After Senator Susan Collins’ major donor and campaign backer Martin Kao was arrested for allegedly defrauding the federal government out of $12.8 million in small business relief funds, new reporting in The Daily Beast digs into how Kao leveraged his DC connections to pressure and intimidate local banks into approving his loan applications.

 

Before Kao reportedly threatened banks to fraudulently obtain funds intended for struggling small businesses, he was funnelling major cash into Maine to support Senator Collins’ reelection. After Collins helped his firm secure an $8 million defense contract, Kao’s wife was linked to an illegal straw donor scheme that contributed  $150,000 to a pro-Collins Super PAC. Employees of Kao’s firm and their families have also donated more than $70,000 to the Collins campaign.

 

The Daily Beast: Alleged COVID Scammer Threatened Banks With His D.C. Connections

 

By Lachlan Markay

October 1, 2020

 

Key Points:

 

  • The CEO of a Hawaii defense contractor invoked his connections to powerful lawmakers in Washington, D.C. in order to pressure banks into approving what federal prosecutors now say were millions of dollars in fraudulently obtained coronavirus bailout loans.

 

  • Prosecutors say Martin Kao, the chief executive of the Honolulu-based Navatek, which was rebranded last week as the Martin Defense Group, illegally obtained more than $12 million in financing through the Paycheck Protection Program. The criminal complaint against Kao alleges that he lied to banks about the number of people employed by his company and applied for multiple PPP loans through various subsidiaries in order to illegally maximize the amount of money he extracted from the program. Kao was arrested on Wednesday on bank fraud and money laundering charges, as first reported by Civil Beat.

 

  • There have been numerous cases of PPP loan recipients exaggerating the number of employees they have or using satellite companies to apply for—and receive—more federal assistance. What stands out in Kao’s case is how he leaned on what he described as his extensive political connections in the nation’s capital to pressure banks into approving his loan applications.

 

  • “Navatek now has a significant and growing presence and employees” in several states, Kao allegedly told an executive at Central Pacific Bank, which eventually awarded Navatek a PPP loan worth $10 million, the highest value available to businesses under the program. Kao said he “work[ed] very closely” with U.S. Senators from those states who had “championed” the PPP program.

 

  • About a week later, Kao reached out to CPB once again, saying in an email that he had just spoken with a senator who insisted that the bank should approve Navatek’s loan application. The senator “is suggesting a conference call with his Banking Committee and [Small Business Administration] staff director...SHE HELPED WRITE THE PPP RULES,” Kao wrote. “She has confirmed directly that CPB should and is obligated to fund” the PPP loan.

 

  • In conversations with a separate financial institution, First Hawaiian Bank, Kao claimed to have “an ‘insider’ at SBA via our contacts at pretty high levels on the Senate Banking Committee. Should hear soon from them.”

 

  • The company’s business in Maine has drawn particular scrutiny due to Kao’s financial support for one of that state’s senators, Republican Susan Collins. Kao donated the legal maximum to Collins’ reelection campaign in May of last year. Then, on December 31, 2019, a nonprofit reportedly linked to Kao’s wife gave $150,000 to a super PAC supporting Collins’ competitive reelection fight this year. The Campaign Legal Center, a nonprofit watchdog group, subsequently filed a complaint with the Federal Election Commission alleging that the contribution was an illegal straw donation designed to obscure the true source of those funds.

 

  • That donation came a few months after Collins helped Navatek secure an $8 million contract to develop advanced hulls and propulsion systems for the U.S. Navy. Collins also signed onto a statement from the Maine congressional delegation in August of this year hailing a $5 million contract awarded to Navatek by the Navy and the University of Maine.

 

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