Martin Kao, 47, was charged with two counts of bank fraud and five counts of money laundering. The press did not name an attorney for him.
According to the complaint, Kao is the CEO of Martin Defense Group, formerly known as Navatek LLC, a Honolulu-based company that has reportedly received several federal government contracts, primarily for designing ship parts for the U.S. Navy.
Kao is accused of inflating the number of employees he had on staff in his Paycheck Protection Program (PPP) loan application so that he could receive a larger loan than he was eligible for. He also allegedly used his subsidiary companies to hide the fact that he had already applied for PPP loans from other banks, which effectively allowed him to go over the program’s $10 million limit.
The PPP was created by Congress as part of the $2 trillion Coronavirus, Aid, Relief, and Economic Security (CARES) Act that was enacted in March 2020. It provided forgivable loans to American businesses that were negatively impacted by the pandemic for business-related expenses, such as paying employee payroll, rent and utilities, and interest on mortgages.
Shortly after the program was created, Kao allegedly applied for a loan of $10 million—the maximum amount allowed—from Central Pacific Bank by claiming he had nearly 500 employees when he actually had fewer than 150, the complaint claims. The complaint further alleges that Kao tried to use his connections as a prolific political donor who has contributed hundreds of thousands to federal politicians to convince Central Pacific Bank to quickly approve and fund his loan.
Kao’s loans were approved and funded, sources indicate. Evidence collected by IRS investigators reportedly showed that he transferred more than $2 million in PPP funding from Navatek to a personal bank account. The IRS did not provide any more details into how the money was spent, noting that it was the subject of further inquiry.
In total, investigators discovered that Kao made three separate attempts to obtain PPP loans and received an estimated $12.8 million. The Justice Department will use asset forfeiture to reclaim the money Kao and his company received through the loan program, according to the complaint.
“If you game the system to get money that businesses so desperately need in Hawaii, we will find you, we will expose you and we will hold you accountable to the fullest extent of the law,” said Kenji Price, the U.S. Attorney for the District of Hawaii, in a press conference.
Price said his office has launched several investigations into potential CARES Act fraud in Hawaii, and several federal agencies, including the IRS, FBI, and the Secret Service are working with the U.S. Attorney’s Office to root out any wrongdoing.
A conviction for federal government fraud can result in a lengthy prison sentence as well as stiff fines. Anyone accused of fraud should immediately consult an experienced attorney who can lay out the legal options for responding to the allegations and help you limit the penalties or completely avoid a conviction.
South Florida Fraud Defense Attorney
Are you accused of committing fraud in South Florida involving COVID-19 relief programs? Contact Brian Silber, P.A. to set up a free initial consultation with one of South Florida’s most experienced fraud defense attorneys.