The legal troubles for Martin Kao, a disgraced Hawaii defense contractor, continue to mount. 

In a new lawsuit filed late last month by PacMar Technologies, formerly known as Navatek, Kao and several of his family members, including his wife and parents, are accused of alleged embezzlement and misappropriation of charitable dollars, some of which was donated by the company. 

At the center of the lawsuit is the Marty & Mickey Kao Foundation, which Kao and his wife, Tiffany Lam, launched in 2019 with Kao’s parents, George and Rachel Kao, to support low income students and the furtherance of education programs designed to advance learning in science, technology, engineering and math. 

According to the lawsuit and other court filings, the foundation, which is also named as a defendant, purchased a $2.9 million luxury condo in San Francisco shortly after it was created as a tax-exempt charity.

Two years later, court records state, that condo was sold for $3.1 million and the proceeds from the sale were transferred to Kao’s parents’ TD AmeriTrade account, which was then used as a “personal piggy bank for all manners of private, non-charitable uses in violation of federal and state law.” 

Jesse Schiel, an attorney representing PacMar Technologies, declined to comment on the specifics of the litigation and instead referred to the pleadings that have been filed in Hawaii Circuit Court.

“This is a very detailed and documented complaint,” Schiel said. “The misconduct asserted in the complaint speaks for itself and we intend to hold Martin and his family members who are involved in this accountable.” 

The lawsuit alleges a number of inappropriate uses of the foundation’s money, including the purchase of Martin Kao’s stake in two family-owned properties for $641,000. 

The timing of those purchases in March 2022 are noteworthy. 

At the time, Kao faced a series of criminal charges for pandemic relief fraud and making illegal campaign donations to U.S. Sen. Susan Collins and a super PAC that supported her bid for re-election in 2020. 

Kao has pleaded guilty in both cases and is currently awaiting sentencing. 

The property transactions also came after PacMar Technologies and its founder, Steven Loui, won a separate arbitration case effectively stripped Kao of his ownership interest in the company and ordered him to pay $6 million in damages. Kao has appealed that ruling. 

Through the lawsuit, PacMar Technologies is seeking to recoup $107,000 that the company contends Kao stole to help pay for foundation expenses, as well as $130,000 that the company donated to the charity when it was first launched in 2019.

The company has also asked the court to freeze the remaining funds in the TD AmeriTrade account to prevent further alleged misappropriation of the money. 

In the meantime, PacMar Technologies has asked the Hawaii Attorney General’s Office to investigate the foundation and whether the charity’s assets can be recovered.

Paula Youngling, the Attorney General charities program administrator, acknowledged in a written statement that PacMar Technologies had notified the agency of its lawsuit, but she declined to comment further.

“To protect the integrity of its investigatory processes, the Department of the Attorney General does not make statements on complaints received or on the existence or status of investigations,” Youngling said.

The lawsuit targeting the Marty & Mickey Kao Foundation is just the latest salvo in Loui’s quest to restore his company’s reputation and hold Kao responsible for tarnishing its name. 

Loui has filed a series of lawsuits in state and federal court, including a racketeering case that targets Kao and other alleged co-conspirators who are accused of taking part in his various criminal enterprises. 

He’s also filed suit against Michael O’Malley, a partner at Goodsill, Anderson, Quinn & Stifel, who is alleged to have worked closely with Kao and was instrumental in helping set up the Marty & Mickey Kao Foundation. 

PacMar Technologies’ latest lawsuit appears to be an attempt by the company to recoup at least some of its losses that it attributes to Kao and his criminal conduct. 

While records show Kao previously spent huge sums on attorneys fees — to the tune of hundreds of thousands of dollars — he was assigned a federal public defender in his illegal campaign contribution case. 

He’s similarly being represented by a federal public defender in a separate criminal case involving alleged mortgage fraud, one in which he has pleaded not guilty. In court records filed in August, Kao has said he has been working at a Cheesecake Factory. 

Keith Kiuchi, a civil attorney representing Kao, said he has not yet read the latest complaint from PacMar Technologies. There are a number of cases pending already, he said, and the latest case will only add the volume.  

“It’s apparent to me that Steven Loui wants a pound of flesh here,” Kiuchi said. “And that Steven Loui’s going to go after Martin Kao until times end.”