Martin Kao, the former CEO of a Hawaii-based defense contractor, has been sentenced to 87 months in federal prison for COVID-relief wire fraud, money laundering, and bank fraud. The sentencing was delivered by Senior United States District Judge Leslie E. Kobayashi in Honolulu. In addition to his prison term, Kao will serve five years of supervised release and is required to pay restitution amounting to $12,841,490 to the Small Business Administration (SBA). He must also forfeit an equivalent amount obtained through fraudulent Paycheck Protection Program (PPP) loans and perform 12,800 hours of community service.
Kao's fraudulent activities included submitting false PPP loan applications during spring 2020. He inflated employee numbers on his first application to secure a $10 million loan from a Hawaii bank. During this process, he pressured the bank by claiming that U.S. Senators would intervene if his application wasn't expedited.
In another instance, Kao concealed previous loans while applying for additional funds from an Internet-based mainland bank and altered documents to hide his actions. A third attempt at securing a PPP loan involved further deception about company payroll records which led to the denial of his application.
Additionally, Kao engaged in mortgage fraud by submitting falsified financial documents to obtain a $3 million loan for purchasing a residence in Kahala.
"Martin Kao, motivated by greed, chose to repeatedly lie about his assets and prior loans," stated Acting United States Attorney Kenneth M. Sorenson. "Today’s sentence sends the clear message that those who seek to defraud the Paycheck Protection Program will be prosecuted."
Adam Jobes from IRS Criminal Investigation noted that Kao's scheme diverted significant emergency relief funds meant for small businesses struggling during the pandemic. Weston King from SBA's Office of Inspector General emphasized their ongoing commitment to addressing fraud within pandemic relief programs.
The CARES Act authorized substantial funding through forgivable loans like PPPs intended for small business support during the pandemic crisis. The Justice Department’s COVID-19 Fraud Enforcement Task Force continues its efforts against such fraudulent activities.
Information regarding potential COVID-19-related fraud can be reported via the Department of Justice’s National Center for Disaster Fraud Hotline or their web complaint form.
The investigation into Martin Kao was conducted by IRS Criminal Investigation and SBA's Office of Inspector General with prosecution handled by Assistant U.S. Attorneys Craig Nolan and Sydney Spector along with Trial Attorneys Jennifer Bilinkas and Tom Tynan.