Former Hawaii defense contractor pleads guilty

A former Hawaii defense contractor and prominent political donor admitted to conspiring to make illegal campaign contributions to a political action committee and a U.S. senator while hiding the scheme from regulators.

Martin Kao, 49, former head of Martin Defense Group LLC, formerly known as Navatek LLC, changed his plea Tuesday in federal court in Washington, D.C.

Kao pleaded guilty 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 is scheduled to be sentenced Feb. 9 and faces up to five years in prison on each count.

Kao and his alleged 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, according to the statement of offense in support of guilty plea, filed Tuesday in federal court. The contributions were designed to support 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.

The maximum permitted contribution from a person 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.

On Aug. 2, 2019, one of the relatives emailed a copy of his contribution form to Kao that “explicitly stated” that the relative’s signature on the form “verifies that this contribution represents my/our personal funds” and listed contribution limits and made clear that contributions from corporations and federal government contractors were prohibited.

In the body of the email, the relative wrote to Kao, “All good? wasn’t sure if I filled it out right.” Kao replied the same day, “All good! Thanks!” according to federal court documents.

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

Chen and Lum Kee are awaiting trial April 24.

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.

Second guilty plea

Tuesday’s guilty plea was the second guilty plea made by Kao in federal court this month.

On Sept. 7, Kao admitted he defrauded banks of more than $12.8 million intended to help businesses struggling through the COVID-19 pandemic.

In that case he is charged with bank fraud and money laundering. If convicted, he faces up to 30 years in prison, a $1 million fine and five years’ probation. On the money laundering allegations, Kao is facing up to 20 years in federal prison on each count and a $250,000 fine.

“We ended up pleading to both cases because we wanted to resolve all of his outstanding legal matters,” Kao’s attorney Victor Bakke told the Honolulu Star- Advertiser on Tuesday.

Prolific donor

Kao is a prolific political donor who has supported county, state and federal elected officials in Hawaii and members of Congress sitting on key committees who could help or hurt his business.

Between 2010 and 2020, Kao and former Navatek executives donated hundreds of thousands of dollars to the campaigns of congressional members who represented the states where they did business and those with seats on defense appropriations subcommittees, according to Federal Election Commission records.

From April 2009 through August 2019, Kao donated $70,150 to 30 state and county lawmakers, more than half to governors and a lieutenant governor, according to contribution records maintained by the Hawaii Campaign Spending Commission.

Kao gave $12,000 to the campaigns of Gov. David Ige from 2017 and 2018 and $12,000 to Lt. Gov Josh Green’s election efforts from 2018 to 2019, and $12,000 to support the political operations of former Gov. Neil Abercrombie from 2009 through 2012.

Between 2013 and 2019 Kao and Navatek executives donated $127,000 to Hawaii state lawmakers.

Between Aug. 12, 2009, and March 9, 2020, Kao donated $228,900 to candidates for the U.S. House and Senate, including Hawaii’s sitting U.S. senators, Mazie Hirono and Brian Schatz.

A handful of state lawmakers returned the contributions they received from Kao to the Hawaii Campaign Spending Commission after the criminal allegations against him surfaced.

Green donated the $6,000 he received from Kao to charities helping domestic violence victims and a school for the blind. State Rep. Della Au Belatti’s campaign returned $2,000 from Kao, House Speaker Scott Saiki gave back $1,500 and the Democratic nominee for lieutenant governor, Sylvia Luke, gave back $500.

Former state Rep. Ty Cullen, awaiting federal sentencing for taking bribes from a Honolulu wastewater executive in exchange for managing legislation to benefit the executive’s business, gave back $1,500.