Fulton complaint alleges fraud by former Worley & Obetz CEOJeffrey Lyons is accused of pocketing $1 million in transfers, the bank alleges.
In a complaint filed Tuesday, Fulton Bank is raising new allegations about the fraud that leveled energy company Worley & Obetz Inc.
The complaint, filed in U.S. Bankruptcy Court, alleges that former Worley CEO Jeffrey Lyons received, directly or indirectly, $1 million in transfers from the Lancaster energy company, which filed for bankruptcy in June.
The complaint also notes that others were involved but they are not named. No criminal charges have been filed in the case.
The complaint alleges that Lyons submitted fraudulent accounts receivable over at least the last four years on the basis of which Fulton lent millions of dollars to Worley & Obetz. Fulton's suit described it as a "massive fraud." Other banks also lent money to the company.
At issue in the Fulton complaint, though, is a certificate of deposit held by Lyons and his wife, Julie.
The complaint, filed at the request of the trustee, is known technically as an interpleader complaint, according to Laura Wakeley, a spokeswoman for Fulton.
The action was necessary, she said, because multiple parties - including the trustee overseeing the Worley & Obetz bankruptcy - are claiming the CD, which had a balance of $155,123.87 as of July 16, according to the complaint.
"Due to these conflicting and adverse interests and claims, Fulton Bank is in great doubt as to whether one or more of Defendants is entitled to the CD on deposit in the Account or any portion of the funds held in the Account," the complaint said.
Fulton said it is not claiming the money itself, but wants to deposit the money with the court so it can decide who gets it.
Fulton said it froze the CD on May 21 - blocking access to it - shortly after learning of the alleged fraud carried out by Lyons. The CD was opened in 2009 and is held jointly by the couple, according to the complaint.
The complaint contends that Julie Lyons had attempted to withdraw money from the CD after it was frozen.
On July 13, the bankruptcy trustee asked Fulton to freeze the CD, noting that it had claims against Lyons and his wife related to the allegedly fraudulent transfers from the company, the complaint said.
On July 16, Julie Lyons filed a writ of summons in a Lancaster County court against Fulton Bank.
The writ, attached to the Fulton complaint, essentially is a warning that Julie Lyons plans to sue Fulton Bank. It does not contain any details. But in its complaint, Fulton says Jeff and Julie Lyons have claimed an interest in the CD.
A lawyer for Julie Lyons, Matthew Boyer of Dell Law firm, could not immediately be reached for comment. Efforts to reach Jeff Lyons have not been successful.
The Lancaster-based Fulton Financial Corp., parent of Fulton Bank, on Tuesday reported its first earnings in the wake of the bad loan.
The bank posted a profit of $35.2 million for the second quarter, down from $45.5 million for the same period in 2017, according to filings with the U.S. Securities and Exchange Commission.
The company also said it took a credit-loss provision of $29.1 million, after accounting for tax savings, stemming from the Worley & Obetz loss. The loss was about $3 million less than originally anticipated.
Below is the full complaint filed by Fulton. Read Lyons's writ of summons here.
Fulton Bank Complaint Filed July 2018 on Scribd
Editor's note: This story has been updated to clarify the type of complaint filed by Fulton Financial. It is not a lawsuit. Comments from a Fulton spokesperson also have been added.