A California man whose now-defunct medical insurance company once provided coverage for thousands of people here was sentenced to three years in federal prison for fraud and money laundering and ordered to pay $7.5 million in restitution.

Peter Posang Wong, 49, a Los Angeles resident who runs a software business, was head of the Pacific Growth Medical Association, which covered more than 26,000 people from 1993 until it was shut down by the state in 1997 in one of the largest insurance company failures in state history.

He was sentenced by U.S. District Judge David Ezra following guilty pleas to filing false information with state insurance officials and trying to hide $300,000 Wong obtained through a false mortgage loan application.

Assistant U.S. Attorney Florence Nakakuni told the judge that the state would have shut down the company about a year earlier if Wong had not filed reports underreporting liabilities and overreporting assets.

Wong's attorney, Sam King Jr., said his client, who has been dealing with diabetes and a congestive heart condition and has cooperated with authorities, was willing to accept his sentence.

"I was young and foolish and made mistakes," Wong told the judge in apologizing to the people of the state.

Ezra said he would have imposed a harsher sentence but said Wong accepted responsibility for his actions, cooperated with authorities and stayed out of trouble the past 10 years.

In a news release, U.S. Attorney Ed Kubo said the state insurance commissioner determined the total claims for liability when PGMA shut down was $17.6 million, although the insurance commissioner distributed almost $8.3 million to victims. A smaller distribution is expected later this year, the release said.

The restitution ordered by the court is what's still owed after the two distributions, the release said.

PGMA also was in the news in connection with a separate criminal case against former United Public Workers head Gary Rodrigues.

Rodrigues was accused of negotiating a contract with PGMA to provide coverage for UPW members that also allowed the company to transfer members' premium payments to the union. The money was used to hire a consultant to review the medical plan.

But Rodrigues selected his daughter to be the consultant, and she did little or no work for the money she was paid, prosecutors said.

Rodrigues was sentenced to five years and four months in prison in 2003 for fraud and related charges, but has been free pending an appeal to the 9th U.S. Circuit Court of Appeals.

Reach Ken Kobayashi at kkobayashi@honoluluadvertiser.com.