Sealed Criminal Complaint; Affidavit In Support of Criminal Complaint as to Martin Kao — United States v. Kao (Dkt. 1, D. Haw. No. 1:21-cr-00061)

Record facts

U.S. District Court for the District of Hawaii · No. 1:21-cr-00061-LEK · Doc. 1 · 2020-09-29 · Docket on CourtListener

Full text

KENJI M. PRICE #10523 
       DANIEL KAHN 
United States Attorney 
 
       Acting Chief, Fraud Section 
District of Hawaii  
       Criminal Division, U.S. Dept. of Justice 
CRAIG S. NOLAN 
       THOMAS J. TYNAN 
Assistant U.S. Attorney  
       Trial Attorney 
Room 6100, PJKK Federal Building        U.S. Dept. of Justice  
300 Ala Moana Blvd. 
 
       Criminal Division, Fraud Section 
Honolulu, Hawaii  96850  
       1400 New York Avenue, N.W. 
Telephone:  (808) 541-2850 
 
       Washington, D.C. 20005 
Facsimile:  (808) 541-2958 
       (202) 768-1136 
E-mail: Craig.Nolan@usdoj.gov 
       Thomas.Tynan@usdoj.gov 
Attorneys for Plaintiff 
UNITED STATES OF AMERICA 
IN THE UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF HAWAII 
UNITED STATES OF AMERICA, 
Plaintiff, 
vs. 
MARTIN KAO, 
Defendant. 
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MAG. NO. 20-01208-WRP 
CRIMINAL COMPLAINT 
CRIMINAL COMPLAINT 
I, the undersigned complainant, being duly sworn, state the following is true 
and correct to the best of my knowledge and belief: 
September 29, 2020
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Count 1 
Bank Fraud 
(18 U.S.C. § 1344(2)) 
In or about April 2020, within the District of Hawaii and elsewhere, 
MARTIN KAO, the defendant, knowingly executed and attempted to execute a 
scheme and artifice to obtain moneys, funds, credits, assets, securities, and other 
property owned by, and under the custody and control of, a financial institution, by 
means of false and fraudulent pretenses, representations, and promises, namely the 
preparation and submission of materially false documents and statements to 
Central Pacific Bank in the application process for a CARES Act Paycheck 
Protection Program loan of approximately $10,000,000.    
All in violation of Title 18, United States Code, Sections 1344(2) and 2. 
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Count 2 
Bank Fraud 
(18 U.S.C. § 1344(2)) 
In or about April and May 2020, within the District of Hawaii and 
elsewhere, MARTIN KAO, the defendant, knowingly executed and attempted to 
execute a scheme and artifice to obtain moneys, funds, credits, assets, securities, 
and other property owned by, and under the custody and control of, a financial 
institution, by means of false and fraudulent pretenses, representations, and 
promises, namely the preparation and submission of materially false documents 
and statements to Radius Bank in the application process for a CARES Act 
Paycheck Protection Program loan of approximately $2,841,490.    
All in violation of Title 18, United States Code, Sections 1344(2) and 2. 
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Counts 3-7 
Money Laundering 
(18 U.S.C. § 1957) 
On or about the dates set forth below, within the District of Hawaii and 
elsewhere, MARTIN KAO, the defendant, knowingly engaged and attempted to 
engage in the following monetary transactions by, through, and to a financial 
institution, affecting interstate and foreign commerce, in criminally derived 
property of a value greater than $10,000, namely the transfer of funds from Central 
Pacific Bank account number XXXXXX9145, such property having been derived 
from a specified unlawful activity, namely Bank Fraud, in violation of Title 18, 
United States Code, Sections 1344(2) : 
Count 
Date of 
Transaction 
Description of 
Transaction 
Disposition of Funds 
Transaction 
Amount 
3 
04/21/2020 
Check no. 31029 
payable to 
NAVATEK, LLC 
Deposited into Merrill 
Lynch account no. 
XXX-X3506 
 $2,000,000 
4 
04/22/2020 
Check no. 30986 
payable to 
MARTIN KAO 
Deposited into Merrill 
Lynch account no. 
XXX-X2641 
 $2,000,000 
5 
04/29/2020 
Check no. 31124 
payable to 
NAVATEK, LLC 
Deposited into Merrill 
Lynch account no. 
XXX-X3506 
 $3,000,000 
6 
05/07/2020 
Check no. 31127 
payable to 
NAVATEK, LLC 
Deposited into Merrill 
Lynch account no. 
XXX-X3506 
 $3,000,000 
7 
05/18/2020 
Check no. 31249 
payable to 
MARTIN KAO 
Deposited into FHB 
account no. XX-
XX1787 
 $20,200 
All in violation of Title 18, United States Code, Sections 1957 and 2. 
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I further state that I am a Special Agent with United States Internal Revenue 
Service, Criminal Investigation. This Complaint is based on the following 
Affidavit, which is attached hereto and incorporated herein. 
Dated on this 2f.Jlt day of September, 2020, at Honolulu, Hawaii. 
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Shaun Morita 
Special Agent 
IRS-CI 
This Criminal Complaint and Affidavit in support thereof were presented to, 
approved by, and probable cause to believe that the defendant above-named 
committed the charged crimes found to exist by the undersigned Judicial Officer at 
___ .m. on September 29 , 2020. 
Sworn to under oath before me telephonically, and attestation acknowledged 
pursuant to Federal Rule of Criminal Procedure 4.l(b)(2), on this 29th day of 
September 2020, at Honolulu, Hawaii. 
vVes Reber Porter 
United States Magistrate Judge 
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AFFIDAVIT IN SUPPORT OF CRIMINAL COMPLAINT 
I, Shaun Morita, being duly sworn, hereby depose and state as follows: 
INTRODUCTION AND AGENT BACKGROUND 
1.
This affidavit is made in support of the foregoing Criminal Complaint
against MARTIN KAO (“KAO”), charging him with Bank Fraud, in violation of 
18 U.S.C. § 1344, and Money Laundering, in violation of 18 U.S.C. § 1957.  
During the spring of 2020, KAO fraudulently obtained more than $12.8 million in 
Paycheck Protection Program (“PPP”) funds on behalf of his company, 
NAVATEK, LLC (now known as MARTIN DEFENSE GROUP, LLC).  The PPP 
was authorized by Congress in the Coronavirus Aid, Relief, and Economic 
Security (“CARES”) Act, P.L. 116-136, of March 2020, to provide emergency 
financial assistance to the millions of Americans who were suffering the economic 
effects caused by the COVID-19 pandemic through forgivable loans to small 
businesses for job retention and other specified expenses.  After committing the 
fraud, KAO transferred approximately $2 million to himself. 
2.
I am a Special Agent with the Internal Revenue Service, Criminal
Investigation (“IRS-CI”) and have been so employed in this capacity since June 
2005.  My duties as an IRS-CI Special Agent include the investigation of possible 
criminal violations of the Internal Revenue Code (Title 26, United States Code), 
the Bank Secrecy Act (Title 31, United States Code), the Money Laundering 
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Control Act of 1986 (Title 18, United States Code, Sections 1956 and 1957), and 
other related offenses.  I successfully completed the 11-week Criminal Investigator 
Training Program at the Federal Law Enforcement Training Center and the 15-
week Special Agent Basic Training Program at the Internal Revenue Service 
National Criminal Investigation Training Academy, both located in Glynco, 
Georgia.  I have been trained in accounting, financial investigative techniques, 
investigations of alleged criminal violations of the Internal Revenue laws and other 
financial crimes, and the laws of search and seizure.  Prior to my employment with 
IRS-CI, I earned a Bachelor of Business Administration degree in accounting. 
3.
In the course of my employment, I have conducted or assisted in a
number of criminal investigations involving violations of federal tax law, money 
laundering and related offenses, including wire and bank fraud, and other illegal 
schemes impacting financial institutions.  I have written search and seizure warrant 
affidavits and participated in the execution of numerous federal search warrants 
involving alleged criminal violations during which evidence of criminal violations 
were seized.  This included the seizure of documents and electronically stored data 
containing evidence related to criminal activity.  In most of the investigations in 
which I participated, where search warrants were used to seize documents, 
electronically stored data or other evidence, the evidence seized helped to prove 
the criminal violations alleged.  Recently, I have been assigned to work with the 
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U.S. Department of Justice and other law enforcement partners to investigate 
possible fraud associated with the stimulus and economic assistance programs 
created by the federal government in response to the COVID-19 pandemic. 
4.
The facts set forth in this Affidavit are based on my personal
knowledge; knowledge obtained from other individuals during my participation in 
this investigation, including federal law enforcement agents; interviews of 
witnesses; examination of documents, records and communications; review of 
information contained within government databases; and information gained 
through my training and experience. 
5.
This affidavit does not include each and every fact known to the
government, but only those facts necessary to support a finding of probable cause 
to support the requested warrant. 
PROBABLE CAUSE 
Overview of the Paycheck Protection Program 
6.
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act
is a federal law enacted in or around March 2020 and designed to provide 
emergency financial assistance to the millions of Americans who are suffering the 
economic effects caused by the COVID-19 pandemic.  One source of relief 
provided by the CARES Act was the authorization of up to $349 billion in 
forgivable loans to small businesses for job retention and certain other expenses, 
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through a program referred to as the Paycheck Protection Program (“PPP”).  In or 
around April 2020, Congress authorized over $300 billion in additional PPP 
funding. 
7. 
In order to obtain a PPP loan, a qualifying business must submit a PPP 
loan application, which is signed by an authorized representative of the business.  
The PPP loan application requires the business (through its authorized 
representative) to acknowledge the program rules and make certain affirmative 
certifications in order to be eligible to obtain the PPP loan.  In the PPP loan 
application, the small business (through its authorized representative) must state, 
among other things, its: (a) average monthly payroll expenses; and (b) number of 
employees.  These figures are used to calculate the amount of money the small 
business is eligible to receive under the PPP.  In addition, businesses applying for a 
PPP loan must provide documentation showing their payroll expenses.   
8. 
A PPP loan application must be processed by a participating lender.  
If a PPP loan application is approved, the participating lender funds the PPP loan 
using its own monies, which are 100% guaranteed by Small Business 
Administration (“SBA”).  Data from the application, including information about 
the borrower, the total amount of the loan, and the listed number of employees, is 
transmitted by the lender to the SBA in the course of processing the loan.    
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9.
PPP loan proceeds must be used by the business on certain
permissible expenses—payroll costs, interest on mortgages, rent, and utilities.  The 
PPP allows the interest and principal on the PPP loan to be entirely forgiven if the 
business spends the loan proceeds on these expense items within a designated 
period of time after receiving the proceeds and uses a certain amount of the PPP 
loan proceeds on payroll expenses.   
10.
Under the PPP, the maximum loan amount is the lesser of $10 million
or an amount calculated using a payroll-based formula.  The methodology used by 
the applicant to calculate the maximum loan amount involves aggregating payroll 
costs from the last twelve months for employees whose principal place of 
residence is the United States and subtracting compensation paid to an employee in 
excess of an annual salary of $100,000.  That amount is divided by twelve to 
calculate the average monthly payroll costs.  The average monthly payroll costs are 
multiplied by 2.5.  The definition of payroll costs expressly excludes compensation 
of an individual employee in excess of an annual salary of $100,000. 
Relevant Entities 
11.
MARTIN DEFENSE GROUP, LLC (“MDG”) (fka NAVATEK,
LLC) is a research, engineering, design, and innovations company that specializes 
in novel systems for the Department of Defense and other partners in academia and 
other scientific fields.  According to its website (mdefensegroup.com, formerly 
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www.navatekllc.com), the company was founded in 1979 and is under the current 
leadership of KAO, who serves as Chief Executive Officer.   
12. 
MDG fka NAVATEK, LLC is headquartered in Honolulu, Hawaii 
and has branch offices located in Portland, Maine; Bangor, Maine; South Kingston, 
Rhode Island; Arlington, Virginia; Ann Arbor, Michigan; Wichita, Kansas; 
Stillwater, Oklahoma; and Columbia, South Carolina. 
13. 
According to the Business Registration Division of the State of 
Hawaii, Department of Commerce and Consumer Affairs (“Hawaii DCCA”), 
NAVATEK, LLC was converted from NAVATEK, LTD on August 31, 2018, and 
changed its name to MDG on July 27, 2020.  The mailing address listed is 841 
Bishop Street, Suite 1110, Honolulu, Hawaii 96813 and the sole manager is KAO. 
14. 
According to the Hawaii DCCA, MDG fka NAVATEK, LLC is the 
sole manager for NAVATEK LIFTING BODY TEC (“NLBT”), NAVATEK CFD 
TECHNOLOGIES, LLC (“NCT”), NAVATEK ALTERNATIVE ENERGY 
(“NAET”), and NAVATEK SHC LLC.   
15. 
NLBT was registered to do business on June 18, 2008 and was 
terminated on December 31, 2019.   
16. 
NCT was registered to do business on June 18, 2008.  The name 
changed to MDG – RI, LLC on July 27, 2020.   
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17. 
NAET was registered to do business on June 18, 2008, and was 
terminated on December 31, 2019.   
18. 
NAVATEK SHC LLC was registered to do business on April 10, 
2019 and is currently active and in good standing.   
19. 
NLBT, NCT, NEAT and NAVATEK SHC LLC share the same 
business address as MDG fka NAVATEK, LLC.  
PPP Application to Central Pacific Bank 
 
20. 
At all times relevant here, Central Pacific Bank (“CPB”) was an 
approved SBA lender and participated as a lender in the PPP.   
21. 
According to information provided by CBP, on or about April 3, 
2020, KAO submitted to the bank a PPP application in the name of NAVATEK 
LLC seeking $10,000,000 in PPP funds.  In the application, KAO represented 
himself as the President/CEO & Manager of NAVATEK, LLC with 99% 
ownership of the company.   
22. 
In the PPP application, KAO claimed that NAVATEK, LLC had 490 
employees and an average monthly payroll of $4,072,000.   
23. 
KAO also certified as required that, from February 15, 2020 to 
December 31, 2020, NAVATEK, LLC had not and would not receive another PPP 
loan.   
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24. 
As additional support for the PPP application, KAO submitted ADP 
Statements of Deposits and Filings for NAVATEK, LLC, NCT, NLBT, and NAET 
for the first, second, third, and fourth quarters of 2019.  The statements summarize 
Federal (IRS) Forms 941 (Employer’s Quarterly Federal Tax Return) for each 
respective company for the given period.  The “Taxable Medicare Wages/Tips” 
figure on each of the statements was highlighted in yellow.  The following table 
summarizes the 2019 total “Taxable Medicare Wages/Tips” and average number of 
employees from the ADP Statements of Deposits and Filings: 
Company Name 
2019 Taxable 
Medicare 
Wages/Tips  
Average Number of 
Employees (rounded 
up) 
NAVATEK, LLC 
$8,497,349.02 
96 
NCT 
$3,688,629.15 
40 
NLBT 
$265,755.96 
1 
NAET 
$167,995.21 
1 
Total 
$12,619,729.34 
138 
 
25. 
KAO also included in the PPP loan application a Summary of Payroll 
and Related Costs for NAVATEK, LLC, NCT, NLBT, and NAET for the same 
time period.  This summary included the quarterly taxable Medicare wages/tips 
paid in 2019 for NAVATEK, LLC, NCT, NLBT, and NAET, quoted above.  
Additionally, the summary included an “Office Expansion Pool” for various U.S. 
cities, totaling $32,630,000; “Employees Benefits,” including life insurance, 
medical insurance, dental premiums, workers compensation insurance, temporary 
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disability insurance, and temporary disability contributions, totaling $1,019,422; 
and an “Expansion and Bonus Pool (All)” of $2,598,272.   
26. 
The combined payroll costs claimed by KAO in the PPP application 
totaled $48,867,425. 
27. 
On or about April 2, 2020, KAO emailed a Senior Vice President at 
CPB stating, “I would like to highlight something VERY IMPORTANT in our 
payroll cost numbers. . . . Navatek now has a significant and growing presence and 
employees” in several specified states.  KAO further stated that he “work[s] very 
closely” with specified U.S. Senators from those states who had “championed” the 
CARES Act, and he “expected to provide an update shortly to each of them.”  
KAO stated that he “strongly urge[d] CPB to process Navatek’s application as 
quickly as possible, so [he] can give great praise to how CPB was able to 
administer quickly the intent of Congress and the President, in helping Navatek 
keep its jobs and payroll in each of their respective states.”  
28. 
On or about April 7, 2020, KAO emailed CPB stating, “I just got off a 
couple calls with [a U.S. Senator and Member of Congress].  The [sic] specifically 
asked about the status of our PPP loan application and were very adamant about 
stepping in, if our application was getting stalled.  I told them that we were 
informed that it was approved yesterday by the SBA and now just waiting for the 
funds.”   
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29.
On or about April 10, 2020, KAO emailed CPB stating, “Some of the
Senate offices staff have already responded to my inquiry about CPB needing 
dispositive rules/guidance from the SBA to fund the loan.  They said the guidance 
is clear.  Once the SBA approves and gives a loan number the bank is empowered 
to fund the loan.”  KAO further stated, “I understand you are caught in the middle, 
but we’re not able to speak to anyone else at CPB.  Obviously there must be 
someone that’s making the executive decision to form this committee.  20 people 
didn’t just assemble for the joy of it.  Who is the person(s) at CPB?  Is he/she 
willing to get onto a call with Congress?  They will be happy to make it 
unequivocally clear what the rules are.” 
30.
On or about April 10, 2020, KAO emailed CPB again, providing a
link to a PPP Information Sheet for Lenders he claimed he was told to forward to 
CPB by a senior staff member of a U.S. Senator.  KAO quoted from the 
Information Sheet, “What underwriting is required?  You will need to verify that a 
borrower was in operation on February 15, 2020[,] . . . had employees for whom 
the borrower paid salaries and payroll taxes, [and] the dollar amount of average 
monthly payroll costs.”  KAO then stated, “[The Senate senior staffer] wanted to 
STRESS that these are simple checks of information and mathematical 
accuracy…it is NOT an audit and the bank is ABSOLUTELY empowered and 
relying on the applicants [sic] representations and certifications.  To perform the 
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above should take minutes…NOT days.  The bank has ZERO risk! . . . I’m not 
barking at you.  I’m just relaying a message from one of [the] highest authorities 
possible in Hawaii.  Can you make sure this message gets to the correct person(s).” 
31. 
On or about April 10, 2020, KAO emailed CPB again stating, “[The 
Senator] is suggesting a conference call with his Banking Committee and SBA 
staff director . . . SHE HELPED WRITE THE PPP RULES. . . . . She has 
confirmed directly that CPB should and is obligated to fund once SBA issues the 
approval number.  Any additional review the bank does should be perfunctory… at 
best.” 
32. 
On or about April 15, 2020, KAO signed the note for the PPP loan 
from CPB.   
33. 
On or about April 17, 2020, CPB deposited $10,000,000 into 
NAVATEK, LLC’s bank account (XXXXXX9145) at CPB. 
PPP Application to Radius Bank 
 
34. 
At all times relevant here, Radius Bank (“Radius”) was an approved 
SBA lender and participated as a lender in the PPP. 
35. 
On or about April 20, 2020, a Principal at a consulting firm in 
Washington, D.C. emailed an executive at Radius (“Radius Executive 1”) to 
connect him to KAO and the Chief Financial Officer (“CFO”) for NAVATEK, 
LLC at the time.  The Principal informed Radius Executive 1 that KAO and the 
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CFO had “tried to go through their bank for a PPP loan and were ultimately 
unsuccessful” and that “[t]hey would very much like your help in filing for a PPP 
loan.”    
36.
Later that same day, KAO emailed Radius Executive 1 a PPP
application and supporting documents for NCT.  KAO noted that NCT “is our 
Computational Fluid Dynamics (‘CFD’) company.”  KAO stated further that, 
“[W]e did submit an application with a local Hawaii bank for a completely 
separate company, and that is the one that got fumbled.”  Additionally, KAO 
stated, “I know very few banks are taking applications.  We would be supremely 
grateful if Radius Bank could make an exception and get this application submitted 
and approval assigned.”  KAO emphasized, “[I]f we were able to get this funded 
even in 10 day [sic] or whatever . . . , it would go a monumental way toward our 
CFD company’s ability to maintain payroll and benefits.”  
37.
On or about April 21, 2020, Radius Executive 1 replied to KAO’s
email, stating “happy to help a client of [consulting firm] that seems to be left 
behind by other banks.”  He asked KAO whether “the payroll calc provided [with 
his PPP application] exclude salaries over $100K?”  KAO replied, “Yes.  The 
calculation excludes any salary amount above $100K.”   
38.
The PPP application KAO submitted to Radius for NCT sought
$2,841,490 in PPP funds.  KAO signed the application and represented himself as 
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the President/CEO & Manager of NCT, with 99% ownership of the company, and 
claimed that NCT had 140 employees and an average monthly payroll of 
$1,136,596.   
39. 
In the Radius application KAO also certified as required that, from 
February 15, 2020 to December 31, 2020, NCT had not and would not receive 
another PPP loan.  As additional support for the PPP application, KAO submitted 
the same ADP Statements of Deposits and Filings for NAVATEK, LLC, NCT, 
NLBT, and NAET that he had submitted in support of his PPP application to CPB.   
40. 
KAO also included a Summary of Payroll and Related Costs for NCT 
for 2019, which contained the same quarterly taxable Medicare wages/tips for 
NAVATEK, LLC, NCT, NLBT, and NAET that he had submitted to CPB.  The 
summary also included the same “Employees Benefits” information (i.e., life 
insurance, medical insurance, dental premiums, workers compensation insurance, 
temporary disability insurance, and temporary disability contributions, retirement 
plan contributions) that KAO had submitted to CPB.  
41. 
On or about April 30, 2020, the Controller for NAVATEK LLC, at 
the request of KAO, emailed Radius Executive 1 additional information, including 
the IRS Form 940 for NAVATEK, LLC, NCT, NLBT, and NAET; the “Radius 
Bank Loan Calculator”; and a “Consolidated Tax Return” for NAVATEK, LLC.  
The Radius President replied, “[I]f there’s not a consolidated tax return for the 4 
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entities per the attached payroll summary I think the only way to proceed is with a 
separate application for each entity.”  The Controller responded by providing a 
history of the four entities.  Specifically, the Controller stated that on December 
31, 2019, NAET and NLBT “were dissolved and their employees were moved into 
Navatek LLC.”        
42. 
In response, on or about May 1, 2020, Radius Executive 1 asked, “The 
only question regarding the borrowing and surviving entity, wouldn’t it be Navatek 
LLC rather than Navatek CFD Technologies? The later [sic] is listed as the 
applicant on the PPP application and if CFD was dissolved in 2019 I would think 
Navatek LLC should be the applicant?”  KAO responded, “Thanks for the call this 
morning.  Pursuant to our conversation, please include both Navatek and Navatek 
CFD as borrowers on the Promissory Note with Radius Bank.”   
43. 
On or about May 4, 2020, KAO signed the note for the PPP loan from 
Radius.  The note identified NCT as the borrower. 
44. 
On or about May 6, 2020, Radius deposited $2,841,490 into 
NAVATEK, LLC’s bank account (XXXXXXXX9145) at CPB. 
PPP Applications to First Hawaiian Bank  
45. 
At all times relevant here, First Hawaiian Bank (“FHB”) was an 
approved SBA lender and participated as a lender in the PPP.   
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46.
According to information provided by FHB, on or about April 21,
2020, KAO submitted to the bank a PPP application in the name of NAVATEK 
SHC LLC seeking $2,852,839 in PPP funds.  In his email, KAO stated, 
As we discussed, we dropped the ball with timing and process the first 
time. Our entire company structure is complicated to say the least.  With 
operations/offices/employees and entities all over the country, we 
really got confused on how to apply.  Long story…short….we 
discussed with SBA and figured it out…too late.  We’ll [sic] here is 
hopefully our second chance.  The SHC Entity is our (Salaries Hawaii 
Company) entity.  We are applying under that entity alone and told that 
is the way to correctly do it.  So the application is correct and all 
calculation have been reviewed to eliminate all salary amounts in 
excess of $100K. 
47.
In the application, KAO represented himself as President/CEO &
Manager of NAVATEK SHC LLC with 99% ownership of the company. 
48.
In the PPP application, KAO claimed that NAVATEK SHC LLC had
140 employees and an average monthly payroll of $1,141,136.  
49.
KAO also certified as required that, from February 15, 2020 to
December 31, 2020, NAVATEK SHC LLC had not and would not receive another 
loan under the PPP.   
50.
As additional support for the PPP application, KAO submitted the
same ADP Statements of Deposits and Filings for NAVATEK, LLC, NCT, NLBT, 
and NAET that he had submitted to CPB and Radius. 
51.
On or about April 21, 2020, a Vice President at FHB emailed KAO
questions about his application.  Specifically, the Vice President suggested that 
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KAO should have certified that he was “an owner of any other business,” as 
indicated on the application.  Further, the Vice President noted, “The [Tax 
Identification Numbers] on the 941 forms attached do not match the TIN on the 
application.  Please submit the correct 941 and include payroll only for the 
applying entity in your loan amount calculations.”   
52. 
In response to the Vice President’s questions about other ownership, 
KAO, in part, stated, “Yes, you are technically correct on this.  The box should be 
checked yes.  Yes, we have several entities that have employees. . . .”   The Vice 
President replied, “Since you are attesting to the accuracy of the information 
provided, you should check whatever box is correct.”  
53. 
In response to the discrepancy regarding the TINs, KAO, in part, 
stated, “[T]he varying entities have employees, but all payroll is ‘cleared’ through 
SHC (Salaries Hawaii Company, LLC).  Otherwise we would have to submit like 
10 different PPP applications, which I think makes no sense. . . .”  The Vice 
President replied, “[Y]ou should apply with whatever entity’s payroll data you will 
be submitting (Form 941 and payroll register listing all employees) and seeking 
forgiveness for.”  
54. 
After the email exchange discussed above, on or about April 21, 2020, 
the Controller for NAVATEK, LLC, on behalf of KAO, emailed two PPP 
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17 
 
applications to FHB, one each for NAVATEK, LLC and NCT.  The applications 
were signed by KAO and dated April 21, 2020. 
a. 
The application for NAVATEK LLC requested $1,918,059 in 
PPP funds and claimed 122 employees and an average monthly payroll of 
$767,224.   
b. 
The application for NCT requested $835,492 in PPP funds and 
claimed 47 employees and an average monthly payroll cost of $334,197.   
c. 
As additional support for the applications, KAO and the 
Controller included the same ADP Statements of Deposits and Filings for 
NAVATEK LLC and NCT that KAO submitted to CPB and Radius Bank. 
d. 
On both applications, KAO certified as required that, from 
February 15, 2020 to December 31, 2020, NAVATEK LLC and NCT had 
not and would not receive another loan under the PPP.   
55. 
On or about April 22, 2020, the Controller emailed revised PPP 
applications for NAVATEK, LLC and NCT and supporting documentation to 
FHB.  Both were signed by KAO and dated April 21, 2020.   
a. 
The application for NAVATEK LLC requested $1,382,338 in 
PPP funds and claimed 122 employees and an average monthly payroll of 
$552,935.   
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18 
 
b. 
The application for NCT requested $691,125 in PPP funds and 
claimed 47 employees and an average monthly payroll of $276,450.   
c. 
Included as an attachment to the email were SBA PPP – 
Supplemental Worksheets to calculate the eligible PPP loan amount and 
accompanying Optional Worksheet Tool used to calculate eligible payroll 
costs for NAVATEK, LLC and NCT.  The Optional Worksheet Tool for 
NAVATEK, LLC included 24 employees with annualized wages subject to 
the $100,000 cap in order to determine the eligible wages to be included in 
total payroll costs, which resulted in a net decrease in average monthly 
payroll of $214,289 and an eligible PPP loan amount of $535,721.  The 
Optional Worksheet Tool for NCT included 15 employees with annualized 
wages subject to the $100,000 cap in order to determine the eligible wages 
to be included in total payroll costs, which resulted in a net decrease in 
average monthly payroll of $57,747 and an eligible PPP loan amount of 
$144,367. 
56. 
On or about April 22, 2020, the Vice President at FHB asked for 
additional information regarding the related corporate entities under common 
ownership and management and additional supporting documentation regarding 
the non-payroll related purpose of the loan.  In response, the Controller emailed the 
same applications explained in paragraph 55 above, a revised Addendum A, and 
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19 
purported utility and lease documentation.  The revised Addendum A identified the 
following as related entities 100 percent owned by KAO: NAVATEK, LLC; NCT; 
NAVATEK SHC LLC; Navatek – ME, LLC; Navatek – OK, LLC; and Navatek – 
KS, LLC. 
57.
On or about April 28, 2020, KAO emailed the Vice President to
inquire about the status of his loan applications.  In his email, KAO stated: 
I wanted to check in to see if you’ve gotten any intel on our applications 
or FHB’s applications in general on this second round of the PPPs.  We 
saw how things got off to a clunky start, with the SBA system crashing 
almost immediately on Monday morning.  We have a separate company 
in Chicago, Illinois and they were able to confirm this morning that they 
were successful in submitting that company’s application into the SBA 
E-Tran system last night.  That company of our is hoping to receive a 
message later this evening with verification of approval and next steps. 
Wondering how things look at FHB. 
The Vice President responded, “The two Navatek applications were entered into 
the SBA e-Tran system but were rejected as the two TINs already have PPP loans 
approved.  Is this correct?  Please call me.”  On or about April 29, 2020, KAO 
replied: 
Thank you again for all your help and time on this.  After much a do 
[sic] last night and this morning, we have made no progress on getting 
to the bottom of this and with SBA on getting the actual approval 
notifications or numbers.  The only thing we found in our various 
accountant’s emails, were confirmations that our applications have 
been submitted.  I’m assuming the rejection notification you received 
did not include the approval numbers?  If so, could you forward those 
to me?  Otherwise, no worries.  We’re over it already.  We’ve spent 
way too much time and wasted too much of your time on this, and for 
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20 
 
too little money involved in the scheme of our overall operations and 
revenue.  Nevertheless, thank you and FHB again! 
 
58. 
Later that day, the Vice President recommended that FHB contact 
CPB to resolve the denial.  In response, KAO stated, “We talked to CPB and was 
able to track down one of the approval numbers.  The second one we are still 
waiting on.  We have an ‘insider’ at SBA via our contacts at pretty high levels on 
the Senate Banking Committee.  Should hear soon from them.  Thanks again!”  
The Vice President replied, “So it sounds like you’re all set with CPB to book one 
of the loans.  Do you know which company that is for?  What about the other loan, 
where you said the documents were sent to your assistant controller but they didn't 
know what to do with it so deleted the file?”  In response, KAO stated, “We’re all 
set.  Those other applications were from our other companies and operations on the 
mainland.  We’re sorting those out now with the accounting folks there.  Most of 
those are ‘relatively small’ and should be resolved by tomorrow.” 
59. 
Subsequently, KAO abandoned his efforts to obtain from FHB 
additional PPP loans. 
Interview of Former Executive 
 
60. 
On August 6, 2020, investigators interviewed a former executive and 
manager (“Executive”) of Navatek, Ltd.  He stated the following:  
61. 
Executive hired KAO in 2010 and made him President of Navatek, 
Ltd. in 2012.  Navatek, Ltd. was converted to NAVATEK, LLC, which was sold to 
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21 
KAO on March 1, 2019.  Executive maintained a 1% ownership interest in the 
company and had an employment contract to oversee two naval contracts and 
provide administrative services, including payroll, through his company, Pacific 
Marine and Supply Company, Ltd. (“PMSC”).  
62.
MDG fka NAVATEK, LLC subleases two office spaces from PMSC
in Suite 1110 on the eleventh floor of 841 Bishop Street in Honolulu.  MDG fka 
NAVATEK, LLC maintains a computer server on-site.  
63.
Executive learned about KAO applying for PPP funds because KAO
requested payroll and related information for the application from PMSC.  
Executive did not know the details of KAO’s PPP loan applications until 
approximately the week of July 7, 2020, when he read a news article about 
NAVATEK, LLC being one of the largest recipients of the PPP loan program in 
Hawaii.  
64.
Executive did not believe MDG fka NAVATEK, LLC was suffering
financially as a result of the COVID-19 pandemic.  During the pandemic, the 
company had hired employees and opened branch offices.  
65.
On or about July 14, 2020, Executive learned from reviewing the SBA
website that NAVATEK, LLC and its subsidiary, NCT, had claimed to have 
approximately 490 and 140 employees, respectively.  Executive verified with his 
payroll department at PMSC that those figures were inaccurate.  
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22 
 
66. 
On or about July 23, 2020, Executive and others met with KAO to 
discuss the PPP loans.  During the meeting: 
a. 
Executive told KAO that he had concerns that KAO may have 
misrepresented the number of employees based on what he saw on the SBA 
website, and therefore he was asserting his minority shareholder interest to 
obtain a copy of the loan application.  Executive told KAO the SBA website 
showed NAVATEK, LLC as having 490 employees and NCT as having 140 
employees.   
b. 
KAO said he had not seen the SBA website, and that NCT did 
not matter because they did not get a PPP loan for that company.  KAO said 
the application for NAVATEK, LLC was correct and that the number of 
employees included prospective employees.  KAO said he thought that was 
okay under the rules, and claimed that he had been advised by the staff of 
several U.S. Senators and a supervisory staff member of the SBA that he 
could include prospective employees.  KAO also said he was informed that 
the eight-week eligibility period of wages paid would most likely be 
extended to the end of the year.  KAO said he based the prospective 
employee numbers on the contracts they had, and were going to have, and 
came up with a manning schedule of the number of employees needed for 
those jobs, which were used for the PPP loan application.   
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23 
c.
Executive raised his concerns that the application did not
exclude employee salaries in excess of $100,000 per year from the PPP loan 
computation.  KAO responded by saying he did everything in conformance 
with what he was advised.   
d.
At the end of this meeting, KAO asserted that the SBA may
have made a mistake by tripling the numbers because they were extending 
the eight-week eligibility date. 
67.
After the meeting, KAO told Executive that he did not think
Executive was entitled to the PPP loan application because it contained 
confidential information.  
Interview of Former Employee 
68.
On August 27, 2020, law enforcement interviewed the former Payroll
and Benefits Manager at MDG fka NAVATEK, LLC (“Employee”).  
69.
Employee confirmed that MDG fka NAVATEK, LLC had an
agreement with PSMC to provide administrative services, which included the 
processing of payroll and benefits enrollment for MDG fka NAVATEK, LLC. 
70.
Employee did not think MDG fka NAVATEK, LLC was affected by
the COVID-19 pandemic.  There were never any concerns raised over revenue or 
any talks of furloughs.  The company did not slow its expansion plans.  Employee 
understood that all of MDG fka NAVATEK, LLC’s business was 
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24 
 
government/military contracts and did not think those contracts were stalled as a 
result of the pandemic. 
71. 
Employee estimated that MDG fka NAVATEK, LLC employed 
approximately 170 people by the time Employee left the company on or about 
August 7, 2020.  This included employees for NAVATEK, LLC, NCT, NLBT, and 
NAET, and employees who worked at satellite offices in Virginia, Wisconsin, 
Rhode Island, Oklahoma, South Carolina, Michigan, Kansas, and a few other states 
where the company intended to open an office within the next six months to two 
years. 
72. 
In  approximately June 2020, MDG fka NAVATEK, LLC paid its 
employees COVID-19 related bonuses that ranged from $1,000 to $2,000, based 
upon their annual salary, and allowed employees to cash-out their paid time off 
(“PTO”).  The combined amount of the bonuses and PTO cash-out benefits 
equated to approximately one pay period’s gross payroll, $350,000 to $375,000.   
73. 
Employee stated that between 2019 and 2020, the Controller received 
a $100,000 pay raise, while the CFO received a raise of approximately $50,000 to 
$70,000. 
74. 
Employee stated that MDG fka NAVATEK, LLC maintains a 
computer server behind a locked door within the office on the eleventh floor of 841 
Bishop Street in downtown Honolulu.    
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25 
Other Documents 
75.
According to documents obtained by investigators, on or about March
30, 2020, an executive at NAVATEK, LLC emailed an employee at PSMC and 
asked for “[a] list of all employees for the period 01/01/19 – 02/29/20 which 
includes . . . Gross Payroll [and] Payroll Taxes,” by “individual versus in total.”  
76.
On or about March 31, 2020, PSMC sent NAVATEK, LLC’s CFO
2019 Forms W-2 (Wage and Tax Statement) issued by NAVATEK, LLC and NCT 
with year-end gross amounts.   
a.
The year-end summary listed gross wages of $8,497,349.02 and
$3,688,629.15, respectively.  The combined gross wages was 
$12,185,978.17, which is the same combined total Taxable Medicare 
Wages/Tip identified on the ADP Statements of Deposits and Filings for the 
first, second, third, and fourth quarters of 2019 for NAVATEK, LLC and 
NCT that KAO used to substantiate the payroll cost for the PPP loan 
applications discussed above.   
b.
As shown in the table below, the Forms W-2 include
$2,564,253.35 of gross wages in excess of $100,000 per year per employee 
paid to a total of 39 employees, including KAO, who made $671,883.17, 
that was required to be excluded from the computation to determine the loan 
amount. 
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26 
Company Name 
2019 Gross 
Wages in Excess 
of $100,000 per 
Year 
Number of Employees 
Paid in Excess of 
$100,000 per Year 
NAVATEK, LLC 
$ 1,871,291.71 
24 
NCT 
$ 692,961.64 
15 
Total 
$ 2,564,253.35 
39 
PPP Loan Proceeds 
77.
A review of available bank records for CPB account number
XXXXXX9145, Merrill Lynch account numbers XXX-X3506 and XXX-X2641 
and First Hawaiian Bank (“FHB”) account number XX-XX1787 reveals the 
following transaction history.  This review is ongoing. 
78.
On or about April 17, 2020 and May 6, 2020, the PPP loan proceeds
of $10,000,000 and $2,841,490, respectively, were deposited into NAVATEK, 
LLC’s bank account number XXXXXX9145 at CPB.  The account signature card 
was last updated on December 19, 2019, and includes KAO, the Controller, and the 
CFO as the authorized signers. 
79.
Prior to the deposit on April 17, 2020, CPB account number
XXXXXX9145 had a balance of $590,596.30.  The account appears to be the 
general operating account for NAVATEK, LLC, as there are numerous deposits, 
transfers, checks, withdrawals, etc. comingled with the PPP loan proceeds.  As of 
July 31, 2020, the ending balance on this account was $759,825.10. 
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27 
80.
The following chart depicts selected transfers of funds from
NAVATEK, LLC’s bank account number XXXXXX9145 at CPB.  Based on a 
tracing analysis, each transfer contained more than $10,000 of PPP loan proceeds. 
Date of 
Transaction Description of Transaction 
Disposition of Funds 
Transaction 
Amount 
04/21/2020 
Check no. 31029 payable to 
NAVATEK, LLC 
Deposited into 
Merrill Lynch 
account no. XXX-
X3506 
 $2,000,000 
04/22/2020 
Check no. 30986 payable to 
MARTIN KAO 
Deposited into 
Merrill Lynch 
account no. XXX-
X2641 
 $2,000,000 
04/29/2020 
Check no. 31124 payable to 
NAVATEK, LLC 
Deposited into 
Merrill Lynch 
account no. XXX-
X3506 
 $3,000,000 
05/07/2020 
Check no. 31127 payable to 
NAVATEK, LLC 
Deposited into 
Merrill Lynch 
account no. XXX-
X3506 
 $3,000,000 
05/18/2020 
Check no. 31249 payable to 
MARTIN KAO 
Deposited into FHB 
account no. XX-
XX1787 
 $20,200 
81.
NAVATEK, LLC maintained Working Capital Management Account
number XXX-X3506 at Merrill Lynch.  The account signature card includes KAO, 
the Controller, and the CFO as the authorized signers.  On April 1, 2020, the 
account had a net portfolio balance of $3,548,589.03.  On or about April 20, 2020, 
NAVATEK, LLC check number 31029 in the amount of $2,000,000 from CPB 
account number XXXXX9145 was deposited into this account, containing 
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28 
approximately $881,560.21 of proceeds traceable to the PPP loans.  On or about 
April 28, 2020, NAVATEK, LLC check number 31124 in the amount of 
$3,000,000 from CPB account number XXXXXX9145 was deposited into this 
account, which represented proceeds traceable to the PPP loans.  On or about May 
6, 2020, NAVATEK, LLC check number 31127 in the amount of $3,000,000 from 
CPB account number XXXXXX9145 was deposited into this account, containing 
approximately $2,402,040.69 of proceeds traceable to the PPP loans.  The total 
proceeds traceable to the PPP loans deposited into this account was approximately 
$6,283,600.90.  There were numerous deposits, checks, etc. comingled with the 
PPP loan proceeds in this account.  As of August 31, 2020, the ending net portfolio 
balance in the account was $12,502,473.02. 
82.
In a letter dated July 29, 2020, KAO authorized the change of the
business name on Merrill Lynch account number XXX-X3506 from NAVATEK, 
LLC to MARTIN DEFENSE GROUP, LLC. 
83.
At all times relevant here, KAO maintained personal Cash
Management Account number XXX-X2641 at Merrill Lynch.  KAO is listed as the 
sole authorized signer on the account.  On April 1, 2020, the account had a net 
portfolio balance of $2,407,256.38.  On or about April 21, 2020, NAVATEK, LLC 
check number 30986 in the amount of $2,000,000 from CPB account number 
XXXXXX9145 was deposited into this account, containing approximately 
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29 
$1,918,715.52 of proceeds traceable to the PPP loans.  As of July 31, 2020, the 
ending net portfolio balance in the account was $4,596,596.96. 
84.
KAO maintained joint checking account number XX-XX1787 at
FHB.  The account signature card includes KAO and his spouse as the authorized 
signers.  On May 7, 2020, the account had a balance of $63,061.60.  On or about 
May 18, 2020, NAVATEK, LLC check number 31249 in the amount of $20,200 
from CPB account number XXXXXX9145 was deposited into this account, which 
represented proceeds traceable to the PPP loans.  As of July 6, 2020, the ending 
balance on the account was $13,818.30. 
SEIZURE AND FORFEITURE OF BANK ACCOUNT FUNDS 
85.
As reflected by the transaction history set forth above, probable cause
exists to believe that up to $12,841,490, currently held by CPB in, or on behalf of, 
CPB account number XXXXXX9145, up to $8,000,000, currently held by Merrill 
Lynch in, or on behalf of, Merrill Lynch account number XXX-X3506, up to 
$2,000,000, currently held by Merrill Lynch in, or on behalf of, Merrill Lynch 
account number XXX-X2641, and up to $20,200, currently held by FHB in, or on 
behalf of, FHB account number XX-XX1787, are proceeds of Bank Fraud, in 
violation of 18 U.S.C. § 1344, and/or property involved in Money Laundering, in 
violation of 18 U.S.C. § 1957, by KAO.  Accordingly, probable cause exists to 
believe that the funds are subject to forfeiture to the United States pursuant to: 
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a. 
18 U.S.C. § 981(a)(l)(A), as property, real or personal, 
involved in a transaction or attempted transaction in violation of 18 U.S.C. § 
1957, or as property traceable to such property; 
b. 
18 U.S.C. § 982(a)(l), as property, real or personal, involved in 
an offense in violation of 18 U.S.C. § 1957, or as property traceable to such 
property; and/or 
c. 
18 U.S.C. § 981(a)(l)(C) and 28 U.S.C. § 2461(c), as property, 
real or personal, which constitutes or is derived from proceeds traceable to 
any offense constituting "specified unlawful activity" (as defined in 18 
U.S.C. § 1956(c)(7)), or a conspiracy to commit such an offense. In the 
instant case, the alleged specified unlawful activity is Bank Fraud, in 
violation of 18 U.S.C. § 1344. 
86. 
Pursuant to 18 U.S.C. § 984, it is not a defense that the property 
involved in an offense that is the basis for forfeiture has been removed from an 
account in a financial institution and replaced by identical property; the 
government need not identify the specific property involved in the offense that is 
the basis for forfeiture; and any identical property found in the same financial 
account as the property involved in the offense that is the basis for forfeiture is 
subject to forfeiture, as long as the action to forfeit property not traceable to the 
offense that is the basis for forfeiture is commenced within one year from the 
30 
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31 
 date of the offense.  As set forth in the Probable Cause section above, 
KAO committed the offenses less than one year ago.
87. 
The Court is authorized to issue a warrant authorizing the 
seizure ofproperty subject to forfeiture in the same manner as provided by 
a search warrant in a criminal case pursuant to 21 U.S.C. § 853(f), as 
incorporated by 18 U.S.C. §982(b)(1) and 28 U.S.C. § 2461(c), and in a 
civil case pursuant to 18 U.S.C. § 981(b).
CONCLUSION 
88.
Based on the forgoing, probable cause exists to believe that:
a.
KAO has committed Bank Fraud, in violation of 18 U.S.C.
§§ 1344 and 2, with respect to each of the two PPP approved loan
applications described above, and Money Laundering, in violation of 
18 U.S.C. §§ 1957 and 2, with respect to each of the five transfers 
from CPB account number XXXXXX9145 summarized in the table 
in Paragraph 80 above, as set forth in the foregoing Criminal 
Complaint; and 
b.
Funds located in CPB account number XXXXXX9145,
Merrill Lynch account numbers XXX-X2641 and XXX-X3506, and 
FHB account number XX-XX1787 are proceeds of and property 
involved in these same offenses; those funds are subject to forfeiture 
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to the United States pursuant to Title 18, United States Code, 
Sections 981 (a)( I )(A), 98l(a)(1 )(C), 982(a)( 1 ), and 984, and Title 
28, United States Code, Section 2461 ( c), up to the amounts 
specified in Paragraph 85 above; and those amounts in the four 
accounts are subject to seizure. 
Shaun Morita 
Special Agent 
IRS-CJ 
This Criminal Complaint and Affidavit in support thereof were presented to, 
approved by, and probable cause to believe that the defendant above-named 
committed the charged crimes found to exist by the undersigned Judicial Officer at 
~ 
.m. on September 29 , 2020. 
Sworn to under oath before me telephonically, and attestation acknowledged 
pursuant to Federal Rule of Criminal Procedure 4.1 (b)(2), on this 29th day of 
September 2020, at Honolulu, Hawaii. 
Wes Reber Porter 
United States Magistrate Judge 
32 
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