Former health insurer guilty
By Ken Kobayashi
Advertiser Courts Writer
The former head of a company whose shutdown was one of the largest insurance company failures in state history pleaded guilty yesterday to felony fraud and money laundering charges.
Peter Posang Wong, 47, admitted to filing false information with state insurance officials in an attempt to bolster the Pacific Growth Medical Association's finances. He also admitted to trying to hide $300,000 he obtained through a false mortgage loan application.
Wong said in court that he authorized changing the figures in a financial report to the state officials in late 1996 to show that PGMA's liabilities were $3.5 million when they were actually $9.1 million.
"I thought that was a way to save the company, and I was wrong," Wong told federal Magistrate Kevin Chang.
Wong faces a prison term when he is sentenced by U.S. District Judge David Ezra on Feb. 21. But it was unclear how much time he would be facing. The two felonies carry prison terms of up to 30 years.
Wong, a California resident, was head of PGMA, which provided medical insurance to more than 26,000 people. It was founded in 1993, but soon ran into financial problems. State regulators seized the company in 1997 to avoid a financial collapse.
In 2002, a settlement was reached in which insurance companies that insured PGMA executives and others agreed to pay nearly $10 million to settle claims. As a result, state regulators estimated that creditors would begin to get that year about 47 cents on each dollar of claims.
Wong was indicted by a federal grand jury in 2003 on 16 counts of providing false information to the state Department of Commerce and Consumer Affairs in 1996 and 1997. In exchange for pleading guilty to one of the 16 counts and a new money laundering charge, the other 15 charges are to be dismissed.
Wong, his lawyer Sam King Jr. and Assistant U.S. Attorney Florence Nakakuni declined to comment as they left the courthouse yesterday.
During the hearing, Wong admitted that he submitted false documents, including W-2 forms and tax returns, in 1994 to obtain a $1.2 million loan to finance the $1.75 million purchase of his home at 'Ikena Circle. He then deposited $300,000 from a second mortgage from the seller into the account of Pacific Equity Growth & Management, which provided management and marketing services to PGMA, he admitted.
Wong's criminal case is separate from the federal prosecution that resulted in the conviction of former United Public Workers head Gary Rodrigues on charges of mail fraud, money laundering and embezzling union money.
One of the charges against Rodrigues was that a contract he negotiated with PGMA to provide coverage for UPW members allowed the company to transfer a portion of the premium payments to the union to hire a consultant to review the medical plan.
Rodrigues, however, did not notify the union that he had selected his daughter, Robin Rodrigues Sabatini, to be the consultant, according to federal prosecutors. Sabatini did little or no work for the hundreds of thousands of dollars she was paid, the prosecutors said.
Sabatini was convicted of mail fraud resulting from her father's embezzlement of union money.
In 2003, Rodrigues was sentenced to five years and four months in prison. Sabatini received a prison term of three years and 10 months. Both remain free on bond pending an appeal of their convictions to the 9th U.S. Circuit Court of Appeals.
Reach Ken Kobayashi at 525-8030 or kkobayashi@honoluluadvertiser.com.
