Law enforcement sources have confirmed that a multi-million dollar loss reported by Lancaster-based Fulton Financial Corporation is related to layoffs of more than 100 employees and “potentially fraudulent activity” at Worley & Obetz.
Fulton Financial Corporation notified the U.S. Securities and Exchange Commission on Thursday that it expects to take a $32 million loss in the second quarter because of “fraudulent activities believed to be perpetrated by one or more employees” of an unnamed borrower.
Sources told ABC27 News the borrower is Worley & Obetz, a Manheim-based HVAC and energy company.
In a statement Thursday on its Facebook page, Worley & Obetz said the initial layoffs on May 21 affected 45 people in management and administrative roles at various offices in Pennsylvania and New Jersey.
“This comes a couple weeks after the disappearance of our CEO, Jeff Lyons,” the statement said. “Due to potentially fraudulent activity, this has forced us to adjust our operating expenses to keep the company viable.”
Manheim Township police reported they were looking for Lyons after his family reported him missing May 15. Two days later, the police department reported that Lyons had been found.
Worley & Obetz said the additional layoffs will commence on June 6 and came after a large customer notified the company that it was transitioning to a new vendor.
“They needed to make an understandable business decision to protect their supply interests,” the statement reads. “The customer transitioned a week sooner than expected, but we are still voluntarily paying our employees through the announced June 6th date.”
“This is an inconceivable nightmare for everyone,” the statement continues. “We are doing everything we can to make this less traumatic for our employees. When we discovered the fraud, Seth Obetz immediately liquidated his life savings to keep the company going. We have a solid plan to keep the core of the company going and strongly believe we will come out the other side even stronger and customers will experience limited to no interruption.”
No charges have been filed in the ongoing investigation.
“The investigators are not revealing their progress, which they say will take weeks at least, but we are confident justice will be served,” the statement said.
Fulton Financial Corporation’s filing with the SEC states that it is working with the borrower to recover its assets and those of “other participating lenders.” The statement does not identify the other lenders.
However, Chambersburg-based Franklin Financial Services Corporation has notified the SEC that it expects a loss of between $7.9 million and $9.1 million related to a loan participation interest by its bank subsidiary, Farmers and Merchants Trust Company.
“The bank was notified by the lead lender, another Pennsylvania bank, that the loan relationship had become impaired due to fraudulent activities believed to be perpetrated by one or more executives employed by the borrower,” the report states.
The SEC filing is entitled “2018 Worley Obetz Impairment.”
Univest Corporation of Pennsylvania, based in Souderton, also filed a notice with the SEC that it expected a loss of $13 million. The report does not mention Worley & Obetz but contains similar language.
“The Bank is aware of alleged fraudulent activities believed to be perpetrated by one or more employees of the borrower,” the notice states.