Martin Kao, 51, a resident of Honolulu and Chief Executive Officer of a Hawaii-based defense contracting company, was sentenced to 87 months in federal prison for his role in a fraudulent scheme to obtain COVID-19 relief funds.
Senior United States District Judge Leslie E. Kobayashi also imposed five years of supervised release and ordered Kao to pay restitution of $12,841,490 to the Small Business Administration (SBA). Kao was found guilty of wire fraud, money laundering, and bank fraud after submitting multiple fraudulent Paycheck Protection Program (PPP) loan applications in the spring of 2020.
According to Kao’s admissions during his guilty plea hearings and other court records, as Chief Executive Officer and 99% owner of a Hawaii-based defense contractor, Kao submitted fraudulent PPP loan applications to at least three banks, including two headquartered in Hawaii, during spring 2020. In his first PPP loan application Kao falsely tripled the number of employees at his company and thereby obtained the maximum loan of $10,000,000 from a Hawaii bank. During the bank’s review of Kao’s application, Kao pressured the bank to expedite approval of the fraudulent application by repeatedly claiming that he had discussed his application with United States Senators and their staffs who would intervene on Kao’s behalf if the bank did not quickly approve his loan.
In his second PPP loan application Kao falsely claimed eligibility for another $2,841,490 and obtained that loan from an Internet-based mainland bank by concealing his company’s receipt of the first PPP loan. Kao then altered the executed promissory note associated with the loan by deleting all references to the PPP to conceal his fraud from others who knew about the first PPP loan. In his third PPP application to a different Hawaii-based bank, Kao again falsely claimed eligibility for another $2,852,839 by concealing his company’s receipt of the first and second PPP loans. When the bank questioned Kao about why payroll records for his employees did not match the tax identification number for the entity identified on the application, Kao falsely described his company’s corporate structure and submitted a revised application, which the bank denied.
Also during spring 2020, Kao submitted a fraudulent mortgage application to a national bank seeking $3,000,000 to purchase a $4,500,000 residence in Kahala. In support of that application, Kao submitted numerous investment account statements and records that he had digitally altered and fabricated to falsely inflate the value of his stock portfolio. In his final submission prior to loan approval, Kao altered the statement to reflect a value of more than $10,000,000 for holdings that in fact were valued at less than $65,000.
“Martin Kao, motivated by greed, chose to repeatedly lie about his assets and prior loans in order to obtain millions of dollars in funds that were intended to help businesses staggered by the COVID-19 pandemic,” said Acting U.S. Attorney Sorenson. “Today’s sentence sends a clear message that those who defraud the Paycheck Protection Program will be prosecuted to the fullest extent of the law.”
Kao’s case is part of a broader initiative by the Justice Department’s COVID-19 Fraud Enforcement Task Force to combat pandemic-related fraud. Authorities emphasize the importance of protecting taxpayer dollars and the integrity of federal relief programs.
The investigation was conducted by the IRS Criminal Investigation and the SBA Office of Inspector General. Assistant U.S. Attorneys Craig Nolan and Sydney Spector handled the prosecution, supported by Trial Attorneys Jennifer Bilinkas and Tom Tynan from the Criminal Division’s Fraud Section.
For those who suspect COVID-19 fraud, the Department of Justice encourages reporting through the National Center for Disaster Fraud Hotline at 866-720-5721 or by visiting the NCDF Web Complaint Form.
As the nation continues to navigate the economic fallout from the pandemic, cases like Kao’s highlight the critical need for vigilance in safeguarding public funds and ensuring that relief programs are not exploited.
