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An ex-Hawaii defense contractor and prominent campaign contributor was sentenced last week to 33 months in federal prison for his role in a conspiracy to funnel $205,600 in illegal campaign contributions to a political action committee and U.S. Senator Susan Collins. Martin Kao, 51, the former CEO and 99% owner of Martin Defense Group LLC, formerly known as Navatek LLC, is already serving 87 months for COVID-19 relief fraud and the sentence he received Monday will run concurrently. “Federal campaign finance laws serve the dual purposes of prohibiting any one individual or corporation from gaining improper influence through excessive campaign contributions and providing transparency to voters and government regulators. When an individual seeks to use a “straw donor” to exceed the contribution limits, these purposes are thwarted, and the campaign finance system is undermined. That is what happened here,” wrote Assistant U.S. Attorney Joshua A. Gold. “… Martin Kao conspired with others to conceal the true donor to Campaign Committee A and Political Committee A. In doing so, he caused false reports to be filed with the Federal Election Commission. These are serious offenses, as reflected in the sentencing guidelines, which call for a significant period of incarceration.” Gold noted Kao’s “relatively prompt acceptance of responsibility and the significant sentence” he received in the COVID-19 fraud case and asked the judge to sentence Kao to 41 months. Kao asked for time served, and his attorney noted he is a changed man who supported his family by working at The Cheesecake Factory before he was imprisoned. “… Kao has demonstrated that he is a humbled and changed man,” wrote Kai’s attorney Michelle Peterson, Chief Assistant Federal Public Defender, in an Oct. 16 sentencing memo. “Mr. Kao, unlike his codefendants in this case, almost immediately accepted responsibility for his conduct and agreed to plead guilty. He subsequently spent several days providing the government full information about his role and that of others in the Company in the conduit contribution scheme as well as other aspects of the pay to play scheme that pervaded Navatek and Capitol Hill — his conduct in this case was for the benefit of Navatek. Despite getting no personal benefit, it was important to him to come fully clean about his role in a pervasively corrupt system that crossed party lines and went very far up the political system and business community.” Kao pleaded guilty in September 2022 to conspiring to make unlawful campaign contributions to a candidate for Congress and a political action committee, making unlawful campaign contributions and causing the submission of false information to the Federal Election Commission, according to the U.S. Department of Justice. Kao and his co-conspirators Clifford Chen, 48, and Lawrence “Kahele” Lum Kee, 52, created a shell company, the Society of Young Women Scientists and Engineers LLC, which they used to make an illegal contribution using government contractor funds to a PAC supporting the election of U.S. Sen. Susan Collins, R-Maine. He also enlisted family members as “conduits to make illegal contributions” to Collins’ campaign committee and then paying them back for those donations using money from Kao’s company, according to federal prosecutors. Kao’s spouse was listed as the registered agent and manager of the shell company. The contributions supported Collins’ campaign in Maine’s primary election on July 14, 2020, and the general election on Nov. 3, 2020. Collins won reelection to the U.S. Senate in 2020. Collins is facing a primary challenge from Maine’s governor, Janet Mills. The maximum amount someone may donate to a federal candidate’s authorized campaign committee was $2,800 per election (primary and general), for a total of $5,600 from any one person to any one federal candidate. Kao knew that government contractors, such as Company A — whose name was redacted in court records — are “presently prohibited from using the proceeds of their government contracts for contributions” to authorized campaign committees and federal independent expenditure-only political committees, according to federal court documents. After Kao and his wife maxed out to Collins, he gave money to six of his relatives and instructed them to donate to Collins’ campaign. On July, 1, 2019, Kao gave one of the relatives a check for $5,200, and the other five each got a check for $5,600. Over the next 16 days, Kao’s relatives contributed the money they were given to Collins’ campaign. On Sept. 19, 2019, one of the relatives texted him saying he paused refinancing a loan with a bank because of the $5,600 payment he got from Kao’s company. “I just told them it’s rental income from a condominium we own and that your company manages. I’m thinking I can just draw up some kind of payment letter, from you or (Company A), that says payment for rental income. … What do you think?” Kao responded, “Ok. Can list me as the point of contact if they need to verify.” Kao stepped down as CEO in November 2020. Kao, Chen and Lum Kee also ran a plan for Chen, Lum Kee and their relatives to contribute to Collins’ campaign before being reimbursed with company cash. On Sept. 17, 2019, Kao talked in person with Chen and Lum Kee about the scheme and “the need to evade the laws limiting the source and amount of campaign contributions,” according to the statement of offense. The same day, Chen and Lum Kee each used their company corporate credit cards to make $5,600 contributions to Collins’ campaign. Kao also instructed Lum Kee to make a max donation from his company-issued American Express card. On Nov. 21, 2019, Lum Kee sent an email to Kao’s and Chen’s company accounts with the subject “New LLC.” It read, “Looks like we can set up a new LLC pretty vaguely. Let me know who you want to list as the registered agent, manager and the address to use and I can get started when you are read(y). Thanks.” Kao replied with the name Society of Young Women Scientists and Engineers LLC. Lum Kee and Chen both got a year of federal supervised release for their role in the crime. Martin Defense Group was based in Hawaii and operated offices in Maine; Washington, D.C.; Rhode Island; Michigan; Oklahoma; Kansas; and South Carolina. It designed and analyzed ship hull forms, ocean structures, underwater lifting bodies and coupled hydrodynamic systems, according to the company, which did contract work for the U.S. Department of Defense. Kao was sentenced Feb. 13 by Senior U.S. District Judge Leslie E. Kobayashi to 87 months imprisonment followed by five years of supervised release for COVID-19 relief wire fraud, money laundering and bank fraud. Kobayashi also ordered him to pay restitution of $12,841,490 to the Small Business Administration; forfeit $12,841,490 in Paycheck Protection Program funds he obtained through fraud; forfeit the proceeds of his bank fraud after foreclosure of the house he bought by fraudulently obtaining a $3 million loan; and perform 12,800 hours of community service while on supervised release. Kao submitted fraudulent PPP loan applications to at least three banks, including two headquartered in Hawaii, during spring 2020, according to Kao’s admissions during his guilty plea hearings and other court records. “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,” Acting U.S. Attorney Kenneth M. Sorenson said in a statement.
