Lilly is captured by the corrupt police officer, Jo, and is handcuffed to a table in Lovely Fashion House. After Jo is defeated and killed, Frank frees Lilly and the three other hostages. He then takes Lilly and the others to the Security Room.
There is a very weird glitch which, when you give her a food item, switch to a handgun very quickly and she will start holding it and can use it. You can also give her a submachine gun as well. If you do this when she defects, she will simply point the gun at Frank and do nothing. This also works on Kelly and Janet.
Lilly is very calm for some reason when escorting her despite being abused.