Jeffrey Lyons - Worley Obetz

Jeffrey B. Lyons, the former CEO of Worley & Obetz, talks with his attorney, Robert Beyer, outside the federal courtroom in Reading on Oct. 25, 2019 shortly before he pleaded guilty to fraud and tax evasion. 

READING — The former CEO of Worley & Obetz was sentenced to 14 years in prison at a federal court here Wednesday for orchestrating a 15-year fraud that sank the company, costing all 275 employees their jobs.

Jeffrey B. Lyons, 59, of Lancaster, had pleaded guilty in October to one count of bank fraud, for bilking Fulton Bank out of $66.7 million in loans, and one count of tax evasion.

"It's such a horrible crime. It wreaked havoc on an entire community,” U.S. District Judge Jeffrey L. Schmehl said in imposing the sentence.

Assistant U.S. Attorney Tiwana Wright had asked the judge to sentence Lyons to a prison term of 19 to 24 years, citing the size, duration and sophistication of Lyons’ scam and the number of people it harmed, including the employees and the company's owners.

But Schmehl agreed with defense attorney Robert Beyer and federal probation officials that the scheme fell short of the legal definition of sophisticated; for instance it did not involve shell companies or offshore bank accounts.

Before Schmehl pronounced the sentence, Lyons offered an apology.

"I'd like to express my apologies and remorse for the pain and anxiety my actions have imposed on my family, my co-workers and the Obetz family...,” he said.

"I never wanted to hurt anybody," he added.

Beyer described his client as a people-pleaser who "was in over his head from the start. … He didn’t have the intelligence or aptitude or skill set to be in charge of a multi-million-dollar company.”

But because Lyons didn’t want to disappoint the chairman of Worley & Obetz, Bob Obetz Jr., who had promoted him to CEO, Lyons resorted to fraud to cover up his failings, according to Beyer.

“Nobody wants to go into their boss and mentor and say, ‘I’m not smart enough to do this job,” the attorney said.

But the Obetz family saw Lyons’ actions very differently, saying they felt betrayed by a person they had treated and trusted like family.

Bob Obetz Jr.’s daughter-in-law, Melissa Obetz, in scathing remarks, called Lyons a “morally corrupt…sociopath.” She was especially angry at the impact of the fraud on her two sons, who had revered Lyons as “Uncle Jeff.”

“You are an evil monster,” she said. “You deserve to sit in a prison cell for the rest of your pathetic life.”

Seth Obetz, son of Bob Obetz Jr. and husband of Melissa Obetz, said he forgives Lyons but is deeply troubled by the impact of the company’s collapse on his father.

That pain and anxiety will last a lifetime, Bob Obetz Jr. said. Turning to Lyons, he said, “You have an unbelievable burden to carry the rest of your life. May God have mercy on your soul.”

Lyons was taken into custody immediately after the sentencing hearing was concluded, with the judge saying it was important to underscore the severity of Lyons' crimes.

Prison time is not the only punishment for Lyons. As part of his guilty plea, Lyons agreed to pay restitution of $54.0 million to Fulton, the main victim of the fraud, although in reality he'll be able to repay only a minuscule portion of that sum. (Fulton has recouped the other $12.7 million of the $66.7 million through the liquidation of Worley & Obetz’s assets.)

He also must pay $552,000 in restitution to the Internal Revenue Service, for back taxes he owes.

The fraud involved creating fake financial statements to trick Fulton into extending millions of dollars in loans over the years, Wright told the court in October.

The primary motives behind the scam, she said at that time, were 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 that hearing.

Discovery of the scheme in May 2018 unplugged Worley & Obetz's financial lifeline, triggering the Manheim-based energy company’s collapse.

The scheme began in 2003, according to prosecutors, when Lyons grew concerned about unprofitable months of operations, worrying that Worley & Obetz’s owners might want to replace him.

He asked the company controller at the time, Karen Connelly, how to make the firm appear profitable. She told him how to pad the books. So Lyons gave her the phony numbers to enter.

During those years, prosecutors 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.

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

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, prosecutors said.

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

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

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

Also charged with bank fraud were Connelly, 65, of Manheim, and her successor, Judith Avilez, 58, of Elizabethtown.

Connelly pleaded guilty in November. She is scheduled to be sentenced on Sept. 24. She admitted assisting Lyons for the first 13 years of the scheme, until she retired.

Avilez has pleaded not guilty and is free on $50,000 bail. She is set to go to trial in September.

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.