Hawaii CEO Charged with COVID-Relief Fraud
News Release from US DoJ, Sept 30, 2020
A Hawaii man has been taken into custody on allegations he fraudulently obtained more than $12.8 million in Paycheck Protection Program (PPP) loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, announced Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division and U.S. Attorney Kenji M. Price of the District of Hawaii.
Martin Kao, 47, of Honolulu, Hawaii, was charged in a federal criminal complaint, unsealed today, filed in the District of Hawaii with two counts of bank fraud and five counts of money laundering. Kao will make his initial appearance Thursday at 9:30 HST before U.S. District Court Judge Kenneth J. Mansfield.
The complaint alleges that Kao, as Chief Executive Officer of Navatek LLC (now known as Martin Defense Group LLC), submitted at least two fraudulent PPP loan applications. In sum, Kao received approximately $12.8 million in PPP funds, over $2 million of which he transferred to his own personal accounts. According to the charges, Kao falsely inflated the number of employees on the loan application and falsely certified that the applicant and its affiliates would not receive, and had not received, another PPP loan.
The CARES Act is a federal law enacted March 29. It is designed to provide emergency financial assistance to millions of Americans who are suffering the economic effects resulting from the COVID-19 pandemic. One source of relief the CARES Act provides is the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses through the PPP. In April 2020, Congress authorized over $300 billion in additional PPP funding.
The PPP allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of one percent. Businesses must use PPP loan proceeds for payroll costs, interest on mortgages, rent and utilities. The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within a set time period and use at least a certain percentage of the loan towards payroll expenses.
A federal criminal complaint is merely an accusation. A defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
This case was investigated by IRS-Criminal Investigation and the SBA’s Office of Inspector General. Trial Attorney Tom Tynan of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Craig Nolan for the District of Hawaii are prosecuting the case.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: Disaster Fraud Complaint Form.
Attachment(s): Download Kao Complaint
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PBN: Navatek CEO arrested on federal bank fraud and money laundering charges
Court documents show email exchanges between Kao and executives at CPB, Radius Bank and FHB saying if the loan was not processed quickly, he'd leverage relationships with unnamed U.S. senators and members of Congress to speed up the process.
In one email to CPB, Kao stated that “[The redacted Senate senior staffer] wanted to stress that these are simple checks of information and mathematical accuracy … it is not an audit and the bank is absolutely empowered and relying on the applicants representations and certifications."
Another email to CPB stated: “[The Senator] is suggesting a conference call with his Banking Committee and SBA staff director ... she helped write the PPP rules ... She has confirmed directly that CPB should and is obligated to fund once SBA issues the approval number. Any additional review the bank does should be perfunctory … at best.”....
Kao is scheduled to make his initial appearance before U.S. District Court Judge Kenneth Mansfield in Honolulu on Thursday at 9:30 a.m....
Navatek CEO Arrested for CARES Act Fraud--Got Help from 'Senator'
CB: … A politically connected defense contractor in Hawaii was arrested and charged Wednesday by the U.S. Justice Department for allegedly bilking the federal government out of $12.8 million in coronavirus relief aid meant to help small businesses.
Martin Kao is the CEO of Martin Defense Group, formerly known as Navatek LLC, a Honolulu-based company that over the years has received millions of dollars in federal contracts, primarily to design state-of-the-art ship hulls for the U.S. Navy.
He is accused by the DOJ of bank fraud and money laundering for falsifying loan applications so that he could receive more money than he was entitled to under the Paycheck Protection Program, which was created by Congress as part of the $2 trillion CARES Act meant to stave off financial ruin for individuals and businesses during the COVID-19 pandemic.
Kao is a prolific political donor. He, his family and his employees have contributed hundreds of thousands of dollars to federal politicians in recent years, including several members of the Senate Appropriations Committee. Hawaii Sen. Brian Schatz, who is on the committee, has also received significant campaign contributions from Kao and his affiliates.
(“B-b-but I paid in. This is a protected business. Whaddauguys doing here?”)
Kao’s company also appears tied to a mysterious $150,000 donation made to a super PAC supporting U.S. Sen. Susan Collins of Maine, who is up for reelection….
read … Yes. Dan Inouye Really is Dead.
HNN: Fraud, money laundering in PPP loan scheme …US Attorney for the District of Hawaii Kenji Price said Kao submitted fraudulent information in his PPP loan documents, including by inflating the number of employees he had and what they earn. After getting a $10 million loan through the program, Price said, Kao deposited $2 million into his personal bank account. Kao then allegedly applied for a second loan through the program…. Price also said that other businesses are being investigated for potential fraud in connection with funds through the CARES Act.
ProPublica: Who Got PPP Loans in Hawaii?
SA: Honolulu man arrested for alleged fraud in $12.8M federal coronavirus relief funds
PBN: Alleged bank fraud case delays company payroll, Kao's lawyer says
(Fun game. Google ‘Navatek’ and try to count the fluff pieces local ‘journalists’ have written about Navatek over the years. Betcha can’t count that high.)