A federal judge has denied a request by Worley & Obetz’s former controller to have her four-year prison sentence converted to home confinement because she’s scared of getting COVID-19.

Karen Connelly, who pleaded guilty to bank fraud in November 2019 for helping to carry out the $67 million scam for 13 years, had argued that she has a high risk of contracting the illness because she’s 67 years old and suffers from kidney disease, diabetes and hypertension.

Connelly added that she needs to be at home to care for her husband, who has lymphoma.

But in a ruling last month, U.S. District Judge Jeffrey Schmehl wrote:

“The Court is not unsympathetic to Defendant’s plight. But ramifications of health issues for a prisoner and the inability to care for an incapacitated spouse can clearly be avoided by not engaging in criminal activity in the first place.”

The situation was a replay of her sentencing hearing, when Connelly sought home confinement for health reasons. Schmehl instead imposed jail time, citing the duration of her crime and the depth of its impact, as all 275 Worley & Obetz employees lost their jobs and its banks lost tens of millions of dollars.

However, after Schmehl determined that Connelly deserved prison time, Connelly asked Schmehl to recommend that the federal Bureau of Prisons assign her to a low-security prison camp for women in Alderson, West Virginia. Schmehl did so and the federal Bureau of Prisons concurred. The Manheim resident reported there in November 2020.

In his 11-page decision, Schmehl systematically showed why Connelly falls short of any of the “extraordinary and compelling” criteria she needed to fulfill to qualify for what’s called “compassionate release.”

She does not have a terminal illness or an uncurable medical condition that “substantially diminishes” her ability to provide self-care, he noted.

Connelly does fulfill part of a second criterion by being older than 65. But she fails to check the other boxes for that criterion, according to the judge. Her health has not “seriously deteriorated” while she hasn’t completed 75% of her sentence, Schmehl said.

To the contrary, Schmehl said Connelly is in relatively good health. “Her medical records show that she is fully ambulatory and that her ailments are adequately controlled by medication administered by (prison staff).

“In fact, Defendant states that despite her current maladies, she is working five days per week in the prison library cataloguing books, she has completed an Adult Education Class and is enrolled in two more classes as well as in a Bible study group,” the judge wrote.

On top of that, Connelly has completed a mere 25% of her sentence, far short of the 75% threshold, the judge observed.

Schmehl also noted that Connelly has been fully vaccinated against COVID-19 while at Alderson, receiving both rounds of Moderna vaccine. Other federal courts have held that fully vaccinated inmates are not entitled to “compassionate release” on the grounds of COVID-19 fears, the judge said.

The judge next punctured a third criterion – family circumstances. Connelly had maintained she’s the only family member available to care for her ill husband. The judge, though, pointed out that the couple has a 40-year-old daughter who lives in the same town as her father.

But even if Connelly had met one of the justifications for “compassionate release,” Schmehl said he would have denied the request at this time anyway because her offense was so grave.

“Without Defendant’s accounting knowledge and contributions, the scheme may never have been successful …,” Schmehl wrote.

Connelly failed to show how “compassionate release” this early in her sentence reflects the seriousness of her offense, promotes respect for the law and provides a just punishment, the judge continued, adding: “In fact, release under these circumstances would have exactly the opposite effect.”

Prosecutors previously have portrayed Connelly as an integral player in the 15-year bank fraud at now-defunct Worley & Obetz that tricked its bankers out of $67 million in loans.

She was not the mastermind of the fraud – that was Jeffrey Lyons, the CEO of the Manheim-based energy company.

But when Lyons asked her how he could hide the company’s losses, Connelly explained how the firm’s financial statements and related documents could be skewed to cover up the red ink and persuade bankers to fund the business. Lyons, in turn, used the borrowed funds to pay for company operating expenses and expansions, but diverted some of the borrowed funds to pay for his personal real-estate purchases.

Connelly also was the person who churned out reams of falsified documents, including a phony contract with Giant supermarkets that portrayed Giant as its biggest customer, to be presented to Worley & Obetz’s bankers and its outside accounting firm.

Connelly did the monthly paperwork for the first 13 years of the scam, then retired but trained her successor, who carried out the tasks for the final two years of the fraud.

The scheme unraveled in mid May 2018 when Lyons fled town rather than attend a meeting with Giant, knowing his ruse was sure to be uncovered. Worley & Obetz shut down in weeks, filing for bankruptcy liquidation in early June 2018.

At her sentencing in September 2020, Connelly said she was bullied and manipulated by Lyons into participating. But Schmehl said that was no excuse for failing to alert authorities. In addition to the prison time, he ordered Connelly to pay $25.4 million in restitution to the banks.

Lyons is serving a 14-year prison sentence. He also was ordered to pay $54.5 million in restitution to the banks. Connelly’s successor, Judith Avilez, is serving a three-year sentence.

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