions to make certain that Lyons understood his rights and was entering his guilty pleas voluntarily.

Lyons, wearing a blue tie, dark blue sports coat and brown pants, answered in a clear, strong voice. He also confirmed Wright's portrayal of what happened and why.

Defense attorney Robert D. Beyer declined to comment on Lyons' pleas.

Lyons allegedly carried out the scheme with the help of two Worley & Obetz’s controllers, who produced the financial documents that displayed the altered figures concocted by Lyons.

They also were charged with bank fraud.

The first controller, Karen Connelly, 65, of Manheim, has yet to enter a plea. She allegedly assisted Lyons for the first 13 years of the scheme, until she retired. Her successor, Judith Avilez, 58, of Elizabethtown, has pleaded not guilty and is free on $50,000 bail. She is set to go to trial in December.

Lyons was charged with tax evasion for not reporting over $650,000 in income he received from Worley & Obetz in 2013, according to the charging document.

The fraud was uncovered in May 2018 after Lyons skipped town rather than attend a meeting with another Worley & Obetz executive and a representative of Giant -- a meeting he knew would uncover his scam. He was fired that day.

Three weeks later, after a plan to rescue the company failed to win the backing of Fulton, Worley & Obetz abruptly closed and filed for bankruptcy liquidation.