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MOTION for Forfeiture of Property Motion for Entry of a Forfeiture Money Judgment and Preliminary Order of… (Dkt. 107)
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| Court | U.S. District Court for the District of Hawaii |
|---|---|
| Filed | 2023-08-15 |
U.S. District Court for the District of Hawaii · No. 1:21-cr-00061-LEK · Doc. 107 · 2023-08-15 · Docket on CourtListener
Summary
A motion by the United States for a forfeiture money judgment and preliminary order of forfeiture in United States v. Martin Kao, No. 1:21-cr-00061-LEK, in the U.S. District Court for the District of Hawaii, filed August 15, 2023 (Doc. 107). Under Fed. R. Crim. P. 32.2(b), it asks for a money judgment of $12,841,490.00, the total PPP funds it says were fraudulently obtained, and forfeiture of four sums seized on or about September 30, 2020: $693,986.72, $8,000,000.00, $2,000,000.00 and $20,200.00. It states that Kao pled guilty on September 7, 2022 to three wire fraud counts and five money laundering counts without a plea agreement. The motion traces the seized funds to the Navatek LLC account that received the PPP funds and to transfers from it. It is signed by Assistant U.S. Attorney Sydney Spector.
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Full text
CLARE E. CONNORS #7936
GLENN S. LEON
United States Attorney
Chief, Fraud Section
District of Hawaii
Criminal Div., U.S. Dept. of Justice
CRAIG S. NOLAN
SYDNEY SPECTOR #11232
JENNIFER BILINKAS
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
Telephone: (202) 305-3928
Email: Craig.Nolan@usdoj.gov
Email: Jennifer.Bilinkas@usdoj.gov
Sydney.Spector@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,
v.
MARTIN KAO,
Defendant.
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Crim. No. 21-00061 LEK
UNITED STATES’ MOTION FOR
ENTRY OF A FORFEITURE MONEY
JUDGMENT AND PRELIMINARY
ORDER OF FORFEITURE AS TO
SPECIFIC PROPERTY; PROPOSED
ORDER OF FORFEITURE (MONEY
JUDGMENT) AND PRELIMINARY
ORDER OF FORFEITURE (SPECIFIC
PROPERTY); CERTIFICATE OF
SERVICE
Case 1:21-cr-00061-LEK Document 107 Filed 08/15/23 Page 1 of 12 PageID.936
2
UNITED STATES’ MOTION FOR ENTRY
OF A PRELIMINARY ORDER OF FORFEITURE
Pursuant to Fed. R. Crim. P. 32.2(b), the United States of America, by and
through its undersigned attorneys, moves this Court for the entry of a forfeiture
money judgment against defendant Martin Kao in the amount of $12,841,490.00
and preliminary order of forfeiture as to the following property seized on or about
September 30, 2020:
i.
$693,986.72 seized from defendant’s business operating
account Central Pacific Bank (“CPB”) Account No.
xxxxxx9145;
ii.
$8,000,000.00 seized from defendant’s business investment
account Merrill Lynch Account No. xxx-x3506;
iii.
$2,000,000.00 seized from defendant’s personal investment
account Merrill Lynch Account No. xxx-x2641; and
iv.
$20,200.00 from defendant’s personal checking account First
Hawaiian Bank (“FHB”) Account No. xx-xx1787
(collectively, the “Specific Forfeitable Property”).
BACKGROUND
On May 6, 2021, a multi-count Indictment was filed charging defendant
Martin Kao with three counts of wire fraud, in violation of 18 U.S.C. § 1343
(Counts 1 through 3) and five counts of money laundering, in violation of 18 U.S.C
§ 1957 (Counts 4 through 8), and providing notice that, upon conviction, the
government would seek forfeiture.
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On September 7, 2022, defendant Martin Kao pled guilty to all Counts,
without a plea agreement. In advance of the change of plea, the Government
submitted a letter to the Court, dated September 6, 2022, outlining the factual basis
for each of the counts. ECF No. 102. During the change of plea hearing,
defendant Martin Kao agreed that the following facts (the facts relevant to the
forfeiture sought herein) were accurate. Sept. 7, 2022 Tr. (“Tr.”) 33:10-38:18:
During the period of March 2020 through July 2020, Defendant
owned 99% of Navatek LLC and served as its Chief Executive
Officer. ECF No. 102, Factual Basis at ¶ 1.
From approximately March 2020 through July 2020, Defendant
knowingly submitted and caused to submitted false and fraudulent
applications for Paycheck Protection Program (“PPP”) loans to Bank
1 and Bank 2, which resulted in Defendant fraudulently obtaining
$12,841,490.00 in PPP funds, to which he was not entitled. The
funds were deposited into Navatek LLC’s CPB account ending in
9145. Id. at ECF No 102 at ¶¶ 3-12, 14-23; see also Tr. at 21:8-26:17,
39:20-23.
Defendant made the following transactions from the Navatek LLC
CPB bank account ending in 9145 that received the $12,841,490 in
fraudulently-obtained PPP funds. Each transaction contained more
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than $10,000 of the proceeds of the wire fraud to which defendant
pled guilty:
Date of
Transaction
Description of Transaction
Disposition of Funds
Transaction
Amount
04/21/2020
Check no. 31029 payable to
NAVATEK, LLC
Deposited into
Navatek’s Merrill
Lynch account no.
XXX-X3506
$2,000,000
04/22/2020
Check no. 30986 payable to
MARTIN KAO
Deposited into
Defendant’s Personal
Merrill Lynch
account no. XXX-
X2641
$2,000,000
04/29/2020
Check no. 31124 payable to
NAVATEK, LLC
Deposited into
Navatek’s Merrill
Lynch account no.
XXX-X3506
$3,000,000
05/07/2020
Check no. 31127 payable to
NAVATEK, LLC
Deposited into
Navatek’s Merrill
Lynch account no.
XXX-X3506
$3,000,000
05/18/2020
Check no. 31249 payable to
MARTIN KAO
Deposited into
Defendant’s Personal
FHB account no. XX-
XX1787
$20,200
TOTAL
$10,020,200
Id. at ¶ 36; see also Tr. 31:6-32:13.
On or about September 30, 2020, the government seized certain funds (the
Specific Forfeitable Property) held in the CPB account that received the
fraudulently-obtained PPP funds, and from the Merrill Lynch and FHB Accounts
to which Defendant subsequently transferred the illegal proceeds.
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The government now seeks a forfeiture money judgment in the amount of
$12,841,490.00 (the total amount of fraudulently-obtained PPP funds) and entry of
a Preliminary Order of Forfeiture as to the Specific Forfeitable Property.
ARGUMENT
Rule 32.2 of the Federal Rules of Criminal Procedure provides, in pertinent
part:
As soon as practicable after . . . a plea of guilty . . . is
accepted, on any count in an indictment or information
regarding which criminal forfeiture is sought, the court
must determine what property is subject to forfeiture
under the applicable statute. If the government seeks
forfeiture of specific property, the court must determine
whether the government has established the requisite
nexus between the property and the offense. If the
government seeks a personal money judgment, the court
must determine the amount of money that the defendant
will be ordered to pay.
Fed. R. Crim. P. 32.2(b)(1)(A). The court’s determination as to the requisite nexus
and the amount of a money judgment “may be based on evidence already in the
record . . . and any additional evidence or information submitted by the parties and
accepted by the court as relevant or reliable.” Fed. R. Crim. P. 32.2(b)(1)(B); see
also United States v. Creighton, 52 Fed. Appx. 31, 36 (9th Cir. 2002) (hearsay
evidence permissible in determining forfeiture). If forfeiture is contested, either
party may request a hearing. Fed. R. Crim. P. 32.2(b)(1)(B). The court “must
promptly enter a preliminary order of forfeiture setting forth the amount of any
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money judgment [or] directing the forfeiture of specific property . . . .” Fed. R.
Crim. P. 32.2(b)(2)(A). Unless doing so is impractical, such order must be entered
sufficiently in advance of sentencing to allow the parties to suggest revisions or
modifications before the order becomes final. Fed. R. Crim. P. 32.2(b)(2)(B).
The only question before the Court is whether the evidence before the Court
is enough to establish, by a preponderance of the evidence, that the requisite nexus
exists between the forfeitable property and the offenses to which the defendant has
pled guilty.1 See Rule 32.2(b)(1); see also United States v. Shryock, 342 F.3d 948,
991 (9th Cir. 2003) (standard of proof regarding the forfeitability of property in a
criminal case is preponderance of the evidence). Where the statutory prerequisites
are met, forfeiture is mandatory. See United States v. Depue, 585 Fed. Appx. 388,
388-89 (9th Cir. 2014) (“Because the Government included notice of forfeiture in
its criminal information, entry of a forfeiture judgment against [defendant] is
mandatory . . . , and the district court erred in refusing to enter such a judgment at
the Government’s request.”).
1 The existence or extent of third-party interests in the specific property is
determined after the entry of the preliminary order. See United States v.
Lazarenko, 476 F.3d 642, 648 (9th Cir. 2007).
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A.
The Court Should Enter a Forfeiture Money Judgment in the
Amount of $12,841,490.00
Pursuant to 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461, a person
convicted of wire fraud in violation of 18 U.S.C. § 13432, shall forfeit to the United
States any property, real or personal, which constitutes or is derived from proceeds
traceable to that offense. 18 U.S.C. § 981(a)(1)(C); 28 U.S.C. § 2461. “Proceeds”
is “property of any kind obtained directly or indirectly, as the result of the
commission of the offense giving rise to forfeiture, and any property traceable
thereto, and is not limited to the net gain or profit realized from the offense.” 18
U.S.C. § 981(a)(2)(A). The amount of the forfeiture is not what the defendant
earned, but what was “obtained” as a result of the commission of the offense.
United States v. Lo, 839 F.3d 777, 793 (9th Cir. 2016); United States v. Prasad, 18
F.4th 313, 319 (9th Cir. 2021). Additionally, because a wire fraud offense
necessarily includes a fraudulent scheme as a whole, “the proceeds of the crime of
conviction consist of the funds involved in that fraudulent scheme, including
additional executions of the scheme that were not specifically charged or on which
the defendant was acquitted.” Lo, 839 F.3d at 793.
Here, Defendant obtained $12,841,490.00, which constitutes proceeds of the
wire fraud offenses in Counts 1 and 2 to which Defendant pled guilty.
2 Wire fraud is a specified unlawful activity as defined in 18 U.S.C. § 1956(c)(7).
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Specifically, as a result of Defendant’s false statements to Bank 1 in Navatek
LLC’s PPP loan application, Defendant obtained $10,000,000 on April 18, 2020.
ECF No. 106, Factual Basis at ¶ 12. As a result of Defendant’s false statements to
Bank 2 in connection with a Navatek subsidiary’s PPP loan application, Defendant
obtained $2,841,490 on May 6, 2020. Id. at ¶ 22. Although the fraudulently-
obtained PPP funds were deposited into an account in the name of Navatek LLC,
Defendant was 99% owner of Navatek LLC and had control of the account. Id. at
¶¶ 1, 36.
Additionally, pursuant to 18 U.S.C. § 982(a)(1), a person convicted of a
violation of 18 U.S.C. § 1957 shall forfeit any property, real or personal, involved
in such violation and property traceable to such violation. 18 U.S.C. § 982(a)(1).
Here, defendant pled guilty in Counts 4 through 8 to violating 18 U.S.C.
§ 1957 by engaging in monetary transactions that contained over $10,000 in
criminally derived property (here, the fraudulently-obtained PPP loans). Id. at
¶ 36. The total funds involved in such § 1957 violations, and thus subject to
forfeiture, is $10,020,000. Because at least some of the funds involved in each
§ 1957 transaction (over $10,000 of each transaction) is included in calculation of
the forfeiture money judgment amount based on a proceeds theory, the
Government takes a conservative approach, and does not seek a forfeiture money
judgment greater than the $12,841,490.
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Accordingly, the government is entitled to a forfeiture money judgment in
the amount of $12,841,490.00 (the “Forfeiture Money Judgment”), pursuant to 18
U.S.C. § 981(a)(1)(C) and 28 U.S.C. §2461, as proceeds of the wire fraud. Further,
$10,020,000 of the Forfeiture Money Judgment is subject to forfeiture, pursuant to
18 U.S.C. § 982(a)(1), as property involved in a violation of 18 U.S.C. § 1957
(Counts 4 through 8).
B.
The Court Should Enter a Preliminary Order of Forfeiture as to
the Specific Forfeitable Property
In addition to the entry of the Forfeiture Money Judgment, the Government
requests that the Court enter a preliminary order of forfeiture as to the Specific
Forfeitable Property, namely:
i.
$693,986.72 seized from defendant’s business operating
account CPB Account No. xxxxxx9145;
ii.
$8,000,000.00 seized from defendant’s business investment
account Merrill Lynch Account No. xxx-x3506;
iii.
$2,000,000.00 seized from defendant’s personal investment
account Merrill Lynch Account No. xxx-x2641; and
iv.
$20,200.00 from defendant’s personal checking account FHB
Account No. xx-xx1787.
Here, Defendant’s fraudulently-obtained PPP funds were deposited into CPB
account ending in 9145. ECF No. 106, Factual Basis at ¶¶ 12, 22. Various
transactions were then made (totaling $10,020,200) from that CPB account to
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Merrill Lynch accounts ending in 3506 and 2641, and an FHB account ending in
1787. Id. ¶ 36.
The $693,986.72 seized from CPB Account No. xxxxxx9145 constitutes
proceeds of the wire fraud to which Defendant pled guilty and is forfeitable
pursuant to 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461. The other Specific
Forfeitable Property (the property seized from the Merrill Lynch and FHB
accounts) is property involved in the 18 U.S.C. § 1957 violations to which
Defendant pled guilty, and is subject to forfeiture pursuant 18 U.S.C. § 982(a)(1).
Upon final forfeiture of the Specific Forfeitable Property, Defendant will be
entitled to a credit against the amount remaining due on the forfeiture money
judgment, in the net amount of the Specific Forfeitable Property that is forfeited.
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CONCLUSION
As the government has proven the requisite basis for forfeiture, the
requirements of Rule 32.2(b) have been met and the proposed Order of Forfeiture
(Money Judgment) and Preliminary Order of Forfeiture (Specific Property) should
be entered.
DATED: Honolulu, Hawaii, August 15, 2023.
Respectfully submitted,
CLARE E. CONNORS
United States Attorney
District of Hawaii
/s/ Sydney Spector
By
SYDNEY SPECTOR
Assistant U.S. Attorney
Case 1:21-cr-00061-LEK Document 107 Filed 08/15/23 Page 11 of 12 PageID.946
CERTIFICATE OF SERVICE
I hereby certify that, on the date noted below, a true and correct copy of the
foregoing was served on counsel of record using the Court’s CM/ECF electronic
filing system.
DATED: August 15, 2023, at Honolulu, Hawaii.
/s/ Sydney Spector
U.S. Attorney’s Office
Case 1:21-cr-00061-LEK Document 107 Filed 08/15/23 Page 12 of 12 PageID.947File and source
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