Founder of failed
isle insurer indictedA federal grand jury
alleges deception led to
PGMA's collapse
A federal grand jury indicted the founder of a Hawaii medical insurance company that collapsed in 1997, triggering a federal investigation of local labor leader Gary Rodrigues.
In a 16-count indictment yesterday, the grand jury alleged that Peter Posang Wong misled state regulators into believing that his company Pacific Group Management Association was financially sound when it was actually insolvent.
Thousands of PGMA's customers wound up losing their health care coverage, while dozens of isle doctors and health care providers were not paid as a result of Wong's alleged deception, according to U.S. Attorney Ed Kubo.
"By withholding material information about the horrendous financial state of PGMA, and by lying about its financial condition, the defendant deceived and misled the state and others into believing that the company was sound and successful when in fact the company was virtually bankrupt due to Peter Wong's manipulation of the company's payment of claims," Kubo said.
The 46-year-old Wong, who now lives in California, could not be reached for comment. His attorney did not return calls seeking comment.
If convicted, Wong faces up to 10 years in prison and a fine of up to $250,000 on each count.
PGMA was a local health insurer that provided low-cost medical coverage to more than 26,000 local residents, including thousands of members of the United Public Workers and Hawaii Government Employees Association unions.
In March 1997 the state Insurance Division seized PGMA, which had liabilities in excess of $17 million at the time.
Wong founded PGMA but was not listed as an officer of the company when it was seized by the state six years ago. He controlled PGMA's key underwriting and marketing decisions through Pacific Equity Growth & Management, the insurer's sole marketing agent.
Investigations into PGMA's collapse by state auditors and the Star-Bulletin uncovered questionable payments to a Kauai company headed by Robin Haunani Rodrigues Sabatini, daughter of former UPW head Gary Rodrigues.
Last November, a federal grand jury convicted Rodrigues on 101 counts of mail fraud, money laundering and embezzlement stemming from a kickback scheme involving more than $300,000 in payments from PGMA and Hawaii Dental Service. Sabatini was convicted on 95 counts.
Yesterday's indictment is a product of a joint investigation by the FBI, the U.S. Department of Labor and the Internal Revenue Service.
It also comes as the state Insurance Division has sued Wong, PGMA and various company officers to recover more than $20 million siphoned off from the local insurance company.
State Insurance Commissioner J.P. Schmidt said the state, which has filed more than 10 lawsuits relating to PGMA since 1997, has recovered more than $9 million.
"We do think that a criminal indictment sends an important message, along with the numerous civil lawsuits filed by the Insurance Division, that this kind of criminal behavior will be found out and the individuals responsible will be pursued civilly and criminally to the fullest extent of the law," said Schmidt.
