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MOTION for Forfeiture of Property Motion for Entry of a Forfeiture… — PPP Attempt Conspiracy Legal Filings (Dkt. 107)

No. 1:21-cr-00061-LEK · Doc. 107 · Docket on CourtListener

Summary

The United States' motion for entry of a forfeiture money judgment and preliminary order of forfeiture as to specific property 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). Citing Fed. R. Crim. P. 32.2(b), the government seeks a money judgment of $12,841,490.00 and forfeiture of $693,986.72, $8,000,000.00, $2,000,000.00 and $20,200.00 seized on or about September 30, 2020. It states that Kao pled guilty on September 7, 2022, without a plea agreement, to three counts of wire fraud and five counts of money laundering. The motion says the PPP funds went into a Navatek LLC account and that transfers totaling $10,020,200 moved from it to other accounts. The filing runs 12 pages and closes with a certificate of service.

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Case 1:21-cr-00061-LEK Document 107 Filed 08/15/23 Page 1 of 12 PageID.936

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, ) Crim. No. 21-00061 LEK
)
Plaintiff, ) UNITED STATES’ MOTION FOR
) ENTRY OF A FORFEITURE MONEY
v. ) JUDGMENT AND PRELIMINARY
) ORDER OF FORFEITURE AS TO
MARTIN KAO, ) SPECIFIC PROPERTY; PROPOSED
) ORDER OF FORFEITURE (MONEY
Defendant. ) JUDGMENT) AND PRELIMINARY
) ORDER OF FORFEITURE (SPECIFIC
) PROPERTY); CERTIFICATE OF
) SERVICE
)
Case 1:21-cr-00061-LEK Document 107 Filed 08/15/23 Page 2 of 12 PageID.937

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.

2
Case 1:21-cr-00061-LEK Document 107 Filed 08/15/23 Page 3 of 12 PageID.938

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

3
Case 1:21-cr-00061-LEK Document 107 Filed 08/15/23 Page 4 of 12 PageID.939

than $10,000 of the proceeds of the wire fraud to which defendant

pled guilty:

Date of Description of Transaction Transaction
Transaction Disposition of Funds Amount
04/21/2020 Check no. 31029 payable to Deposited into $2,000,000
NAVATEK, LLC Navatek’s Merrill
Lynch account no.
XXX-X3506
04/22/2020 Check no. 30986 payable to Deposited into $2,000,000
MARTIN KAO Defendant’s Personal
Merrill Lynch
account no. XXX-
X2641
04/29/2020 Check no. 31124 payable to Deposited into $3,000,000
NAVATEK, LLC Navatek’s Merrill
Lynch account no.
XXX-X3506
05/07/2020 Check no. 31127 payable to Deposited into $3,000,000
NAVATEK, LLC Navatek’s Merrill
Lynch account no.
XXX-X3506
05/18/2020 Check no. 31249 payable to Deposited into $20,200
MARTIN KAO Defendant’s Personal
FHB account no. XX-
XX1787

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.
4
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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

5
Case 1:21-cr-00061-LEK Document 107 Filed 08/15/23 Page 6 of 12 PageID.941

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).
6
Case 1:21-cr-00061-LEK Document 107 Filed 08/15/23 Page 7 of 12 PageID.942

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).
7
Case 1:21-cr-00061-LEK Document 107 Filed 08/15/23 Page 8 of 12 PageID.943

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.

8
Case 1:21-cr-00061-LEK Document 107 Filed 08/15/23 Page 9 of 12 PageID.944

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

9
Case 1:21-cr-00061-LEK Document 107 Filed 08/15/23 Page 10 of 12 PageID.945

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.

10
Case 1:21-cr-00061-LEK Document 107 Filed 08/15/23 Page 11 of 12 PageID.946

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

11
Case 1:21-cr-00061-LEK Document 107 Filed 08/15/23 Page 12 of 12 PageID.947

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

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