3 Honolulu execs, Martin Kao, Clifford Chen and Lawrence ‘Kahele’ Lum Kee indicted for alleged illegal campaign contributions

Three Honolulu executives formerly with a Hawaii- based defense contractor were indicted Thursday in Washington, D.C., for allegedly making illegal campaign contributions to a U.S. Senate candidate and a political action committee.

Martin Kao, 48, Clifford Chen, 48, and Lawrence “Kahele” Lum Kee, 52, with defense contractor Martin Defense Group LLC, formerly known as Navatek LLC, are charged with conspiracy to defraud the United States and to make conduit and government contractor contributions, and making government contractor contributions.

Kao is also charged with two counts of making false statements to the Federal Election Commission.

Although the indictment does not name her, other news sources have identified the candidate as U.S. Sen. Susan Collins (R- Maine), who ran for reelection in 2020.

Thursday’s indictment does not link a separate 2020 federal complaint in which Kao, former CEO and president of Martin Defense Group and founder of Navatek, was charged with bank fraud and money laundering of more than $12.8 million in CARES Act funds. But the timing of the fraudulent acts, alleged to have occurred in the spring of 2020, fit with the timing of the election. The indictment says the primary was in July 14, 2020, and the general election was Nov. 3, 2020.

As a defense contractor, Martin Defense Group was prohibited from making contributions to a political action committee in support of a candidate for the U.S. Senate using government contractor funds.

The three men are accused of creating a shell company to conceal the source of an illegal contribution of $150,000 to an independent expenditure-only political action committee — a super PAC, which supported Collins.

The indictment names the alleged shell company, the Society of Young Women Scientists and Engineers LLC (SYWSE), which was incorporated Nov. 26, 2019, with Kao’s spouse as registered agent and manager.

Lum Kee allegedly wrote a check for $150,000 from Martin Defense Group to SYWSE, which contributed that amount to the super PAC.

The super PAC on Dec. 31, 2019, reported the contribution to the FEC. On Feb. 3, 2020, the day allegations that SYWSE was used to make illegal campaign contributions were publicly reported, Kao had SYWSE’s P.O. box closed, the indictment said.

The three men allegedly used their family members as conduits to make illegal donations to Collins’ campaign and then reimbursed themselves for those donations using funds from the company.

Chen was the company’s chief financial officer, and Lum Kee was its accountant.

Martin Defense Group was based in Hawaii and operated branch 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. It serviced contracts for the Department of Defense.

The three are scheduled to make their initial appearance at a later date. If convicted, they could face up to five years in prison and a $250,000 fine on each count.

Kao is accused in a separate federal case of defrauding banks in April and May 2020 of more than $12.8 million under the Coronavirus Aid, Relief, and Economic Security (CARES) Act Paycheck Protection Program.

As the Bangor Daily News reported Oct. 1, 2020, Kao, who has donated to Collins and whose business operates in Maine, is accused of defrauding the very program Collins championed.

The program was meant to help businesses hurt by the pandemic through forgivable loans to small businesses for job retention and other expenses.

Kao was charged by criminal complaint filed Sept. 29, 2020, with bank fraud and money laundering.

He was indicted May 6 and pleaded guilty May 12 to two counts of bank fraud and seven counts of money laundering.

He allegedly made false representations as to the number of employees the company had and how much they made to Central Pacific Bank in an application for a CARES Act PPP loan of $10 million, and to Radius Bank in the amount of $2,841,490.

He allegedly claimed his combined payroll costs amounted to $48.8 million.

He also allegedly laundered the money by depositing the funds into seven different accounts, some in the name of Navatek LLC and some in his own name.

Kao founded Navatek in 1979, and had been the chief executive officer at the time the Hawaii complaint was filed.

Kao appeared to pressure a senior vice president at CPB to approve the loan, writing in an email, “Navatek now has a significant and growing presence in several states.” He also claimed to have been “working very closely” with certain U.S. senators who had championed the CARES Act.

The latest indictment says that by May 31, 2019, Kao and his spouse reached the lawful limit for contributions to Collins’ campaign, so on July 1, 2019, he began giving money to six relatives in amounts of $5,200 and $5,600. The indictment alleges emails to and from the relatives show Kao directed them to make contributions to Collins’ campaign using his money and sent them a contribution form certifying they were personal funds and not from a prohibited source.

The indictment alleges “Campaign Committee A,” Collins’ campaign, reported to the FEC false information about these contributions, namely that they came from individuals and not Kao or his company.

The campaign finance director told Kao, “We are here to help any way we can … financially or whatever,” and reminded Kao he already contributed the maximum allowable amount, but wrote, “If you have friends or family members that would be wiling to donate please don’t hesitate to send them my way,” the indictment said.

Kao allegedly responded, saying, “You’re going to see two more max out donations of $5,600/each come in later today.”

Chen and Lum Kee also used their company corporate credit cards to pay for contributions to the campaign.