Feds: Accused used non-existent companies to defraud PHN of millions

May 16—PITTSBURGH — Three top-ranking executives are accused of creating fake companies that performed no work and swindling Primary Health Network out of more than $2 million between 2011 to 2019.

The Herald obtained a copy of the 28-page, 17-count indictment issued Thursday by a grand jury in the Western District of Pennsylvania. The Western District U.S. Attorney's office has charged Drew Pierce, 55, of West Middlesex; Mark Marriott, 56, of Sharpsville; John "Jack" Laeng, 70, of West Middlesex; John O'Brien, 60, of Masury, Ohio; and Christopher O'Brien, 58 of Masury, Ohio.

The five are charged with conspiracy to commit mail/wire fraud, conspiracy to commit money laundering and mail/wire fraud.

Pierce was Primary Health Network's chief financial officer from 2011 to 2014, and chief executive officer from 2014 until 2020. Laeng was Primary Health Network's CEO from 2011 to 2014, an employee of the organization through 2016, and a board member of the network's PHN Charitable Foundation into 2020.

Marriott was Primary Health Network's facilities administrator until 2020.

According to the indictment, the three men and an unnamed co-conspirator created and controlled four non-existent companies — TopCoat Plus LLC, JDS Health Care Strategies, Three SDJ LLC and PenKey Holdings.

TopCoat, owned by Marriott and Three SDJ, was a "purported 'management company,'" as designated in the indictment. Pierce, Laeng and the co-conspirator owned JDS LLC, a "purported management company'"; and Three SDJ, a "purported 'ice cream parlor'" basked in Pierce's home.

The three companies performed no work but received payments from Primary Health Network.

On Jan. 29, 2020, federal agents raided Primary Health Network's corporate headquarters in Sharon and the affiliated PHN Charitable Foundation, also in Sharon.

Primary Health Network officials and federal authorities had no comment on the subpoenas at the time. However, Primary Health Network's board dismissed Pierce and Marriott April 6, 2020. At the time of the raid, Laeng had retired but was a member of the PHN Charitable Foundation board.

The non-profit Primary Health Network operates health centers in 16 counties in Pennsylvania — including Mercer, Butler, Cambria, Crawford, Erie, Lawrence, Northumberland and Venango — and Ashtabula County in Ohio. The agency is a community health care provider that serves unserved and underserved communities.

TopCoat

Marriott, as facilities manager, had the authority to enter into contracts for construction and maintenance for properties throughout the Primary Health Network system. He contracted with TopCoat at inflated prices for a project in Lewistown, Pa., but the company performed no work.

Instead, Keystone Tele-Data, owned by John O'Brien, performed the work at what prosecutors called an "inflated" rate, but still less than the amount budgeted by Primary Health Network. In one contract, for "systems services," Keystone Tele-Data bid $361,000, but received the full budgeted amount of $574,991.

Pierce paid part of the excess funds to Marriott and Three SDJ for that and other contracts.

JDS

In the second set of allegations contained in the indictment, prosecutors accuse Pierce and Laeng of entering contracts with an unnamed development consultant, who paid JDS Health Care Systems for work that was never performed. Primary Health Network paid the consultant more than $1 million, about half of which went to JDS, which in turn paid Laeng, Pierce and the co-conspirator.

Excel

Prosecutors accuse Pierce and Marriott of presenting inflated invoices for contracts with Excel Construction Services, which Christopher O'Brien owned, and invoices for work never performed.

Pierce and Marriott received the inflated payments directly and through PenKey.

Personal services

Pierce and Marriott are accused of using Primary Health Network funds to pay personal expenses and requiring PHN employees to perform work on their property during business hours.

Restitution

The federal government is seeking $1,421,000, plus recovery of the funds defrauded from Primary Health Network, $2,293,715.12.

Potential imprisonment

Each of the mail fraud, wire fraud and conspiracy to commit mail/wire fraud counts carries a maximum sentence of 20 years in prison and a fine of $250,000 or twice the amount stolen. The conspiracy to commit money laundering charges carry a maximum sentence of 10 years in prison and the same scale of fines for each count.

The FBI and IRS criminal investigation division participated in the investigation along with the U.S. Attorney's office.

NOTE: All suspects are to be presumed innocent until proven or adjudicated guilty in court.