Ex-insurer gets prison time

Peter Wong admitted money laundering and to lying about his firm

Peter Posang Wong will spend three years in federal prison for the 1997 collapse of Pacific Group Medical Association*, which left thousands of state public employees without health insurance and dozens of isle doctors with millions in unpaid bills.

U.S. District Judge David Ezra ordered Wong to also pay $7.5 million restitution for money laundering and lying about the health of his company to state regulators.

Wong, 49, was facing a prison term of 41 to 51 months under federal advisory sentencing guidelines. Ezra said he imposed the three-year prison term yesterday because of the age of the case, Wong's health and because Wong cooperated with prosecutors and took responsibility for his actions.

"The fact that he stepped up to the plate, the court has to recognize that," Ezra said.

Wong pleaded guilty to the charges in June 2005. Ezra said the statute of limitations for financial crimes is usually five years. Wong waived the statute of limitations for one of the charges.

His attorney Samuel King Jr. said Wong suffered congestive heart failure two years ago and is taking 10 types of medication.

Before the sentencing, Wong apologized to the people of Hawaii.

"I was young and foolish and made mistakes. I just hope that I can get past this and do something useful with my life," he said.

Wong lives in Los Angeles, where he designs software programs, King said. He has until June 18 to turn himself in to begin serving his sentence.

When Wong started PGMA, providing health insurance primarily to small businesses, it was with good intentions, the company did well and Wong was well regarded, said Assistant U.S. Attorney Florence Nakakuni.

When the company became the insurance provider in 1994 for Hawaii Government Employees Association and United Public Workers, the state's two biggest public employee unions, "Money started pouring into company coffers, and Wong got greedy," Nakakuni said.

The company was losing money, but Wong concealed the true size of the losses with false financial reports, according to his plea agreement. The money laundering charge stems from a $300,000 transfer to a PGMA-related company Wong also controlled.

Had the state known the true financial health of PGMA, the state Insurance Commissioner would have seized the company in 1996 rather than a year later, resulting in fewer losses, Nakakuni said.

When then-state Insurance Commissioner Rey Graulty took over PGMA, the company had liabilities of $17.6 million. Of that, about $17 million was owed to doctors and other health providers, and $335,000 was owed to employees, she said.

The state paid creditors 47 cents on the dollar in 2000, Nakakuni said. A final distribution that will increase the payout to about 56 cents on the dollar will be made in August or September, said state Insurance Commissioner J.P. Schmidt.

King said Wong is just happy to be alive and will pay off the restitution at $300 per month.

The state filed 10 lawsuits seeking to recover money owed to PGMA. It has settled nine of them, Nakakuni said.

The one remaining lawsuit is against a Kauai company headed by Robin Haunani Rodrigues Sabatini, the daughter of former UPW State Director Gary Rodrigues.

Rodrigues and Sabatini were convicted in 2002 of multiple counts of mail fraud, money laundering and embezzlement. Some of the counts against Sabatini stem from consulting fees she received from PGMA without performing any work. Her case is under appeal.