A Hawaii defense contractor who has donated to U.S. Sen. Susan Collins and whose business operates in Maine faces federal charges alleging he defrauded the Paycheck Protection Program, the small business loan program championed by the senator.
Martin Kao, the CEO of Martin Defense Group, formerly known as Navatek LLC, allegedly inflated the number of his employees his business had and how much they made to get a $10 million loan, then deposited $2 million into his personal bank account, according to a criminal complaint filed in U.S. District Court in Hawaii on Tuesday.
He then allegedly applied for a second loan. Kao, 47, is set to make an initial appearance in federal court in Honolulu on Thursday, according to U.S. Attorney Kenji M. Price’s office. He is facing two charges of bank fraud and five charges of money laundering.
The defense contracting company, headquartered in Honolulu, Hawaii, said it grew to employ 40 engineers and scientists in Portland and Bangor offices this summer. It has offices in six other states and primarily designs ship hulls for the U.S. Navy. Kao appeared with Collins at a company event in Portland last year after his company won an $8 million Navy contract.
Kao allegedly flaunted ties to U.S. senators in conversations with officials at a Hawaii-based bank in loan conversations, noting in an April 2 email his company operates in multiple states and saying he “work[s] very closely” with senators from those states who “championed” the March coronavirus relief bill that included the loan program, according to the criminal complaint.
It does not name the lawmakers with whom he allegedly talked. Collins spokesperson Annie Clark said Thursday morning the Republican senator had not spoken with Kao since August 2019 and no one in her office had contact with him or his company about the Paycheck Protection Program.
In a later email to the bank, Kao told the bank that a Senate staffer “wanted to STRESS that these are simple checks of information and mathematical accuracy … and the bank is ABSOLUTELY empowered and relying on the applicants [sic] representations and certifications.”
Both Kao and his wife, Tiffany Jennifer Lam, are major political donors, having given at least $150,000 to federal groups since the start of 2018. They have given maximum contributions to Collins, a Republican, this cycle, according to federal data. He has also given to many Democratic senators, including Jeanne Shaheen of New Hampshire.
Lam was linked to a shadowy $150,000 donation to a pro-Collins super PAC, the Honolulu Civil Beat reported in February. It was the subject of a federal ethics complaint that month from the nonpartisan Campaign Legal Center, which cited evidence the company making the contribution had no legitimate income and was set up to hide the true donors.
The Paycheck Protection Program, which was co-authored by Collins, has offered more than $660 billion in forgivable loans to small businesses, including more than $2.3 billion that went to 28,000 businesses in Maine, according to federal data.
The Department of Justice has recently ramped up prosecution of businesses that obtained loans fraudulently. A Democratic congressional report in early September raised concerns about nearly $5 billion in potentially fraudulent loans, though that total would still represent less than one percent of the program’s overall funding.