The former CEO of a Hawaii defense contractor pleaded guilty Wednesday in federal court to bank fraud and money laundering after he obtained more than $12.8 million in pandemic relief loans under false pretenses.
As the head of Navatek LLC in 2020, Martin Kao applied for Paycheck Protection Program loans using false information about his payroll to receive more money than he was entitled to. He also kept applying for new loans under the names of subsidiaries after the company had already received the maximum of $10 million, according to prosecutors.
The program was intended to help small businesses that were suffering at the onset of the coronavirus pandemic, but Kao fraudulently obtained millions, then transferred $2 million to himself “for his personal benefit,” federal prosecutor Craig Nolan said Wednesday.
Kao, 49, is now potentially facing decades in prison and millions of dollars in fines. His sentencing was scheduled for January.
In a telephonic hearing in U.S. District Court, Kao admitted to the facts of the case. He said he inflated the number of employees he had on his loan applications, counting “prospective” employees who didn’t exist.
According to Bakke, the $2 million Kao deposited in his personal bank account was already “his money” – it was just taken from a business account that also contained the fraudulently obtained PPP money. Legally, that tainted the entire account and moving funds amounts to money laundering, he said.
“It commingled with all the other funds,” he said. “The fact that Navatek wrote him a paycheck, that’s money laundering because that account has dirty money in it.”
Meanwhile, Kao faces additional charges for illegal campaign contributions in Washington, D.C. He is accused of making illicit donations through a shell company to support Maine Sen. Susan Collins. He was charged earlier this year alongside two former colleagues, Clifford Chen and Lawrence Lum Kee.
Bakke said during Wednesday’s hearing that Kao has a plea agreement in that case, and Kao told the judge that deal is “contingent” on his guilty plea in the Hawaii bank fraud and money laundering case.
Sign up for our FREE morning newsletter and face each day more informed.
A good reason not to give
We know not everyone can afford to pay for news right now, which is why we keep our journalism free for everyone to read, listen, watch and share.
But that promise wouldn’t be possible without support from loyal readers like you.
Make a gift to Civil Beat today and help keep our journalism free for all readers. And if you’re able, consider a sustaining monthly gift to support our work all year-round.