Insurance head
pleads guilty

The founder of the defunct company
admits to providing false financial data

The founder of a nonprofit insurance company that provided health coverage to 26,000 Hawaii workers admitted he misled state regulators to make them believe his company was financially sound.

Peter Posang Wong, 47, pleaded guilty yesterday before U.S. Magistrate Kevin Chang to a federal charge of making false statements on a financial report submitted to the state Insurance Division. Wong also pleaded guilty to one count of money laundering in a complaint filed Monday.

Yesterday's admission comes nearly eight years after insurance regulators seized Pacific Group Medical Association in March 1997. By then, the four-year-old company was insolvent and had stopped paying claims, leaving about $17.5 million owed to public workers, their doctors and other health providers. Wong left the islands in late 1996 and never returned.

The company provided health insurance to more than 26,000 residents, including members of the Hawaii Government Employees Association and United Public Workers union. Its collapse has been blamed in part on Wong's alleged diversion of funds from PGMA into other businesses and accounts he controlled -- allegations he has denied in court documents.

Making false statements is punishable by up to 10 years in prison and $250,000 in fines, and supervised release of two years to three years. Money laundering is punishable by up to 20 years in prison and a fine of $500,000.

Wong remains free on bond while awaiting sentencing Feb. 21. He and his attorneys have declined comment.

Wong, who now lives and works in California, was initially indicted on the federal charges in July 2003.

Yesterday, he admitted that he intentionally misled the insurance commissioner in a November 1996 financial report reflecting $9.1 million in long-term liabilities claims payable -- which was about $6 million more than what the insurer actually had -- and $629,825 in total reserves, an amount significantly overinflated.

"I take responsibility for that," Wong said. "I thought it was a way to save the company, and I was wrong."

The Insurance Division reviewed financial statements to make sure that the insurance company was solvent.

The prosecution had a memo distributed by the company just months before insurance regulators took over, warning that the "company is in crisis -- the house is burning."

Investigations into the insurance company's collapse by state auditors and the Star-Bulletin uncovered questionable payments from the insurance company to a Kauai company headed by Robin Haunani Rodrigues Sabatini, daughter of former UPW head Gary Rodrigues.

Rodrigues and his daughter were convicted in November 2002 on multiple counts of mail fraud, money laundering and embezzlement stemming from a kickback scheme involving more than $300,000 in payments from Pacific Group Medical Association and Hawaii Dental Service.