PGMA’s Wong
accused of
siphoning millions

An investigator says an
investment network stretched
to the Caymans

By Ian Lind
Star-Bulletin

Pacific Group Medical Association founder Peter P. Wong allegedly constructed an intricate network that enabled insiders to siphon off millions of dollars from the failed health insurer, according to financial investigator Thomas E. Hayes.

The network had more than 60 separate bank, brokerage, and investment accounts stretching from Kakaako to the Cayman Islands, said Hayes, a special assistant to state Insurance Commissioner Rey Graulty.

Hayes said PGMA is more complex than other fraud cases he has helped unravel, including the case of Ron Rewald, convicted of bilking more than 400 island investors out of $20 million in the early 1980s, and Agretech, a Ponzi scheme in which investors lost nearly $40 million in a series of limited partnerships.

Despite the fraud allegations repeatedly raised by Graulty and Hayes in court proceedings, the state has not taken action directly against Wong or any other individuals who may have been responsible for the insurer's collapse. PGMA was declared insolvent and seized by the state regulators in March 1997, leaving its members and medical providers with more than $18 million in unpaid bills.

The company provided health insurance coverage for 28,000 people before its collapse, with nearly half drawn from the memberships of the United Public Workers and Hawaii Government Employees Association, the state's two largest public employee unions.

Hayes said he provided documents to the attorney general's office "on areas of wrongdoing," but a criminal probe launched last year was slowed by the heavy workload involving the Bishop Estate investigation.

Cynthia Quinn, special assistant to Attorney General Margery Bronster, said she could not comment except to confirm that PGMA "is an active case within this department."

But several former PGMA employees who were interviewed by the attorney general's office last year say there has been no follow-up by investigators.

Graulty, appointed in court proceedings to oversee the liquidation of PGMA's assets, views Wong as "an empty basket" because he already faces millions of dollars in federal tax liens.

Wong and his wife, Susan, are currently living in California, where they are part owners of an Irvine-based insurance agency.

Wong has not commented publicly, but has denied any wrongdoing in court documents.

"Many times, in these cases, by the time you chase after the individual, the trail is cold. You have to concentrate on the assets you see in front of you where the chances for recovery are greater," Graulty said. "It's much easier to pursue an insurance payout than chase the Cayman Islands and Peter Wong and what he's done with the money."

Graulty described his effort to recover company assets as "a war on many fronts, with multiple lawsuits, multiple parties and attorneys, and many legal flash points."

"People involved is pointing fingers at everybody else," Graulty said. "The process of determining liability will be slow and tedious."

Graulty has sued the officers and directors of PGMA in hopes of collecting on a $5 million insurance policy. But in court proceedings, the officers say they aren't responsible and instead blame Wong, along with PGMA's attorney and auditor, for failing to alert them as financial problems escalated.

Graulty has filed separate suits to collect a total $2.4 million in premiums withheld by UPW and the Voluntary Employees' Benefit Association of Hawaii, an affiliate of the HGEA. Both union groups claim Graulty has no authority to force them to pay for services PGMA never delivered.

The Voluntary Employee Benefit Association of Hawaii has also charged the state with regulatory malpractice because insurance regulators failed to take action against PGMA as soon as they discovered the insurer was insolvent. "It's been quite difficult," Graulty said. "I not only have to be the aggressor against PGMA, but I'm having to defend myself against allegations that the Insurance Division didn't act properly."

Graulty is also negotiating over a potential $4.6 million in claims against PGMA's reinsurers, which had provided insurance to cover unexpected losses experienced by the health insurer.

Graulty said he has at least temporarily dropped his probe of payments made to Four Winds RSK, a Kauai company headed by Robin Rodrigues, daughter of UPW State Director Gary Rodrigues. The firm provided unspecified services related to PGMA's coverage of UPW members.

Documents related to the transactions were subpoenaed earlier by Graulty, who said Rodrigues has been questioned about the deal during a sworn deposition.

"We have not determined whether the payments were appropriate or not," Graulty said. "We have our suspicions, but suspicions are not something you can take to the judge."

Graulty said his efforts are focused on areas that promise a significant return, and that the payments to Four Winds are not a priority.

"It might be major to you, but to us, in the scheme of things, it is not as significant. We're after the $2 million, not the amount his daughter was paid for a management contract," Graulty said.