Jeffrey B. Lyons was living the high life — a $925,000 house, five investment properties, a vacation house near the beach, a country club membership, a $475,000 salary.
The 59-year-old Lancaster resident was widely admired in business circles for rising from college dropout and truck driver to CEO of a successful and growing energy company, Manheim-based Worley & Obetz.
But Lyons also was living a lie.
Worley & Obetz’s success was a charade, built on a complex and lengthy fraud he orchestrated, a high-maintenance scam that finally unraveled when an outside consultant raised questions that Lyons ultimately couldn't dodge.
The fraud — which showed Worley & Obetz doing massive amounts of business with Giant supermarkets, when in reality it did little — initially was created by Lyons to hide Worley & Obetz’s losses.
But over the years the scam mushroomed, eventually bilking Fulton Bank out of $66.7 million that not only covered up red ink but funded corporate acquisitions, Lyons’ personal investments and expenses, and payouts to the company’s owners justified by Worley & Obetz’s “profits.”
The extraordinary steps that Lyons took to keep the fraud hidden, and what ultimately flushed it into the open, were disclosed in a court filing by Assistant U.S. Attorney Tiwana Wright for a federal court judge before he decided Lyons’ punishment on Wednesday.
The filing answers the last — and biggest — question about the case: how did Lyons keep the fraud secret for so long and what sparked the chain of events that led to its discovery?
Beginning of the end
If the consultant had not voiced concerns, “there is simply no reason to believe that Lyons would not have continued the fraud. He had gotten away with the fraud for at least 15 years. He had many in the Lancaster area believing that he was a Lancaster native who never finished college but was able to successfully lead a multi-million-dollar organization,” Wright wrote.
“ … Lyons never voluntarily ended his fraud scheme because he enjoyed the false world he created too much to allow it to end,” she added.
The beginning of the end came in early 2018, when company vice chairman Seth Obetz hired a consultant to review Worley & Obetz’s operations, find ways to improve its profits and plan for company growth, according to Wright.
Obetz directed Lyons to provide the company’s financial records to the consultant. Lyons balked at first, then handed over mostly bogus financial statements as well as a phony contract with Giant, once its biggest customer but no longer.
The consultant was alarmed because the statements showed Worley & Obetz was getting 85% of its “revenue” from Giant, on unfavorable payment terms — a risky reliance on a single customer.
Obetz scheduled several meetings with Lyons and Giant to discuss the consultant’s findings, but Lyons kept canceling them, knowing that a meeting with Giant would reveal the fraud.
According to Wright, Lyons once claimed he’d been stricken with multiple sclerosis. Another time, Lyons said his father died, and asked the Obetz family not to send flowers or contact Lyons’ mother to express condolences.
Fled from home with cash
Finally, Obetz scheduled a meeting with Giant on May 15, 2018, where Obetz planned to tell Giant it could no longer afford to sell the chain “millions” of gallons of fuel on those “unfavorable terms.”
Lyons, knowing his fraud was about to be discovered, skipped the meeting. He fled from his home, taking “a large amount of cash” from the safe there, writing his wife a check for $95,000 and a note that said “I love you all,” according to Wright.
Back in Manheim, controller Judith Avilez, who allegedly helped Lyons carry out the fraud, told Obetz why Lyons skipped the meeting, prompting Obetz to fire him immediately. Police located Lyons in Fargo, North Dakota, said Wright. He returned home.
But the financial impact of the fraud — which left Worley & Obetz with $66.7 million in debt to Fulton, rather than having $17 million in capital as shown on its bogus financial statements — left the firm too weak to survive. It ended up closing and filing bankruptcy three weeks later.
The bankruptcy process has allowed Fulton to recoup some of its losses for itself and other banks that participated in the lending, trimming the loss to $54.0 million.
Until May 2018, Lyons had been able to evade any scrutiny of the phony Giant deal or Worley & Obetz's financial records overall.
According to Wright, Lyons “made it known at (Worley & Obetz) that he was the primary contact for anything related to the Giant account.” Lyons also rarely took vacations lest a question about Giant arise while he was away.
Meanwhile, Giant’s growth throughout southcentral Pennsylvania made Lyons’ claim of ever-increasing fuel sales to the chain plausible in the minds of Worley & Obetz’s owners, the prosecutor said.
Giant, meanwhile, found another main supplier of gasoline. But Lyons sustained the ruse by having a co-worker, who also was his mistress, type up a new “contract” with Giant that showed the nonexistent sales, said Wright.
The CEO further covered the losses at Worley & Obetz by directing an employee at a Worley & Obetz affiliate, Amerigreen, to transfer money to Worley & Obetz when it was short of funds to pay expenses, said the prosecutor.
Meanwhile, Lyons also was busy feeding lies to Worley & Obetz’s accounting firm, Trout Ebersole & Groff, and Fulton.
Lyons fed the accounting firm his phony financial statements, prepared by him and Worley & Obetz’s controller, which the firm used to produce Worley & Obetz’s monthly reports, end-of-year reports and yearly tax returns, said Wright.
‘Appearance of legitimacy’
Those reports from Trout, Ebersole & Groff, in turn, gave Worley & Obetz’s numbers “the appearance of legitimacy” and helped persuade Fulton to lend Worley & Obetz more and more money, the prosecutor said.
Fulton, though, wanted more assurance that Worley & Obetz was strong enough to repay those loans, asking Lyons “for years” to provide audited financial statements, which would have required an auditor to verify that the revenue on Worley & Obetz's statements was real.
Auditing would have uncovered that the revenue from Giant was an illusion. So Lyons refused. "Lyons convinced Fulton that the (Trout, Ebersole & Groff) reports were sufficient and that audited reports were much too expensive," according to Wright.
(Trout, Ebersole & Groff has not been accused of any shortcomings nor was it ever asked to verify the accuracy of the data that Worley & Obetz provided.)
Fulton also took comfort, the prosecutor said, in the fact that Giant supposedly owed Worley & Obetz more than $50 million for recent gasoline purchases on an ongoing basis.
“Fulton reasoned that if anything happened to (Worley & Obetz) which caused them to be unable to pay the outstanding loan balances, Fulton could collect the (money) Giant purportedly owed (Worley & Obetz) and also sell the (Worley & Obetz) equipment to cover the debt,” said Wright.
But Giant owed Worley & Obetz nothing, she indicated, because those purchases were an illusion.