Court filing
TRANSCRIPT of Proceedings Stg. as to Ct. 1-8 as to Martin Kao - held… — PPP Attempt Conspiracy Legal Filings (Dkt. 165)
No. 1:21-cr-00061-LEK · Doc. 165 · Docket on CourtListener
Summary
Transcript of the February 13, 2025 sentencing hearing in United States v. Martin Kao, Criminal Nos. 21-00061-LEK and 23-00003-LEK, before Senior U.S. District Judge Leslie E. Kobayashi of the U.S. District Court for the District of Hawaii, filed March 19, 2025 as Document 165. The court states that Kao pled guilty on September 7, 2022 to wire fraud in relation to a presidentially declared emergency, money laundering (Counts 4 through 8) and, in the second case, bank fraud. It finds total offense level 29, criminal history category 1, a guideline range of 87 to 108 months and restitution of $12,841,490. The court says Kao, through his company Navatek, applied for three Paycheck Protection Program loans totaling $15,694,329 and received $12,841,491 for two of them. The 68-page transcript closes with the court reporter's certificate.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 1 of 68 PageID.1421
1
1 IN THE UNITED STATES DISTRICT COURT
2 FOR THE DISTRICT OF HAWAII
3
UNITED STATES OF AMERICA, ) CRIMINAL NOS. 21-00061-LEK
4 ) 23-00003-LEK
Plaintiff, )
5 ) Honolulu, Hawaii
vs. )
6 ) February 13, 2025
MARTIN KAO, )
7 ) SENTENCING AS TO COUNTS 1
Defendant. ) THROUGH 8 UNDER CRIMINAL
8 ) NUMBER 21-00061 AND COUNT 1
) UNDER 23-00003 TO THE
9 ) INDICTMENT
10 TRANSCRIPT OF PROCEEDINGS
BEFORE THE HONORABLE LESLIE E. KOBAYASHI,
11 SENIOR UNITED STATES DISTRICT COURT JUDGE
12 APPEARANCES:
13 For the Plaintiff: CRAIG S. NOLAN, ESQ.
Office of the United States Attorney
14 PJKK Federal Building
300 Ala Moana Boulevard, Suite 6100
15 Honolulu, Hawaii 96850
16 For the Defendant: VICTOR J. BAKKE, ESQ.
Law Office of Victor Bakke
17 Topa Financial Center
700 Bishop Street, Suite 2100
18 Honolulu, HI 96813
19 MELINDA K. YAMAGA, ESQ.
Office of the Federal Public
20 Defender
PJKK Federal Building
21 300 Ala Moana Blvd Rm 7-104
Honolulu, HI 96850
22
Official Court Reporter: Gloria T. Bediamol, RPR RMR CRR FCRR
23 United States District Court
300 Ala Moana Boulevard
24 Honolulu, Hawaii 96850
25 Proceedings recorded by machine shorthand, transcript produced
with computer-aided transcription (CAT).
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 2 of 68 PageID.1422
2
1 February 13, 2025 1:33 p.m.
01:33PM 2 THE CLERK: Criminal Numbers 21-00061-LEK and
01:33PM 3 23-00003-LEK, United States of America versus Martin Kao.
01:33PM 4 This case has been called for sentencing as to Counts
01:33PM 5 1 through 8 under Criminal Number 21-61 and Count 1 under 23-03
01:33PM 6 to the indictment.
01:33PM 7 Counsel, please make your appearances for the record.
01:33PM 8 MR. NOLAN: Good afternoon, Your Honor. Craig Nolan
01:33PM 9 for the government. Also present is Sara Nieling of the
01:33PM 10 probation office.
01:33PM 11 THE COURT: Good afternoon to you both.
01:33PM 12 MR. BAKKE: Good afternoon, Your Honor. Attorney
01:33PM 13 Victor Bakke on behalf of Mr. Kao.
01:33PM 14 Your Honor, I'm representing him in Criminal Number
01:34PM 15 21-00061, and Mr. Kao is obviously present.
01:34PM 16 THE COURT: All right. The record will reflect the
01:34PM 17 presence of Mr. Kao. How are you today, sir?
01:34PM 18 THE DEFENDANT: I'm okay. Thank you for asking.
01:34PM 19 THE COURT: Thank you.
01:34PM 20 Ms. Yamaga.
01:34PM 21 MS. YAMAGA: Thank you, Your Honor. Good afternoon,
01:34PM 22 Melinda Yamaga, I am also representing Mr. Kao; however, I am
01:34PM 23 representing him in Criminal Number 23-00003-LEK.
01:34PM 24 THE COURT: All right. Will each of you or only one
01:34PM 25 of you be making argument with regard to sentencing?
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 3 of 68 PageID.1423
3
01:34PM 1 MR. BAKKE: I will be, Your Honor. I will be lead on
01:34PM 2 this.
01:34PM 3 THE COURT: All right. Very good. Do you need some
01:34PM 4 time to have the hearing assistance? I saw you struggling.
01:34PM 5 MR. BAKKE: No, we did it ahead of time.
01:34PM 6 THE COURT: Very good. Is it working?
01:34PM 7 MR. BAKKE: Yes.
01:34PM 8 THE COURT: Do you need help? Very good.
01:34PM 9 MS. YAMAGA: I will have one comment specific to my
01:34PM 10 case in the criminal forfeiture order that was signed; that's
01:34PM 11 it.
01:34PM 12 MR. BAKKE: So we won't be overlapping, Judge.
01:35PM 13 THE COURT: Sounds very good. Thank you. So everyone
01:35PM 14 but Mr. Kao and Mr. Bakke may be seated.
01:35PM 15 All right. So, Mr. Kao, we are here -- you need to
01:35PM 16 stand -- so we're here today for your sentencing hearing. At
01:35PM 17 this hearing, I'm going to make certain factual findings and
01:35PM 18 then I'm going to go over what I believe to be the aggravating
01:35PM 19 and mitigating factors in your case. And then I'm going to
01:35PM 20 hear from Mr. Nolan on behalf of the government, on the
01:35PM 21 government's position on what an appropriate sentence is for
01:35PM 22 you.
01:35PM 23 An appropriate sentence is one under the law that's
01:35PM 24 sufficient but not greater than necessary to meet the goals of
01:35PM 25 sentencing. And the goals of sentencing include just
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 4 of 68 PageID.1424
4
01:35PM 1 punishment for the harm that you have done to our community, an
01:35PM 2 opportunity to prevent you and others from committing these
01:35PM 3 types of crimes in our community, and to give you an
01:36PM 4 opportunity for rehabilitation.
01:36PM 5 And then of course I'm going to hear from Mr. Bakke
01:36PM 6 and Ms. Yamaga, and then you'll have an opportunity to speak on
01:36PM 7 your behalf, if you wish. You don't have to, it won't be held
01:36PM 8 against you if you don't. And then I'm going to take all of
01:36PM 9 this information, in addition to the very comprehensive
01:36PM 10 presentence investigation report, and I will use that to
01:36PM 11 fashion your sentence. All right?
01:36PM 12 So let me first ask you to confirm that you and your
01:36PM 13 attorneys have had a full opportunity to reread, review and to
01:36PM 14 file any objections to the contents of the presentence
01:36PM 15 investigation report. Have you had that opportunity, Mr. Kao?
01:36PM 16 THE DEFENDANT: Yes, Your Honor.
01:36PM 17 THE COURT: You would agree with that, Mr. Bakke?
01:36PM 18 MR. BAKKE: Yes, Your Honor.
01:36PM 19 THE COURT: Ms. Yamaga.
01:36PM 20 MS. YAMAGA: Yes, Your Honor.
01:36PM 21 THE COURT: All right. You may all be seated.
01:36PM 22 The Court makes the following factual findings that on
01:36PM 23 September 7, 2022, Mr. Kao, you pled guilty to the eight-count
01:37PM 24 indictment charging you in Criminal Number number 21-61, Counts
01:37PM 25 1, 2, 3, which charged you with Wire Fraud Scheme in Relation
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 5 of 68 PageID.1425
5
01:37PM 1 to a Presidentially Declared Emergency in violation of federal
01:37PM 2 law; Counts 4 through 8, Money Laundering, in violation of
01:37PM 3 federal law; and in Criminal Number 23-03, to Count 1, Bank
01:37PM 4 Fraud.
01:37PM 5 I now place the presentence investigation report in
01:37PM 6 the record under seal. If an appeal is taken, counsel will
01:37PM 7 have access to all of the report including the confidential
01:37PM 8 recommendation.
01:37PM 9 I have received several letters in support that were
01:37PM 10 attached to your sentencing memorandum in 23-0003-LEK and I've
01:37PM 11 gone through all of them.
01:37PM 12 Mr. Nolan, it's my understanding the government has no
01:37PM 13 remaining objections to either the factual findings or the
01:38PM 14 application of the guidelines to the facts; is this correct?
01:38PM 15 MR. NOLAN: That is correct, Your Honor.
01:38PM 16 THE COURT: Mr. Bakke and Ms. Yamaga, are there any
01:38PM 17 remaining objections that the Court needs to address?
01:38PM 18 MR. BAKKE: None from me, Your Honor.
01:38PM 19 MS. YAMAGA: No, Your Honor. Thank you.
01:38PM 20 THE COURT: Then the Court adopts the factual findings
01:38PM 21 in the presentence report including the addendum that addressed
01:38PM 22 all of the objections. I agree with probation.
01:38PM 23 There has been a request for the Court to consider
01:38PM 24 specific 3553(a) factors of Mr. Kao, and that's set forth in
01:38PM 25 the sentencing memorandum, in which I have read. So based on
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 6 of 68 PageID.1426
6
01:38PM 1 all of this information, the Court determines that the
01:38PM 2 applicable guidelines are: Total offense level 29, criminal
01:38PM 3 history category 1. This gives a guideline range of 87 to
01:38PM 4 108 months, as to Counts 1 through 3, under Criminal Number
01:39PM 5 21-61; and Count 1, under Criminal Number 23-03; and as to
01:39PM 6 Counts 4 through 8, under Criminal Number 21-61.
01:39PM 7 Supervised release, the guideline range is two to five
01:39PM 8 years, as to Counts 1 through 3, under Criminal Number 21-61;
01:39PM 9 Count 1, under Criminal Number 23-03, the statutory maximum is
01:39PM 10 up to five years; as to Counts 4 through 8, under Criminal
01:39PM 11 Number 21-61, the statutory maximum is up to three years.
01:39PM 12 Fine plus cost of imprisonment and supervised release,
01:39PM 13 the guideline range is $30,000 to $1 million. The statutory
01:39PM 14 provisions are for Counts 1 through 3, under Criminal Number
01:39PM 15 21-61, and Count 1, under Criminal Number 23-03, is up to
01:40PM 16 $1 million. As to Counts 4 through 8, under Criminal Number
01:40PM 17 21-61, the statutory provision is up to $250,000 or twice the
01:40PM 18 amount of the criminally derived property involved.
01:40PM 19 Restitution is in the amount of $12,841,490. And
01:40PM 20 there's a mandatory special assessment of $100 per count for a
01:40PM 21 total of $900.
01:40PM 22 So these are the factors the Court sees in aggravation
01:40PM 23 and mitigation, Mr. Kao.
01:40PM 24 In aggravation, I first turn to the nature and
01:40PM 25 circumstances of the offenses to which you pled guilty. In
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 7 of 68 PageID.1427
7
01:40PM 1 your situation you, through your company Navatek, applied for
01:40PM 2 three Paycheck Protection Program loans during the COVID-19
01:41PM 3 pandemic. These loan requests totalled $15,694,329. You
01:41PM 4 committed fraud because the applications contained false
01:41PM 5 information about your company's payroll and the number of
01:41PM 6 employees which were all falsified. You also falsely stated
01:41PM 7 that Navatek would not receive any other PPP loans.
01:41PM 8 To compound this falsity, you used influence and
01:41PM 9 pressure on senior bank officials to process the loan quickly
01:41PM 10 by stating you had a relationship with our senators and
01:41PM 11 congresswoman in congress, and that they supported a quick
01:41PM 12 approval. As a result of these false applications, you
01:41PM 13 received $12,841,491 for two loans, the third loan was denied,
01:42PM 14 and you directed others to move those loan proceeds to
01:42PM 15 different accounts, including $2 million to your personal
01:42PM 16 account. You enriched yourself at the expense of local
01:42PM 17 businesses that were struggling and suffering and needed
01:42PM 18 emergency funds. And ultimately, as a result of your actions,
01:42PM 19 it's the taxpayers of this country, of our community, who have
01:42PM 20 been defrauded and left holding literally the bag to pay for
01:42PM 21 all of these millions.
01:42PM 22 Other factors are characteristics. You have a prior
01:42PM 23 conviction for assault, so you have a history of violence. You
01:42PM 24 pled guilty and are awaiting sentencing in the District of
01:42PM 25 Columbia for conspiring to make unlawful federal campaign
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 8 of 68 PageID.1428
8
01:43PM 1 contributions and then submitting false documents to hide these
01:43PM 2 contributions. This demonstrates to the Court that you have
01:43PM 3 lived a life of a pattern of deceit and embezzlement and
01:43PM 4 entitlement and with a disregard for the law.
01:43PM 5 Another victim in your case is the Bank of Hawaii.
01:43PM 6 You altered multiple documents, when applying for a residence
01:43PM 7 on Kahala Avenue, and received a $3 million mortgage loan for
01:43PM 8 which you were not eligible. As a result of your falsity, the
01:43PM 9 bank was forced to spend legal fees to foreclose, which will
01:43PM 10 continue incurring costs until the loan is paid off.
01:43PM 11 I've looked at your financial information in the
01:43PM 12 presentence report. There are several properties that you are
01:43PM 13 on deed for, two in Kahala one in Beverly Hills; there's
01:44PM 14 investment properties; there are cars, including a Mercedes and
01:44PM 15 Ferrari. So the question becomes why. And I can only conclude
01:44PM 16 it was simply and blatantly greed.
01:44PM 17 There are factors in mitigation. You have education
01:44PM 18 and training to support yourself in a legally and acceptable
01:44PM 19 way; you have no history of mental illness; you have no history
01:44PM 20 of drug addiction, although to your credit you self-reported an
01:44PM 21 alcohol addiction while on bond; you have the support of your
01:44PM 22 wife; you have two young children, ages eight and 9, one of
01:44PM 23 whom has disabilities and needs assistance in that for autism
01:44PM 24 and hearing impairment; and you have done volunteer work while
01:44PM 25 on bond with your church, Meals on Wheels. So those are the
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 9 of 68 PageID.1429
9
01:44PM 1 factors in mitigation.
01:45PM 2 So I'll turn now to Mr. Nolan with regard to the
01:45PM 3 government's position on an appropriate sentence.
01:45PM 4 Mr. Nolan.
01:45PM 5 MR. NOLAN: Sure. Thank you, Your Honor. Before I
01:45PM 6 get to our position, I just want to put on the record that
01:45PM 7 PacMar, through its -- I may get his title wrong --
01:45PM 8 president/owner, Steven Loui, is present. The probation office
01:45PM 9 found to be PacMar victim, couldn't sort out the legal bills
01:45PM 10 well enough to come up with a definitive restitution figure.
01:45PM 11 Mr. Loui, through his attorney, Jesse Schiel, who is also
01:45PM 12 present, has asked to address the Court. So is the Court --
01:45PM 13 THE COURT: Yes, absolutely. Victims have a right to,
01:45PM 14 and if there is anyone from Bank of Hawaii, I would encourage
01:45PM 15 them to come forward as well.
01:45PM 16 MR. NOLAN: We don't have representatives of the
01:45PM 17 victim banks here or the Small Business Administration. Would
01:46PM 18 you like Mr. Loui to come forward now?
01:46PM 19 THE COURT: Yes, please, to the podium if he's
01:46PM 20 comfortable. If not, then next to you at counsel table.
01:46PM 21 Whatever you are comfortable with. Aloha. Welcome.
01:46PM 22 MR. LOUI: Your Honor, thank you for allowing me the
01:46PM 23 opportunity to speak today. I am Steven Loui, owner of PacMar
01:46PM 24 Technologies, formally known as Navatek. I'm here to redeem
01:46PM 25 myself from transferring the company I love and started to the
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 10 of 68 PageID.1430
10
01:46PM 1 con man and criminal Martin Kao, who has damaged the company I
01:46PM 2 founded and its loyal and outstanding employees.
01:46PM 3 Pacific Marine & Supply Company is a ship-repair
01:46PM 4 company founded in 1944 by my father, Fred Loui. After my
01:46PM 5 father unexpectedly passed away in 1969, I returned home after
01:46PM 6 college, after graduating in engineering, to take over the
01:47PM 7 operations of the company. Under my leadership, Pacific Marine
01:47PM 8 became the largest commercial ship repair and dry-docking
01:47PM 9 company in Hawaii.
01:47PM 10 To complement Pacific Marine's operations, I started
01:47PM 11 PacMar Technologies in the 1970s under its original name
01:47PM 12 "Navatek Limited." Since its formation, PacMar's focus was on
01:47PM 13 developing advanced ships and marine technologies to improve
01:47PM 14 passenger ride quality, reduce operator injury, and improve
01:47PM 15 hull efficiency. PacMar has since grown into a diversified
01:47PM 16 technology company with an international presence, leading the
01:47PM 17 way in research engineering, design, innovation and
01:47PM 18 hydrodynamics.
01:47PM 19 Mr. Kao joined Pacific Marine in 2008, several decades
01:47PM 20 after the company had been formed, and I would like to say
01:47PM 21 successful. We are well known for our SWATH ships, dinner
01:47PM 22 boats and research ships that we had built. Unbeknownst to me
01:48PM 23 until very recently, Mr. Kao's deceit began at hiring, where he
01:48PM 24 falsely represented orally, and in his resume, that he held law
01:48PM 25 degrees from UCLA and NYU. It was only through his initial
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 11 of 68 PageID.1431
11
01:48PM 1 deceit that I offered Mr. Kao a job.
01:48PM 2 In or around August 2018, after 40 years of running
01:48PM 3 the company, I decided to step away from the day-to-day
01:48PM 4 operations and believed I had found a worthy successor in
01:48PM 5 Mr. Kao to keep the company prospering and he would be one who
01:48PM 6 took good care of the employees.
01:48PM 7 Unfortunately, Mr. Kao did the opposite, running the
01:48PM 8 company immediately into the ground just one year through
01:48PM 9 numerous acts of criminality. Mr. Kao's, criminality included
01:48PM 10 not only the PPP fraud but also campaign finance fraud and
01:49PM 11 mortgage fraud, all of which the Court is well aware of.
01:49PM 12 Upon learning of Mr. Kao's outsized PPP loans through
01:49PM 13 an article in the Star Advertiser in the summer of 2020, I
01:49PM 14 immediately reported Kao's fraud to law enforcement and
01:49PM 15 participated in law enforcement investigations to ensure that
01:49PM 16 Mr. Kao was held responsible for his actions and to make sure
01:49PM 17 that the company's reputation and name remained clear.
01:49PM 18 Thereafter, I immediately initiated state proceedings to have
01:49PM 19 Mr. Kao removed from the company and began the lengthy process
01:49PM 20 of saving the company.
01:49PM 21 In this short period, Kao virtually destroyed a very
01:49PM 22 productive and local company, one which had a great reputation
01:49PM 23 at all times prior to Mr. Kao joining it. Approximately 91
01:49PM 24 employees, roughly half the company's work force, resigned
01:50PM 25 within nine months of Kao's arrest. Kao's criminality
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 12 of 68 PageID.1432
12
01:50PM 1 paralyzed the company's ability to secure vital government
01:50PM 2 contracts that are the life blood of its business. Our
01:50PM 3 security holdings for our top secret research were put on hold
01:50PM 4 for many months until we were able to clear it. In that time
01:50PM 5 we lost many jobs. The company has managed to survive but only
01:50PM 6 through the loyal and incredibly dedicated work of its
01:50PM 7 remaining employees, some of which are here today. I also
01:50PM 8 provided large financial support to meet the cash needs of the
01:50PM 9 company.
01:50PM 10 While Mr. Kao cannot defend his past, he now seeks the
01:50PM 11 mercy of the Court at sentencing conveniently asserting that he
01:50PM 12 has been reborn and found new meaning in life. Put simply,
01:50PM 13 Martin's story, and all he has said about his request for a
01:51PM 14 reduction in sentencing because of his asserted rehabilitation
01:51PM 15 I believe is a fallacy.
01:51PM 16 Contrary to self-serving statements to this Court,
01:51PM 17 Mr. Kao has shown absolutely no remorse for the harm he has
01:51PM 18 caused to me, to the company, and the senior employees he fired
01:51PM 19 to clear a way for his criminal cohorts. And certainly not to
01:51PM 20 any of the employees, including many of the hard-working loyal
01:51PM 21 employees who lost their jobs due to the wreckage he left
01:51PM 22 behind. These -- the employees who stayed are the ones really
01:51PM 23 responsible for saving the company.
01:51PM 24 Mr. Kao has also shown no remorse by refusing to pay
01:51PM 25 the company back the millions he stole from it. Instead of
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 13 of 68 PageID.1433
13
01:51PM 1 repaying the company, Mr. Kao has hidden his millions in assets
01:51PM 2 through a series of fraudulent conveyances and other
01:51PM 3 misconduct. We have multiple lawsuits to recover those funds.
01:52PM 4 Mr. Kao has defied all attempts and has not paid any of the
01:52PM 5 millions in damages that have been awarded against him, much of
01:52PM 6 which was simply stolen from the company. For example, he --
01:52PM 7 contrary to the company's operating charter, he had the company
01:52PM 8 issue checks to pay for his defense attorney shortly after his
01:52PM 9 arrest. Any amounts the company has received to date are due
01:52PM 10 to our costly legal actions to garnish wage and rental income.
01:52PM 11 The total Circuit Court awarded damages and accrued interest he
01:52PM 12 owes the company, as of the end of January, is $8,079,945.
01:52PM 13 This month, in fact it was posted on the internet this morning,
01:52PM 14 the company has incurred further costs of $500,000 in Federal
01:52PM 15 Election Commission fines and legal fees because of Kao's
01:52PM 16 political fraud.
01:53PM 17 Mr. Kao's claim of rebirth and enlightenment also run
01:53PM 18 contrary to his conduct before the Hawaii judiciary over the
01:53PM 19 past three years. In the same state court case that led to his
01:53PM 20 disassociation from the company, Mr. Kao has been found and
01:53PM 21 held in contempt of court three times in 2024 alone.
01:53PM 22 The contempt orders arose from Martin's attempted end
01:53PM 23 around the Court's rulings against him related to the
01:53PM 24 garnishment of rental proceeds for two luxury properties owned
01:53PM 25 by Kao and his wife, Tiffany Lam -- one worth over 6 million in
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 14 of 68 PageID.1434
14
01:53PM 1 Kahala and the other worth several million in Hawaii Loa Ridge.
01:53PM 2 After Mr. Kao refused to comply with the Court's
01:53PM 3 orders in that case, the Court found Mr. Kao in contempt of
01:53PM 4 court entered on May 2, 2024. The Court's findings that Kao
01:53PM 5 engaged in bad faith and they stated:
01:53PM 6 "The Court views Mr. Kao's behavior as delaying the
01:54PM 7 proceedings in bad faith so that he can engage in evasive
01:54PM 8 behavior... The Court therefore finds that Kao had violated the
01:54PM 9 Court order and finds that Kao in contempt for violating that
01:54PM 10 order... Kao lacked a good faith excuse or reasonable basis for
01:54PM 11 failing to comply with the Court's order... Consequently, the
01:54PM 12 Court finds that Kao's contempt -- Kao's conduct in refusing to
01:54PM 13 comply with the Court's order was 'entirely without color' and
01:54PM 14 advanced 'for reasons of harassment and other improper
01:54PM 15 purposes.'"
01:54PM 16 A month later, after he did not comply with the court
01:54PM 17 order, on June 13, 2024, the Court issued a second contempt
01:54PM 18 order. Mr. Kao was found in contempt of court with the Court
01:54PM 19 finding as follows:
01:54PM 20 "The Court finds that Kao is in violation of the
01:54PM 21 Court's Contempt Order... Despite these repeated reminders and
01:54PM 22 efforts to compel Defendant Kao's compliance with the Court's
01:55PM 23 Contempt Order, Defendant Kao has refused to comply with the
01:55PM 24 Court's Contempt Order, just as he refused to comply with the
01:55PM 25 Court's prior orders which ultimately led to the Court's
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 15 of 68 PageID.1435
15
01:55PM 1 Contempt Order. This Court bent over backwards to try to be
01:55PM 2 fair to Defendant Kao. But with his record of constant
01:55PM 3 evasion, no effort to try to lend any cooperation, recognition
01:55PM 4 that he had an enormous judgment debt, and doing everything to
01:55PM 5 avoid paying every penny, this Court is not able to issue a
01:55PM 6 ruling that would essentially excuse Defendant Kao and justify
01:55PM 7 his evasive behavior."
01:55PM 8 Defendant Kao was ordered to pay a civil fine to the
01:55PM 9 Court in the amount of $200 per day.
01:55PM 10 After Kao failed to comply with the second contempt
01:55PM 11 order, Kao was again found in contempt of court a third time
01:55PM 12 and entered on November 22, 2024. The judge found as follows:
01:55PM 13 "The Court... finds that there is a record of
01:56PM 14 extremely evasive conduct by Kao, that his noncompliance with
01:56PM 15 the Court's Contempt Orders is and has been knowing and
01:56PM 16 willful, and that his defense of inability to pay and/or
01:56PM 17 poverty is not well taken given the extreme efforts he has
01:56PM 18 undertaken to avoid compliance of the Court's Contempt Orders."
01:56PM 19 Mr. Kao was ordered to pay a contempt fine of $500 per
01:56PM 20 day under the third contempt order. Mr. Kao currently owes the
01:56PM 21 circuit court well over $80,000 in civil fines, which he has
01:56PM 22 refused to pay the judiciary to date and he continues to ignore
01:56PM 23 and defy the Court's rulings.
01:56PM 24 Mr. Kao has not made any restitution to the company or
01:56PM 25 to the Hawaii state judiciary in spite of owing or co-owning
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 16 of 68 PageID.1436
16
01:56PM 1 with family members six properties in Hawaii with a fair market
01:56PM 2 value in excess of $15 million. Additionally, after his arrest
01:56PM 3 in September 2000, he sold a Beverly Hills condo in June 2021
01:57PM 4 for $1,245,000 and was in the process of selling a Taiwan
01:57PM 5 property valued at $800,000. We knew about the Taiwan property
01:57PM 6 because Kao illegally had the company pay his personal bills to
01:57PM 7 that attorney. So in the over $2 million received from these
01:57PM 8 properties, none of it was used to make restitution to the
01:57PM 9 company or to the Hawaii judiciary. If he was truly remorseful
01:57PM 10 of his actions and all the damages he caused, he would have
01:57PM 11 used the cash and sold as many additional properties that he
01:57PM 12 controlled to pay the court damages.
01:57PM 13 Mr. Kao continues his fraudulent transgressions
01:57PM 14 extending to the Department of Justice. For his Washington
01:57PM 15 D.C. political fraud case, he was given a public defender
01:57PM 16 because of his claims of insolvency. We know that throughout
01:57PM 17 2022 and possibly earlier, Kao was receiving $16,000 a month
01:58PM 18 from the Kahala property and $8,100 a month from the Hawaii Loa
01:58PM 19 property. These were the rentals subject to our garnishment
01:58PM 20 orders which he also refused to acknowledge.
01:58PM 21 In addition to his real estate and rental property
01:58PM 22 income, Kao and his family committed charity fraud and
01:58PM 23 illegally received over $3.1 million cash from the liquidation
01:58PM 24 of a charity asset, a luxury San Francisco condominium on Nob
01:58PM 25 Hill. These transgressions are a subject of two separate
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 17 of 68 PageID.1437
17
01:58PM 1 lawsuits the company has filed -- excuse me, for charity fraud
01:58PM 2 and fraudulent property transfers. From the discovery in those
01:58PM 3 cases, the stocks owned in the Kao family Ameritrade account
01:58PM 4 are worth over $4 million in 2021. I had my staff update the
01:59PM 5 value of those stocks. As of the end of the year they were
01:59PM 6 worth more than $9 million.
01:59PM 7 With Kao's extensive resources, he should have been
01:59PM 8 using them to pay the multiple court awards totalling
01:59PM 9 $8.2 million as part of his path to rehabilitation and
01:59PM 10 respecting laws and justice. Instead, he is lavishing himself
01:59PM 11 by attending Harvard classes which we estimate cost in excess
01:59PM 12 of $30,000.
01:59PM 13 Based on all of the above and much more, PacMar
01:59PM 14 believes Mr. Kao deserves the maximum jail sentence allowable
01:59PM 15 by law. His lack of providing any restitution to those damages
01:59PM 16 from his crimes demonstrates his lack of remorse or accepting
01:59PM 17 responsibility for his transgressions. Far from being a
01:59PM 18 first-time offender, he has pled guilty to three separate
01:59PM 19 indictments and there are many more crimes that he has
01:59PM 20 committed and continues to commit that he has not been held
01:59PM 21 accountable for yet. His request to the Court for a reduced
02:00PM 22 sentence citing his rehabilitation in my opinion is just a
02:00PM 23 continuing scam. Thank you.
02:00PM 24 THE COURT: Thank you very much. I appreciate you
02:00PM 25 taking the time and those also from your company who came here
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 18 of 68 PageID.1438
18
02:00PM 1 today. You obviously put a lot of time and thought in your
02:00PM 2 statement, and I have listened to all of it. So I thank you,
02:00PM 3 thank you very much. Good luck to you, sir.
02:00PM 4 MR. NOLAN: Thank you, Your Honor. There is not a lot
02:00PM 5 more for the government to say. The Court clearly has done its
02:00PM 6 reading, it's read everything, it had a comprehensive report by
02:00PM 7 the probation office, really an exceptional report in my view.
02:00PM 8 The Court has gone through aggravators and mitigators, but the
02:00PM 9 Court has distilled it. It's greed, deceit and entitlement.
02:00PM 10 And me saying that ten more times doesn't make it any worse.
02:01PM 11 I do just want to take a moment though to recall that
02:01PM 12 about ten days before Mr. Kao submitted the first application,
02:01PM 13 the one for $10 million, this county was put under a
02:01PM 14 Stay-At-Home order. So the world had come to a standstill in
02:01PM 15 March of 2020. We didn't know what was happening. We were
02:01PM 16 wiping down groceries with bleach wipes because we didn't
02:01PM 17 understand what was going on around us.
02:01PM 18 And while that was happening, we were trying to figure
02:01PM 19 out, How do we move forward? How do we engage in business?
02:01PM 20 How do we do our work? How do we take care of our kids? How
02:01PM 21 do our kids get schooled? I think it's fair to say that we
02:01PM 22 were all in some state of relative panic. And so the
02:02PM 23 government's response at the municipal level, at the state
02:02PM 24 level, at the national level was to essentially shut us down
02:02PM 25 and shut down the economy.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 19 of 68 PageID.1439
19
02:02PM 1 This is a state full of small businesses, not unlike
02:02PM 2 many other states, but mom-and-pop shops, mom-and-pop
02:02PM 3 restaurants, family-owned institutions that have been around
02:02PM 4 for generations, new businesses struggling to make it for the
02:02PM 5 first time. And their customer base was just wiped out, and
02:02PM 6 their employee base was wiped out. Most of us were told to
02:02PM 7 stay at home, unless you performed an essential function.
02:02PM 8 And so the government through congress decided to pour
02:02PM 9 billions of money through the economy to pump that out as
02:02PM 10 quickly as it could to save the economy, so that employers who
02:03PM 11 had no income coming in or greatly reduced income coming in
02:03PM 12 could pay their employees; so their employees could buy food,
02:03PM 13 spend some money in their local neighborhoods, and do the
02:03PM 14 things we do every day and take for granted even when the
02:03PM 15 economy is bad. It was about as bad as things could get.
02:03PM 16 And so congress enacted the PPP program, Paycheck
02:03PM 17 Protection Program, for just that purpose; so that employers
02:03PM 18 could pay their employees, keep them on the payroll, hopefully
02:03PM 19 ride out the storm. We never thought it would be as long as it
02:03PM 20 lasted. We had some reprieves and thought we were done and
02:03PM 21 then we went back into it, and congress poured more and more
02:03PM 22 money in.
02:03PM 23 So along comes Mr. Kao right at the beginning of this
02:03PM 24 program. In fact, his first submission for the first loan was
02:04PM 25 actually done on a form that was changed that very night, and
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 20 of 68 PageID.1440
20
02:04PM 1 he was asked to redo it on the current form, because the SBA
02:04PM 2 was scrambling to put together this program. And it did put
02:04PM 3 together this program, and it gave -- it told the banks to push
02:04PM 4 out the money, and it said it was going to guarantee all of
02:04PM 5 those loans up to $10 million. And so while mom-and-pop shops
02:04PM 6 around the state and around the country were applying for
02:04PM 7 10,000 or 25,000, Mr. Kao decided that he would apply for 10
02:04PM 8 million.
02:04PM 9 Now Mr. Kao's company at the time named Navatek was
02:04PM 10 eligible for a fraction of that. It could have applied for its
02:04PM 11 -- based on its 140-or-so employees and done the formula, the
02:04PM 12 formula that took into account the salaries of those employees
02:04PM 13 up to a hundred thousand, and his company would have been
02:05PM 14 entitled to couple million, maybe a little more, maybe a little
02:05PM 15 less depending on how you really calculate it, he could have
02:05PM 16 done that. He didn't need to do it because he was a defense
02:05PM 17 contractor. And even if there was a slight disruption in the
02:05PM 18 money that flowed, that money continued to flow.
02:05PM 19 His customer didn't go away because his primary
02:05PM 20 customer was the U.S. Government. And that company that was
02:05PM 21 founded by Mr. Loui's father, or at least the related company
02:05PM 22 was, and then grown by Mr. Loui, is a valued defense contractor
02:05PM 23 primarily to the navy. They deal with boats and ships and
02:05PM 24 hulls and all sorts of things. Frankly, I don't understand.
02:05PM 25 They employed 140 people, about a hundred in Hawaii at
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 21 of 68 PageID.1441
21
02:05PM 1 the time of that loan. Many of the jobs were high paying
02:05PM 2 engineer jobs, as you might expect. And so he didn't need the
02:06PM 3 money for his company, but he was eligible for a fraction. But
02:06PM 4 that wasn't good enough. So he put down 400-some-odd
02:06PM 5 employees, when it was 140. They did the calculation, it was
02:06PM 6 very simple, it came out above the 10 million max; he got the
02:06PM 7 10 million max.
02:06PM 8 And then he went to another bank and he lied to that
02:06PM 9 bank. He said, oh, we're entitled to this. He used the
02:06PM 10 same -- this time he did stick with his 140 employees; but as
02:06PM 11 we know, he had already gotten 10 million to cover those 140
02:06PM 12 and then a bunch of imaginary employees. So he lied to them
02:06PM 13 and he got his 2.8 million. He used a different -- he had a
02:06PM 14 number of LLCs related, they were not entitled to different
02:06PM 15 pots of money, they were entitled to -- there was one group of
02:06PM 16 employees, no matter which payroll they were on, and that's how
02:07PM 17 he considered it as well.
02:07PM 18 So he got the 2.8 million through deceit, through
02:07PM 19 lies. And then he doctored -- he actually altered the
02:07PM 20 promissory note after the fact so that some people, not
02:07PM 21 everyone in his organization, because some people knew, but
02:07PM 22 some people, perhaps accountants who knew about the earlier
02:07PM 23 PPP, perhaps others wouldn't see. So he took that note and he
02:07PM 24 literally on his computer redacted in white all references to
02:07PM 25 the PPP program. So it looked like a standard SBA note to hide
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 22 of 68 PageID.1442
22
02:07PM 1 and conceal on top of his lies.
02:07PM 2 And then he went to a third bank, it was the second
02:07PM 3 institution in this state, and he lied to them and they pushed
02:07PM 4 back and he lied again. And finally they denied it. They
02:07PM 5 caught him.
02:08PM 6 And so he did all those things when he didn't need to
02:08PM 7 in the first place. He took $2 million and transferred it to
02:08PM 8 his own coffers. In part, that 2 million we don't trace it to
02:08PM 9 the Kahala home, that's case number two, but it was in there
02:08PM 10 and it was for evaluation purposes when Merrill Lynch, B of A
02:08PM 11 looked at his application.
02:08PM 12 So he did all those things to the detriment of others
02:08PM 13 who really couldn't pay their employees, who couldn't pay their
02:08PM 14 rent or mortgage for their business, which was one of the other
02:08PM 15 eligible categories. He didn't need any of that money. And
02:08PM 16 while doing this, as the Court said, he used influence. He
02:08PM 17 touted his connections to politicians in this state and beyond
02:08PM 18 and their staffs. There were implied threats to the first bank
02:08PM 19 that, oh, they would be in touch, they would call, did he need
02:09PM 20 to call them on that bank, one of our largest banks, right?
02:09PM 21 Banks don't want senators being told that they are not
02:09PM 22 abiding by the dictates of a federal program. They were just
02:09PM 23 struggling with, what do we have to verify? He was one of the
02:09PM 24 first applicants. How do we do this? What standards do we
02:09PM 25 apply? And he was pushing, pushing, pushing, but the Court
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 23 of 68 PageID.1443
23
02:09PM 1 knows that.
02:09PM 2 The emails are replete. The company emails are
02:09PM 3 replete with him and some of his colleagues joking about what
02:09PM 4 they were doing, making fun of it, making fun of others. It
02:09PM 5 was really terrible stuff, appalling stuff.
02:09PM 6 And so amazingly and incredibly, during that same very
02:09PM 7 time period, he applies -- in the second case, he applies to
02:09PM 8 buy yet another property, and the Court has his financial
02:10PM 9 assets, a $4.5 million property in Kahala. Pretty nice. And
02:10PM 10 he wants a loan, so he gets that through Merrill Lynch and B of
02:10PM 11 A and he gets $3 million. In doing that, he wants -- he again
02:10PM 12 sat down at his computer and he doctored his investment
02:10PM 13 portfolio, and he represented that he had much more money than
02:10PM 14 he did. Those were material statements. Whether or not he
02:10PM 15 would have qualified, that bank was going to look at that
02:10PM 16 because that's important. What does he have? Does he have the
02:10PM 17 ability to pay? Can we go against his other assets? The stuff
02:10PM 18 that is just standard business practices for banks.
02:10PM 19 Why he did that, I don't know. It makes no sense.
02:10PM 20 Did he need another house? He had many already in places like
02:10PM 21 Beverly Hills and here and Honolulu. But to actually engage in
02:11PM 22 that kind of conduct as a professional, he worked -- I don't
02:11PM 23 know whether he has a law degree or not, but he was a business
02:11PM 24 man leading one of the leading companies, maybe not the
02:11PM 25 biggest, but one of the leading companies in this state. He
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 24 of 68 PageID.1444
24
02:11PM 1 was sophisticated, he worked for an accounting firm for years
02:11PM 2 before he joined Mr. Loui. There is no reason he should have
02:11PM 3 done this. Absolutely no reason. It was greed, it was deceit,
02:11PM 4 and it was entitlement. But the Court knows that.
02:11PM 5 So here's what the government recommends. First of
02:11PM 6 all, the government recommends the low end of the guidelines,
02:11PM 7 87 months. And we are recommending the low end of the
02:11PM 8 guidelines because we have taken into consideration his
02:12PM 9 post-offense rehabilitative conduct and his volunteering and
02:12PM 10 all of that. So that's where the government gives him credit
02:12PM 11 for that. It's ultimately of course up to the Court.
02:12PM 12 I will say, and I've been granted authority to say
02:12PM 13 this by the folks in DC who debriefed him, because you've heard
02:12PM 14 about that, they debriefed him extensively, he provided a lot
02:12PM 15 of information. No investigation has been launched as a result
02:12PM 16 of those debriefings. Whether something does, I don't know.
02:12PM 17 And if something does and the prosecutors in Washington are
02:12PM 18 involved with that, and they believe he's entitled to some
02:12PM 19 cooperation credit down the road for that, then they will call
02:12PM 20 me and we will make a decision collectively. And if he is
02:12PM 21 entitled to it, we will bring the issue back to the Court of
02:13PM 22 course.
02:13PM 23 But from the government's perspective, the Court
02:13PM 24 certainly can take into consideration his debriefings under the
02:13PM 25 statutory sentencing factors, but it did not amount to
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 25 of 68 PageID.1445
25
02:13PM 1 substantial assistance.
02:13PM 2 All right, so back to the 87 months. The government
02:13PM 3 defers to the Court on supervised release; that's the Court's
02:13PM 4 resources through its probation office. With regard to the
02:13PM 5 rest, the forfeiture the Court has already articulated it is
02:13PM 6 $12,841,490 that should be payable to the Small Business
02:13PM 7 Administration. There is a forfeiture order already in the PPP
02:13PM 8 case for that -- it should be that same amount. And the Court
02:14PM 9 has already ordered the forfeiture of the over 10 million that
02:14PM 10 the government seized pursuant to warrant from his own
02:14PM 11 accounts, 2 million, and his company's accounts somewhat north
02:14PM 12 of 8 million. And he will get credit for that toward that
02:14PM 13 forfeiture money judgment of course.
02:14PM 14 With regard to the fine, the government advocates for
02:14PM 15 a $1 million fine. I mean, Mr. Loui went through some of his
02:14PM 16 assets, the probation has gone through some of his assets, the
02:14PM 17 nature of the crime, I'm not going to belabor it, but the
02:14PM 18 government feels this is one of those relatively rare cases
02:14PM 19 where a fine is appropriate. And we suggest the top of the
02:14PM 20 guideline, 1 million.
02:14PM 21 I know Ms. Yamaga will have something to say about the
02:14PM 22 criminal forfeiture order entered in the mortgage fraud case
02:15PM 23 and of course you'll listen to her on that. From the
02:15PM 24 government's perspective, and I do apologize we should have
02:15PM 25 gotten that in earlier, but it's a placeholder, there is no
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 26 of 68 PageID.1446
26
02:15PM 1 doubt that the government is entitled to forfeiture of the
02:15PM 2 proceeds of that fraud, which are at least 3 million, and
02:15PM 3 that's what came out of that.
02:15PM 4 And the government feels the law is very clear,
02:15PM 5 provided some additional case law that Ms. Yamaga today just
02:15PM 6 moments before, that made clear that the government also gets
02:15PM 7 the appreciation prorated in that house for two-thirds of bank
02:15PM 8 money fraudulently obtained bought that house, one-third of
02:15PM 9 other money, the Kao's money, bought that.
02:15PM 10 But what the Court has entered, from the government's
02:15PM 11 perspective, is a placeholder until we have a foreclosure and a
02:15PM 12 sale. We just felt, why speculate, why estimate when there is
02:16PM 13 a state process that's going to come up with real numbers.
02:16PM 14 Now, the county says it's worth 7.2, 7.3 million, we'll see
02:16PM 15 what it sells for.
02:16PM 16 I will point out that PacMar has obviously submitted
02:16PM 17 to the probation office a request for restitution. The
02:16PM 18 probation office has looked at that, I've discussed it with the
02:16PM 19 probation office, PacMar has said to me they would like a
02:16PM 20 restitution hearing so that they can prove up restitution.
02:16PM 21 Essentially, what we are talking about are legal bills, legal
02:16PM 22 costs incurred in responding to subpoenas we issued here for
02:16PM 23 this investigation specific to the PPP case, I think. And the
02:16PM 24 probation office didn't feel that they could come up with a
02:16PM 25 number based on the submissions.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 27 of 68 PageID.1447
27
02:16PM 1 The government is really not in a better position than
02:17PM 2 the probation office, and so I've told PacMar through its
02:17PM 3 counsel that it really needs to parse the legal bills and put
02:17PM 4 them in piles so that the appropriate PAR can be considered by
02:17PM 5 the Court. If the Court is inclined to set a restitution
02:17PM 6 hearing, it is, of course, my hope that if you do set a
02:17PM 7 restitution hearing that counsel, PacMar, the government, with
02:17PM 8 help from the probation office, will come up with an agreed
02:17PM 9 upon number for the Court's consideration.
02:17PM 10 THE COURT: So on that, I have a couple of questions.
02:17PM 11 I didn't want to interrupt you, but if you wanted to finish up
02:17PM 12 I'm happy to do that. So my questions are threefold. It has
02:17PM 13 to do with the fine, it has to do with PacMar's request for
02:17PM 14 restitution, and I just have a question how come there is no
02:17PM 15 investment information in terms of Mr. Loui had mentioned that
02:17PM 16 he had all of these investment assets. I didn't see any of
02:18PM 17 that. I mean, I see the two Mercedes, the Ferrari, the Rolls
02:18PM 18 Royce and then all of this luxury real estate.
02:18PM 19 So the dilemma I find myself in in a fine is that I
02:18PM 20 know that there are several -- I'm personally aware of, because
02:18PM 21 it's in the federal court as a civil lawsuit, one. So if there
02:18PM 22 was any chance of recovering any kind of damage award, they
02:18PM 23 wouldn't be able to touch the money that he would have to pay
02:18PM 24 towards the fine, because that goes to the government, and I
02:18PM 25 certainly couldn't double dip if PacMar is given a restitution
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 28 of 68 PageID.1448
28
02:19PM 1 amount that would then be an offset or a setoff, or what have
02:19PM 2 you, that they wouldn't be able to recover those amounts.
02:19PM 3 I'm just trying to figure out on different tracks. I
02:19PM 4 agree with you that this is one of those rare cases where a
02:19PM 5 fine makes sense, except for the fact that you have all of
02:19PM 6 these other victims that are out there that are seeking civil
02:19PM 7 remedies for the harm that's been done to them. And the
02:19PM 8 dilemma I find is is it just punishment, so there is an
02:19PM 9 argument for that. But yet does it then thwart ultimately any
02:19PM 10 kind of recompense to actual victims?
02:19PM 11 MR. NOLAN: Right. No, I appreciate the Court's
02:19PM 12 question and observations because that's true. One reason not
02:19PM 13 to impose a fine here is that PacMar is looking to recover, the
02:20PM 14 SBA is looking to recover, Bank of America is looking to
02:20PM 15 recover. Frankly, we are hindered here because, at least to my
02:20PM 16 knowledge, and certainly the probation office can correct me if
02:20PM 17 things change, but Mr. Kao never provided a financial
02:20PM 18 disclosure. And I'm seeing the probation office confirming it.
02:20PM 19 He was asked to provide one, of course. He didn't
02:20PM 20 sign a plea agreement so I don't have a contractual, right, but
02:20PM 21 in the normal course the probation office asked for that. And
02:20PM 22 we only have the information -- I believe it goes back to the
02:20PM 23 bail reports. I don't know if the probation office was able to
02:20PM 24 get more, but Mr. Kao declined to tell the probation office, in
02:20PM 25 response to this request, as to what he has out there.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 29 of 68 PageID.1449
29
02:20PM 1 So the government certainly understands that the Court
02:20PM 2 thinks it prudent, given all his outstanding forfeiture
02:21PM 3 judgments, given all of his outstanding judgments in the state
02:21PM 4 and arbitration proceedings, and given what the restitution
02:21PM 5 judgments will be in this case, if the Court decides not to
02:21PM 6 impose a fine.
02:21PM 7 THE COURT: Yes. So that's my question with regard to
02:21PM 8 the fines. That makes sense about the financial disclosure.
02:21PM 9 As I read in the presentence report, it's publicly available
02:21PM 10 information that was provided, obviously, what you do a real
02:21PM 11 estate --
02:21PM 12 MR. NOLAN: Sure.
02:21PM 13 THE COURT: -- look it up in the commuter with regard
02:21PM 14 to that and with regard to the automobiles and the outstanding
02:21PM 15 loans. So that's what would show up. And there was a report
02:21PM 16 of, even though there were all these properties, who was on the
02:21PM 17 deed. Okay, so that -- I was just wondering, somebody with
02:21PM 18 these assets, I imagine would have an investment account and
02:22PM 19 Mr. Loui mentioned it, but that makes sense. Okay.
02:22PM 20 MR. NOLAN: Right. So Mr. Loui has been able to do a
02:22PM 21 better job than the government at the moment on some of that.
02:22PM 22 I, of course, haven't verified that information with regard to
02:22PM 23 investment accounts and the like.
02:22PM 24 THE COURT: They have all those civil actions across
02:22PM 25 the street too, so I'm sure they have gotten a lot of
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 30 of 68 PageID.1450
30
02:22PM 1 information from that.
02:22PM 2 MR. NOLAN: And I anticipate of course that after we
02:22PM 3 have judgments from the court that our civil division will
02:22PM 4 start -- will seek leave of court to conduct some discovery and
02:22PM 5 pursue assets out there as well. The IRS has a lien on that
02:22PM 6 Kahala house. I think that's in the PSR. It's somewhere north
02:22PM 7 of a million dollars. They are a codefendant in the -- or a
02:22PM 8 party in the foreclosure actions.
02:22PM 9 So that's the recommendation of the government. I'm
02:22PM 10 happy to answer any further questions.
02:22PM 11 THE COURT: No. Thank you very much. I appreciate
02:22PM 12 that.
02:23PM 13 Mr. Bakke.
02:23PM 14 MR. BAKKE: Your Honor, could I have one moment to
02:23PM 15 consult with the probation officer? I have a question.
02:23PM 16 THE COURT: You may.
02:23PM 17 Mr. Bakke, I'm sorry to interrupt. We have been going
02:23PM 18 for almost an hour. I think it's fair to the court reporter
02:23PM 19 that we take a brief recess. Could you consult and then just
02:23PM 20 let Ms. Cortez know when you are ready to proceed and we will
02:23PM 21 take like a ten-minute recess. Thank you very much. We stand
02:23PM 22 in recess.
02:23PM 23 (Proceedings were recessed at 2:23 p.m. to 2:32 p.m.)
02:32PM 24 THE COURT: The record will reflect the presence of
02:32PM 25 counsel and Mr. Kao and Ms. Nieling.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 31 of 68 PageID.1451
31
02:32PM 1 So, Mr. Bakke.
02:32PM 2 MR. BAKKE: Yes, Your Honor. Thank you.
02:32PM 3 Your Honor, before I get started, on page 23 of the
02:33PM 4 presentence report it talks about criminal history. And I
02:33PM 5 believe that on paragraph 97, if the Court had earlier said
02:33PM 6 today that the defendant had a prior conviction. But that was
02:33PM 7 not a conviction under state law, that was a deferral, and the
02:33PM 8 case was dismissed. So there was never any conviction. I just
02:33PM 9 wanted to clarify that.
02:33PM 10 THE COURT: Okay, thank you.
02:33PM 11 MR. BAKKE: Your Honor, when it comes to sentencing we
02:33PM 12 can sit here all day and talk about what a person did. And
02:33PM 13 that obviously is where we have to start, okay. But that is
02:33PM 14 not the end of the story, and we have to balance that under the
02:33PM 15 3553(a) factors with the mitigating factors.
02:33PM 16 And, in fact, just the general life history of a
02:33PM 17 person, because although people have to be held to answer for
02:33PM 18 their individual acts, individual actions don't always
02:34PM 19 completely define a person for their whole life. And
02:34PM 20 especially at Mr. Kao's age, he hasn't led a life of crime.
02:34PM 21 And these allegations that have brought him here are more types
02:34PM 22 of crimes of opportunity and things like that, as opposed to an
02:34PM 23 orchestrated long running -- this is not a Ponzi scheme, this
02:34PM 24 isn't --
02:34PM 25 THE COURT: It's not a Ponzi scheme, but it's very
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 32 of 68 PageID.1452
32
02:34PM 1 involved and it was deliberate. This is not a bank teller who
02:34PM 2 at Christmas maybe is a single mother and somebody deposits
02:34PM 3 $5,000 of cash and in a moment of weakness she takes the cash.
02:34PM 4 That's understandable. This took planning, this took
02:34PM 5 leadership. This was not a matter of just putting in one piece
02:34PM 6 of paper or making a phone call.
02:34PM 7 So I understand what you are saying, it's not a Ponzi
02:34PM 8 scheme where you're reaching out -- but it was quite
02:34PM 9 sophisticated.
02:34PM 10 MR. BAKKE: Your Honor, with all due respect, we
02:35PM 11 completely disagree with that in a sense of I went through that
02:35PM 12 same situation. Nobody this side of the bar had to deal with
02:35PM 13 employees, the COVID, the paying your rent, everything like
02:35PM 14 that. It was chaos. The problem is Mr. Kao took advantage of
02:35PM 15 that. And as we know across the country many people took
02:35PM 16 advantage of it that most didn't have any criminal history.
02:35PM 17 But when they saw it there and they saw that opportunity they
02:35PM 18 took it, and it was done over a relatively short period of
02:35PM 19 time. But I do agree with the Court that, yes, you kind of
02:35PM 20 have had to know what you were doing, you know.
02:35PM 21 THE COURT: And you kind of had to have the ability to
02:35PM 22 threaten that you could use relationships with senators and
02:35PM 23 congresswomen and throw your weight around with regard to that.
02:35PM 24 That's an aspect of this.
02:35PM 25 MR. BAKKE: That's correct. Mr. Kao actually had that
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 33 of 68 PageID.1453
33
02:35PM 1 weight, so to speak, to throw around.
02:35PM 2 THE COURT: Right.
02:35PM 3 MR. BAKKE: So but the real problem started with him
02:36PM 4 even coming up with the stupid idea that we can get a bunch of
02:36PM 5 money here. And like the prosecutor said, he would have been
02:36PM 6 entitled to something, it looks like, under the regular rules.
02:36PM 7 It's just the way it was calculated. And there were other
02:36PM 8 companies, if you recall.
02:36PM 9 THE COURT: The way it was calculated because of
02:36PM 10 abject fraud. He took numbers of individuals that you said
02:36PM 11 were on your payroll and you inflated it by a factor of
02:36PM 12 several, not double.
02:36PM 13 MR. BAKKE: Absolutely. But I think what Mr. Nolan
02:36PM 14 and I were kind of getting at is this was so stupid because it
02:36PM 15 didn't have to be done. He could have just gone in and said,
02:36PM 16 you know what, I legitimately need this -- even though I have a
02:36PM 17 big company he still could have qualified for something. But
02:36PM 18 that goes back to greed and despair. Why didn't he just apply
02:36PM 19 normally, instead of trying to milk it for more than the
02:36PM 20 program --
02:36PM 21 THE COURT: Well, you could get six times more than
02:36PM 22 apparently he might have been able to qualify for. Although, I
02:37PM 23 don't know if he really qualified for it because it wasn't
02:37PM 24 meant for people who had like Uncle Sam as the provider. But
02:37PM 25 even assuming that to be true, we're talking -- well, Mr. Nolan
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 34 of 68 PageID.1454
34
02:37PM 1 had mentioned somewhere in the neighborhood of $2 million -- we
02:37PM 2 are talking about almost $13 million.
02:37PM 3 MR. BAKKE: Absolutely, correct, and that's where the
02:37PM 4 crime comes in, Your Honor. So I'm trying to get into -- you
02:37PM 5 know, about this being a long, drawn out, thought out process.
02:37PM 6 This was something that just came up in a very short period of
02:37PM 7 time, there weren't a lot of rules, it was ripe for abuse,
02:37PM 8 which we found out later through all the cases across the
02:37PM 9 country, and he absolutely has to be held accountable for that.
02:37PM 10 But I'm trying to put it in kind of a framework like
02:37PM 11 we didn't know what was going on. You had places like Ruth's
02:37PM 12 Chris, Shake Shack, you had major companies all applying for
02:37PM 13 these maximum $10 million loans that they qualified evidently
02:37PM 14 for under the rules. But when the public kind of heard about
02:38PM 15 it, a lot of those companies let the loan go because of the
02:38PM 16 optics. It looked bad, why does this big company get all this
02:38PM 17 money and the mom-and-pop shops hardly get anything?
02:38PM 18 Again, not any excuses. I'm not making any excuses.
02:38PM 19 I'm just trying to put it in a little bit of context because we
02:38PM 20 are talking about Martin's overall character of his whole life
02:38PM 21 that this was a very short period of time.
02:38PM 22 Now, he was very busy during that short period of
02:38PM 23 time, but he had 50 years before that. He was a good guy,
02:38PM 24 father, all of that stuff. He was successful. He had the
02:38PM 25 Ferraris -- he had more than one Ferrari, he had the
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 35 of 68 PageID.1455
35
02:38PM 1 properties, he was living a successful lifestyle that came from
02:38PM 2 legitimate work. He is not a drug dealer or something.
02:38PM 3 So we go through all that and then, all of sudden, now
02:39PM 4 he is greedy and deceitful and everything like that. And I'm
02:39PM 5 looking at that and going, what changed from Martin and the
02:39PM 6 father and everything to this? Where did he get lost? Because
02:39PM 7 he wasn't like that before, and the only thing I can find, Your
02:39PM 8 Honor, is when he got involved with Navatek and Mr. Loui and he
02:39PM 9 went to work for them. And that --
02:39PM 10 THE COURT: Wait, wait. Okay, honestly I got to head
02:39PM 11 you off here. So you are saying because he started working at
02:39PM 12 this firm, from which he has stolen millions of dollars, that
02:39PM 13 that somehow they made him do it or influenced him to do these
02:39PM 14 actions?
02:39PM 15 MR. BAKKE: Well, Your Honor, I'm unaware of him
02:39PM 16 having stolen millions of dollars from the company.
02:39PM 17 THE COURT: Well, it was supposed to go to the
02:39PM 18 company, right? Didn't he apply for the PPP? It was not for
02:39PM 19 him personally, he wasn't supposed to personally get the money,
02:40PM 20 correct?
02:40PM 21 MR. BAKKE: Correct, for the company.
02:40PM 22 THE COURT: Right. And he put the company's name on
02:40PM 23 it, and he made representations about the company qualifying
02:40PM 24 for PPP.
02:40PM 25 MR. BAKKE: Yes.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 36 of 68 PageID.1456
36
02:40PM 1 THE COURT: And so then when those get approved, then
02:40PM 2 that money is supposed to go to the applicant, Navatek. So I'm
02:40PM 3 kind of losing you with saying, well, yeah, but Navatek really
02:40PM 4 didn't lose any money or there is no evidence of Navatek --
02:40PM 5 MR. BAKKE: They didn't because they weren't entitled
02:40PM 6 to that money to begin with.
02:40PM 7 THE COURT: You know what, so I get that. So you are
02:40PM 8 saying that the whole fraud of this, the only victims then are
02:40PM 9 the taxpayer and the banks?
02:40PM 10 MR. BAKKE: Correct, Your Honor.
02:40PM 11 THE COURT: Navatek is not a victim. Is that the
02:40PM 12 point you are trying to make?
02:40PM 13 MR. BAKKE: As far as the PPP loan itself, because I
02:40PM 14 got a little lost with Mr. Loui talking about all this other
02:40PM 15 collateral damage that may come, and that may be going to
02:40PM 16 restitution. But where I was going with this, Your Honor, is
02:41PM 17 not he went to work for the company so he stole money from the
02:41PM 18 PPP loan, because we also have the Washington D.C. case.
02:41PM 19 THE COURT: Yeah, absolutely, which I am taking into
02:41PM 20 account as 3553(a) factors of sentencing because he is a
02:41PM 21 convicted felon in another matter, and I know generally what
02:41PM 22 that involves. So that's an additional factor I can take into
02:41PM 23 account in evaluating what an appropriate sentence is. But I
02:41PM 24 don't make any judgment with regard to what happened there
02:41PM 25 because that's not part of my case.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 37 of 68 PageID.1457
37
02:41PM 1 MR. BAKKE: Correct, Your Honor. We know that it was
02:41PM 2 campaign fraud, making illegal donations to elected officials.
02:41PM 3 THE COURT: Correct.
02:41PM 4 MR. BAKKE: So that's kind of where I'm saying is when
02:41PM 5 Mr. Kao came into Navatek, he was not a businessman, he wasn't
02:41PM 6 experiencing government contracting. Quite frankly, I don't
02:41PM 7 know how he got 99 percent of the company, why they gave it to
02:41PM 8 him. It appears because they were happy that he did something
02:42PM 9 good for them.
02:42PM 10 THE COURT: Well, I don't know and I don't want to
02:42PM 11 make any judgment. What's your point with regard to --
02:42PM 12 MR. BAKKE: My point, Your Honor, is when he came in
02:42PM 13 that company was rotten already. And so he learned from
02:42PM 14 Mr. Loui, he learned from them the way they did things, and the
02:42PM 15 way they did things when he came in was already in place. You
02:42PM 16 pay people for influence, you throw your weight around, you do
02:42PM 17 those kinds of things.
02:42PM 18 Before this thing, when he started, he wasn't any of
02:42PM 19 that kind of stuff. But he got in there and that's where he
02:42PM 20 lost his way, Your Honor. He got into that environment, it was
02:42PM 21 big money, it was relatively easy money, and he loved the whole
02:42PM 22 thing of it. He loved everyone looking up to him and being the
02:42PM 23 boss and flying to DC and being the big company in Hawaii. And
02:42PM 24 he just got lost. He got lost in all of that. And the money,
02:42PM 25 the Ferraris, the whole thing, right.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 38 of 68 PageID.1458
38
02:42PM 1 And that's where I'm just trying to put in a little
02:43PM 2 bit of context that that's where -- he went from a normal guy
02:43PM 3 to this super star in the industry and all the benefits that
02:43PM 4 came with it. And he got lost, he took advantage of it, and
02:43PM 5 then that brings us to the rehabilitation. Because as high as
02:43PM 6 he went, he fell just as far.
02:43PM 7 And as the -- Court is aware, I don't need to go
02:43PM 8 through all the rehabilitation, but this was all done on his
02:43PM 9 own. I mean, to me, and I know the Court has read through
02:43PM 10 everything and the Court really I think in other cases, you
02:43PM 11 really take into consideration the letters, right? Not because
02:43PM 12 it's a letter from a bank president, it's somebody that really
02:43PM 13 knows him and somebody that can really talk to the person.
02:43PM 14 And I've never seen in a case like this where you have
02:43PM 15 letters from the Cheese Cake Factory from his co-workers, where
02:43PM 16 he spent over two years excelling in a job that many people
02:43PM 17 would say, well, that's so below him. Obviously, there is
02:44PM 18 nothing wrong with working at the Cheese Cake Factory, but it's
02:44PM 19 not the CEO of Navatek.
02:44PM 20 THE COURT: Understood. Understood.
02:44PM 21 MR. BAKKE: And so those things are looking at -- when
02:44PM 22 I go back to 3553(a)is that he has humbled himself, because he
02:44PM 23 went from kind of the zero to the hundred back down almost to
02:44PM 24 the zero. And that takes a lot of character and a lot of
02:44PM 25 humbling, and he did well, and he excelled at it. And I think
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 39 of 68 PageID.1459
39
02:44PM 1 his values changed.
02:44PM 2 And I remember I told him one time, I went to visit
02:44PM 3 him and he said, oh, look at this Ferrari. I got this Ferrari.
02:44PM 4 And I go, yeah, but you know what, Martin, what's important now
02:44PM 5 is not what's in your garage, it's who lives in your house.
02:44PM 6 That's where your focus and goals are. And he just looked at
02:44PM 7 me like, I never thought of it that way. And he's got a
02:44PM 8 beautiful family, and he put them through hell through all of
02:45PM 9 this, and he'll have to attenuate to that.
02:45PM 10 But it's that kind of situation where, you know -- the
02:45PM 11 Harvard thing. I was like, what do you mean you got into
02:45PM 12 Harvard? He didn't even tell me. I found out --
02:45PM 13 THE COURT: Did it really cost $30,000?
02:45PM 14 MR. BAKKE: I don't know how much the tuition is.
02:45PM 15 THE DEFENDANT: It's about $900 a college credit,
02:45PM 16 graduate credit. I've taken 20 credits already.
02:45PM 17 THE COURT: And you took 20 credits. Thank you.
02:45PM 18 Okay.
02:45PM 19 MR. BAKKE: Again, it's not one of these cases where
02:45PM 20 we are looking so hard at rehabilitation, because that's, as
02:45PM 21 the Court said, that's just one of the factors. Just one of
02:45PM 22 them. But it's also a very important one.
02:45PM 23 Obviously, restitution and all that stuff it sounds
02:45PM 24 like we're probably going to have to have a restitution study
02:45PM 25 to sort that out more. There's also the $2 million after we
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 40 of 68 PageID.1460
40
02:46PM 1 are done with court here. We have to go downstairs because
02:46PM 2 they are going to take the $2 million that is up on the bail;
02:46PM 3 so we are going to have to sort that out more.
02:46PM 4 What I'm really here about now is with Martin because
02:46PM 5 we hear everything, well, he lied, he lied, he lied. Yeah, no
02:46PM 6 doubt that he lied. I guess my position is, does it really
02:46PM 7 raise it to that much of an aggravating factor in a situation
02:46PM 8 where really the whole charge is lying? I mean, everyone that
02:46PM 9 was charged with PPP loans lied. So it's kind of like that is
02:46PM 10 the crime.
02:46PM 11 THE COURT: Well, it is the crime. Fraud is the
02:46PM 12 crime, right? And then we look at also the amount that the
02:46PM 13 person benefitted by, right? So I admit to you there was a lot
02:46PM 14 of PPP fraud apparently. I don't think the statistics will
02:46PM 15 bear out that there were a lot of fraud in excess of
02:46PM 16 $12 million.
02:46PM 17 MR. BAKKE: I would agree with that. It's about 1 to
02:47PM 18 2 million and then after that it's like 15 or 20. It's kind of
02:47PM 19 like not a real gap in the middle from the cases that I saw.
02:47PM 20 THE COURT: Right. So this is a pretty egregious case
02:47PM 21 in terms of the amount and also his role.
02:47PM 22 So where are you on what's an appropriate sentence?
02:47PM 23 MR. BAKKE: Your Honor, I just believe that under the
02:47PM 24 very unique circumstances of this case, especially such as an
02:47PM 25 exemplary post-offense rehabilitation, I don't know where the
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 41 of 68 PageID.1461
41
02:47PM 1 actual range should be. But I would recommend that a guideline
02:47PM 2 range of 87 months is more than necessary to comply with the
02:47PM 3 sentencing goals in 3553(a)(2). How much? I'll defer to the
02:47PM 4 Court, Your Honor.
02:47PM 5 But with his background, prior to starting at Navatek
02:47PM 6 and ending at Navatek, prior to that he's led a good life, and
02:48PM 7 he's going to come out of this at some point. We just got to
02:48PM 8 make sure that it's -- and this is the hard job for you, Your
02:48PM 9 Honor, is the Goldilocks, which is we don't want it too hash
02:48PM 10 but not too soft either. He definitely has to be made an
02:48PM 11 example of, and he has to atone, and he has to pay and all of
02:48PM 12 that. I just don't know where that perfect bowl of porridge is
02:48PM 13 at the end of the day, but I believe that 87 months is more
02:48PM 14 than necessary.
02:48PM 15 THE COURT: Okay. Thank you very much.
02:48PM 16 Ms. Yamaga, is there anything you wanted to add and
02:48PM 17 then I'll give Mr. Kao an opportunity to speak on his behalf.
02:48PM 18 MS. YAMAGA: Nothing with respect to the sentence. I
02:48PM 19 just have a comment on the criminal forfeiture. Do you want me
02:48PM 20 to address that now?
02:48PM 21 THE COURT: Sure.
02:48PM 22 MS. YAMAGA: So as Mr. Nolan alluded to, he and I have
02:48PM 23 had a conversation, I just noted that his motion and proposed
02:48PM 24 order was only filed two days ago, which gave me very little
02:49PM 25 time to review it, in particular, little time to review it with
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 42 of 68 PageID.1462
42
02:49PM 1 Mr. Kao.
02:49PM 2 I can go through the one legal issue that I noted upon
02:49PM 3 my initial perusal, but what I'm ultimately asking the Court to
02:49PM 4 do is to hold off on the final order of judgment and just give
02:49PM 5 me one week to review it with Mr. Kao --
02:49PM 6 THE COURT: Absolutely.
02:49PM 7 MS. YAMAGA: -- and we might not make this one
02:49PM 8 objection that I had already highlighted to Mr. Nolan.
02:49PM 9 THE COURT: Yes, I think so. And I think the way the
02:49PM 10 proposed order was is that it was just the fact of the
02:49PM 11 forfeiture wasn't entitled to under the case but not the
02:49PM 12 amount. And then we're going to have to talk about the
02:49PM 13 calculations. So I just assume that you are not challenging
02:49PM 14 that the government is entitled to forfeiture, but you are
02:49PM 15 really challenging how that's going to be calculated in the
02:49PM 16 final amount.
02:49PM 17 MS. YAMAGA: That's correct. It's the appreciation
02:49PM 18 whether that's --
02:49PM 19 THE COURT: Yes, and that might be a legal issue for
02:49PM 20 me to rule on.
02:49PM 21 MS. YAMAGA: Yes, Your Honor. That's the only issue
02:49PM 22 right now.
02:49PM 23 THE COURT: Right. And then the other issue that came
02:49PM 24 up is potentially a restitution hearing with regard to
02:49PM 25 Navatek's claim.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 43 of 68 PageID.1463
43
02:49PM 1 Do you guys have any position on that, or you guys
02:50PM 2 want to think about it and we'll have a status conference?
02:50PM 3 MS. YAMAGA: I'd defer to Mr. Bakke.
02:50PM 4 THE COURT: Because that's on his, yes. You're on the
02:50PM 5 bank loan. Sorry.
02:50PM 6 Mr. Bakke.
02:50PM 7 MR. BAKKE: Maybe we can have a status conference on
02:50PM 8 it.
02:50PM 9 THE COURT: Okay, very good. Let's do that because I
02:50PM 10 don't have enough information to do that.
02:50PM 11 Mr. Kao, you have an opportunity to speak on your
02:50PM 12 behalf, it's this time, if you wish. If you don't, it won't be
02:50PM 13 held against you. Do you wish to say something to the Court?
02:50PM 14 THE DEFENDANT: Yes, Your Honor.
02:50PM 15 THE COURT: All right. Please.
02:50PM 16 THE DEFENDANT: First of all, good afternoon.
02:50PM 17 THE COURT: Good afternoon.
02:50PM 18 THE DEFENDANT: Thank you for this opportunity to
02:50PM 19 address the Court.
02:50PM 20 I'm here because I failed. I'm here today to accept
02:50PM 21 responsibility for my mistakes and face the consequences of my
02:50PM 22 actions. So I say before this Court, I'm sorry, I have no
02:50PM 23 excuses, I acknowledge my mistakes, and I accept full
02:51PM 24 responsibility for the wrongs I've committed.
02:51PM 25 I can assure the Court that these statements are not
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 44 of 68 PageID.1464
44
02:51PM 1 said impiously, but I also do not believe that anything I say
02:51PM 2 today, however genuine, could ever excuse my actions. At the
02:51PM 3 end, only my actions can.
02:51PM 4 As I've come to learn through my own epistemology, a
02:51PM 5 life journey towards repentance, any genuine contrition,
02:51PM 6 accountability and acceptance of my mistakes cannot be
02:51PM 7 proclaimed, they must be ensued through and from my actions.
02:51PM 8 A lot of people have said a lot of things about me and
02:51PM 9 the person I was when I committed these offenses. So today let
02:51PM 10 me tell the Court who I was.
02:51PM 11 I was a naive and ignoramus imposture. So naive, so
02:52PM 12 ignorant that I had no fear or even understanding of the
02:52PM 13 consequences of my actions. I didn't think that it was illegal
02:52PM 14 or that lying could be prosecuted as a crime. I wrongfully
02:52PM 15 thought that fraud would result in no direct physical or
02:52PM 16 visceral financial harm was of any consequence. None of the
02:52PM 17 crimes I'm here before the Court today were contrived or
02:52PM 18 premeditated. Instead, everything was by opportunity and by
02:52PM 19 chance.
02:52PM 20 So when the banks told me to just apply as I saw fit,
02:52PM 21 to just apply, however it made sense for my company, don't
02:52PM 22 worry about how you apply, we'll figure it out later. It
02:52PM 23 doesn't matter how you apply. It only matters how you spend
02:52PM 24 the money.
02:52PM 25 So I saw opportunities in the chaos with the pandemic.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 45 of 68 PageID.1465
45
02:52PM 1 And if someone asked questions later -- and I took advantage of
02:53PM 2 it. And if someone asked questions later, I would just deal
02:53PM 3 with it at that time. Both of my offenses occurred around the
02:53PM 4 same time, both during the height and frenzy of the pandemic,
02:53PM 5 both crimes of opportunity committed without planning or any
02:53PM 6 forethought.
02:53PM 7 While my mistakes may be borne from situational
02:53PM 8 circumstances, it doesn't make -- mean that there is no
02:53PM 9 accountability for my actions. For too long I have allowed
02:53PM 10 myself to hide behind the misguided notions of ethics and
02:53PM 11 philosophies of consequentialism, that somehow the end justify
02:53PM 12 the means. From the false narrative I've painted in my mind,
02:53PM 13 that despite my wrongful conduct and how the company applied
02:53PM 14 for the PPP loans, my actions were justified and even to be
02:53PM 15 celebrated. Because in the calendar year 2020, despite COVID,
02:53PM 16 despite Hawaii shutting down, despite America shutting down,
02:54PM 17 despite the world shutting down, I still spent $16 million.
02:54PM 18 $15,850,461 to be exact on my employees' payroll salary and
02:54PM 19 wages, most of which are here today. It included my own salary
02:54PM 20 of $1. I spent far in excess in payroll in 2020 in the 12.8
02:54PM 21 million my company received in PPP loans.
02:54PM 22 I know this is not a time to get into the details, but
02:54PM 23 I can assure this Court that I did not receive one penny of the
02:54PM 24 PPP money.
02:54PM 25 THE COURT: I'm sorry, what about the $2 million that
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 46 of 68 PageID.1466
46
02:54PM 1 was put into your account?
02:54PM 2 THE DEFENDANT: The $2 million was a distribution for
02:54PM 3 my personal capital account. And the reason he was able to
02:54PM 4 trace it was because the PPP funds weren't deposited into the
02:55PM 5 company's general business account, which pays payroll, my
02:55PM 6 distributions --
02:55PM 7 THE COURT: But you know you are being held
02:55PM 8 accountable for the $2 million that was transferred.
02:55PM 9 THE DEFENDANT: I know. I understand.
02:55PM 10 THE COURT: And now you're saying that that was money
02:55PM 11 you were legally entitled to and that was not part of the crime
02:55PM 12 that you committed. I just want to make sure what you're
02:55PM 13 telling me so I understand it correctly.
02:55PM 14 THE DEFENDANT: I'm not sure how to explain the
02:55PM 15 semantics other than to say that when we received the PPP
02:55PM 16 loans --
02:55PM 17 THE COURT: Right. It went into the company account,
02:55PM 18 it got commingled --
02:55PM 19 THE DEFENDANT: It went into the company account, two
02:55PM 20 tranches: One for 10 million and one for 2.8. When we
02:55PM 21 received the 10 million, we moved 8 million of it into a
02:55PM 22 company account, a higher bearing interest brokerage account.
02:55PM 23 THE COURT: Okay.
02:55PM 24 THE DEFENDANT: Company account, company account.
02:55PM 25 From our general business account where we paid salaries, wages
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 47 of 68 PageID.1467
47
02:56PM 1 and everything else, I made a distribution to myself --
02:56PM 2 actually a loan for $2 million. So I understand the
02:56PM 3 traceability rule and the money being tainted. So I understand
02:56PM 4 that dynamic, and I don't --
02:56PM 5 THE COURT: And that's why I'm having a little
02:56PM 6 difficulty swallowing that you didn't take -- you know, I have
02:56PM 7 to say it's interesting because the dilemma I have on
02:56PM 8 sentencing, quite frankly -- well, I'll let you finish and then
02:56PM 9 I'll let you know some of the concerns I have, but go ahead.
02:56PM 10 THE DEFENDANT: You know all this, you know, the money
02:56PM 11 fungibility issues, how much money I spent on payroll, I agree
02:56PM 12 it all fueled my delusions of self-righteousness. I even sent
02:56PM 13 emails that are bragging that our company will be the poster
02:56PM 14 child of PPP. Once the Small Business Administration came in
02:57PM 15 and audited us on how we spent the money, once congress saw
02:57PM 16 that we talked about my congressional influence on
02:57PM 17 relationships, once they saw how we spent -- how much money we
02:57PM 18 spent on payroll, how I hired and created jobs during the
02:57PM 19 pandemic in each of their individual states, this was across 12
02:57PM 20 different states.
02:57PM 21 THE COURT: So you're like Robin Hood then, you're
02:57PM 22 actually a good guy doing all of these things. So no matter
02:57PM 23 how you robbed other people to pay for that, you did only good
02:57PM 24 things with it; is that what you are telling me?
02:57PM 25 THE DEFENDANT: That's what I fooled myself into
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 48 of 68 PageID.1468
48
02:57PM 1 believing.
02:57PM 2 THE COURT: But you understand that's not what
02:57PM 3 happened now, or do you still believe that? That's the problem
02:57PM 4 I'm having.
02:57PM 5 THE DEFENDANT: I do believe that. I do believe that
02:57PM 6 I'm here today because I made a mistake. I justified my own
02:57PM 7 actions in how I applied. And I can confess to the crimes I've
02:57PM 8 done, but I cannot accept the things that I didn't do.
02:58PM 9 THE COURT: Like what, that you didn't do, that are
02:58PM 10 you going to be held accountable in the sentencing or that
02:58PM 11 there are other things that people are mad at you about that
02:58PM 12 has nothing -- what we are talking about is a sentencing. I'm
02:58PM 13 trying to figure out an appropriate sentence for you, so I'm
02:58PM 14 just -- I just need clarity in my mind. You said you're not
02:58PM 15 responsible for the things that you didn't do.
02:58PM 16 THE DEFENDANT: Right.
02:58PM 17 THE COURT: And I know Mr. Loui talked about a lot of
02:58PM 18 different things and that's in state court. I'm just looking
02:58PM 19 at what's in the presentence report.
02:58PM 20 THE DEFENDANT: Okay. Then I'll disregard what
02:58PM 21 Mr. Loui said.
02:58PM 22 THE COURT: Yeah. I don't know what's going on, and I
02:58PM 23 make no judgment with regard to that. The victims have an
02:58PM 24 opportunity to speak, and they can talk about whatever they
02:58PM 25 want to talk about because they have a right to talk about how
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 49 of 68 PageID.1469
49
02:58PM 1 they believe they've been affected. So whatever is going for
02:58PM 2 the garnishment and everything else, that's not part of this
02:58PM 3 case.
02:58PM 4 THE DEFENDANT: I'll disregard that then. I'll
02:59PM 5 retract that statement.
02:59PM 6 THE COURT: Great.
02:59PM 7 THE DEFENDANT: I understand that lying to myself only
02:59PM 8 prolonged my mental anguish, and I could not accept the
02:59PM 9 consequences of my actions because I refused to confront the
02:59PM 10 reality of my own choices, insisting that I was a victim of
02:59PM 11 prosecutorial zeal.
02:59PM 12 Today I truly see and can clearly see that my mistakes
02:59PM 13 and failures, while manifested in my criminal actions before
02:59PM 14 this court today, are so much more embodied in my failure as a
02:59PM 15 CEO and leader in our business community. There was no book,
02:59PM 16 no manual, no courses you could take -- that I could take to
02:59PM 17 learn how to be a CEO. For me, all I knew how to do wrongfully
02:59PM 18 was to emulate those I worked for, their behavior.
02:59PM 19 THE COURT: So you are not in a drug conspiracy where
03:00PM 20 you are working for the mafia, the Mexican cartel. This was a
03:00PM 21 whole idea of filling out forms to seek money from a government
03:00PM 22 program where you falsified information. So what you are
03:00PM 23 telling me is that other people made you do this?
03:00PM 24 THE DEFENDANT: No, I'm not telling you that at all.
03:00PM 25 THE COURT: Okay. You are telling me that you are in
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 50 of 68 PageID.1470
50
03:00PM 1 a culture where somehow you got the message that this is what
03:00PM 2 you are supposed to do, even though nobody told you directly to
03:00PM 3 multiply the number of -- to falsify and multiply by almost a
03:00PM 4 factor of like three, right, from 150 to 400 employees, that's
03:00PM 5 because you were working in this terrible culture?
03:00PM 6 THE DEFENDANT: No, my culture that I'm referring to
03:00PM 7 is the culture of political influence and the culture of maybe
03:00PM 8 lawless dispensations. So when I applied for the PPP loans,
03:01PM 9 the reason I applied the way I applied was, at the time we were
03:01PM 10 growing our company exponentially and, the truth be told, the
03:01PM 11 way we grew our company was by making promises to senate
03:01PM 12 appropriations, congressional appropriation members in exchange
03:01PM 13 for creating jobs in their state.
03:01PM 14 So when the pandemic hit, I was asked and directed by
03:01PM 15 members that I served, Will you continue to honor the job
03:01PM 16 commitments you made in my state? And I couldn't do that. I
03:01PM 17 could not have done it without the PPP loan.
03:01PM 18 THE COURT: Without falsifying the PPP loan so that
03:01PM 19 you would get a six-fold kind of money.
03:02PM 20 THE DEFENDANT: Correct. So the PPP loan, the way
03:02PM 21 it's calculated, it's based on historical data.
03:02PM 22 THE COURT: Right. So I guess what you are saying is
03:02PM 23 you are arguing it was a crime of necessity? You had a gun to
03:02PM 24 your head and you had to do this because you made these
03:02PM 25 promises and, therefore, you had to commit fraud? Honestly, I
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 51 of 68 PageID.1471
51
03:02PM 1 wouldn't recommend you go down this road, I have to tell you,
03:02PM 2 because it's kind of like blaming your mother for all of this.
03:02PM 3 Well, she didn't raise me right and therefore I committed this.
03:02PM 4 I'm sure that's not what you intend to say.
03:02PM 5 THE DEFENDANT: No, it's not.
03:02PM 6 THE COURT: Yeah, but it's going down that road. So I
03:02PM 7 would just ask you to think about what you want to share with
03:02PM 8 me. Because what I have before me are fairly discreet acts,
03:02PM 9 right, the two loans, the misrepresentations, six times the
03:02PM 10 amount that the company would have been entitled to, according
03:02PM 11 to the government, and then fraudulently conducting yourself
03:03PM 12 with regard to the mortgage loan.
03:03PM 13 So I don't think anybody else applied for those
03:03PM 14 things, and I understand what you are saying about the
03:03PM 15 different tranches, and then you're being paid out and you
03:03PM 16 ordered this thing. But the way that the information is is
03:03PM 17 that the 2 million that went into your personal account came
03:03PM 18 from the PPP -- came after the PPP money was deposited with the
03:03PM 19 company.
03:03PM 20 So I'm just going to ask you, what's the point that
03:03PM 21 you're trying to make in terms of explaining to me why you did
03:03PM 22 this other than greed -- or it was greed, but you have a reason
03:03PM 23 for it, like people made you do it.
03:03PM 24 THE DEFENDANT: It's not that someone made me do it.
03:04PM 25 It's -- whether it's greed or personal pride, I was in a
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 52 of 68 PageID.1472
52
03:04PM 1 position where during COVID a lot of people were asking for a
03:04PM 2 lot of things, and it felt good to be able to meet those
03:04PM 3 expectations -- rightfully or wrongfully.
03:04PM 4 And as much up as I had hoped to placate my
03:04PM 5 benefactors, maybe wrongfully, through using PPP funds, I
03:05PM 6 understand now that -- and I'm not making excuses for what
03:05PM 7 happened, and I apologize if it came out that way; but again, I
03:05PM 8 can't change the past.
03:05PM 9 THE COURT: Sure.
03:05PM 10 THE DEFENDANT: All I can do is accept what I've done.
03:05PM 11 I'm reminded of -- as I stand here before you, facing
03:05PM 12 incarceration, losing my freedom, I'm reminded of a quote from
03:05PM 13 one of my favorite books, Man's Search For Meaning.
03:05PM 14 "Everything can be taken from a man but one thing: the last of
03:05PM 15 the human freedoms. To choose one's own attitude in any given
03:06PM 16 set of circumstances, to choose one's own way."
03:06PM 17 I am reminded of a speech I once heard by Chief
03:06PM 18 Justice John Roberts where he gave this commencement speech at
03:06PM 19 his son's graduation and he titled it: I Wish You Bad Luck.
03:06PM 20 It was a facetious title but one with a great message. The
03:06PM 21 message being that it's often through life's misfortunes and
03:06PM 22 how we respond that we learn life's greatest lessons.
03:06PM 23 As you know, before going back to school, I worked as
03:07PM 24 a dishwasher and cook. Before that I applied to work at the
03:07PM 25 American Red Cross and was turned down after they did a
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 53 of 68 PageID.1473
53
03:07PM 1 background check. The pain of being rejected doing work when
03:07PM 2 you are offering to do it for free is kind of indescribable.
03:07PM 3 But that misfortune turned what was a pride-swallowing siege of
03:07PM 4 washing dishes and mopping floors into a real appreciation for
03:07PM 5 just having a job. It turned the misfortune of this
03:07PM 6 circumstance to be working at the restaurant for two years
03:07PM 7 where I met some of the most hard-working and resilient people
03:07PM 8 in my life.
03:08PM 9 Although I can't change the past, I can only look at
03:08PM 10 this process in what it's supposed to be for me. Truth be
03:08PM 11 told, when I was first arrested and released, my mind went to a
03:08PM 12 very dark place. I kind of immersed myself -- I became a
03:08PM 13 full-blown alcoholic in less than a month. I immersed myself
03:08PM 14 in readings of Dostoevsky, Franz Kafka, Tolstoy, those dark
03:08PM 15 allegories of the injustices of our justice system seemed to
03:08PM 16 resonate with me at that time.
03:08PM 17 But do I recognize that this process, while it's easy
03:08PM 18 to forget about the rehabilitation side because of how violent
03:08PM 19 the -- I guess the prosecution and punitive side of it is, I do
03:09PM 20 understand that we are not opponents and that we are actually
03:09PM 21 on the same side. I think you want for me to be the best
03:09PM 22 version of me possible.
03:09PM 23 THE COURT: I also want you to pay back all your
03:09PM 24 victims.
03:09PM 25 THE DEFENDANT: Sure.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 54 of 68 PageID.1474
54
03:09PM 1 THE COURT: So I agree. I really want you to
03:09PM 2 rehabilitate, I want you to experience remorse and ask for
03:09PM 3 forgiveness. But most of all, the point is, how are you going
03:09PM 4 to make amends to your family for being away from them for
03:09PM 5 years, to the victims, to your former colleagues for the
03:09PM 6 financial harm and distress?
03:09PM 7 You don't have to give me an answer now. I don't
03:09PM 8 think there is an answer. But that's what I'm interested in,
03:09PM 9 you figuring that out during your period of incarceration. And
03:09PM 10 when you come out and you are on supervised release, there is
03:10PM 11 going to be a significant community service component, because
03:10PM 12 I think you owe that to our community, and then you'll be able
03:10PM 13 to work with probation on criminal thinking. Because that's
03:10PM 14 what you are describing, this idea that you are better than
03:10PM 15 everybody else, that this is somehow doing actions that serve
03:10PM 16 the greater good. That's criminal thinking, and they can help
03:10PM 17 you with that.
03:10PM 18 THE DEFENDANT: I understand. Thank you for
03:10PM 19 listening.
03:10PM 20 THE COURT: So my dilemma, what I wanted to share with
03:10PM 21 you, Mr. Kao, is that typically people who stand before me,
03:10PM 22 like when you were saying sort of the defense of necessity,
03:10PM 23 that you felt like you were required to do this because you had
03:10PM 24 to keep your company afloat or what have you, but there are
03:10PM 25 people who facilitate pounds of methamphetamine into our state
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 55 of 68 PageID.1475
55
03:10PM 1 that destroys families, children, many people's lives and has
03:11PM 2 been for decades that literally have come before me, and it's
03:11PM 3 true that the Mexican mafia had taken their sister and shot her
03:11PM 4 in the head and said, If you don't do this and go to the Big
03:11PM 5 Island and facilitate pounds of making coming into the Big
03:11PM 6 Island, we're going to kill your kid and then we're going to
03:11PM 7 kill you. So that person is still convicted and sentenced to a
03:11PM 8 mandatory minimum of 20 years.
03:11PM 9 And I've got to say if anybody gets to sort of argue
03:11PM 10 necessity, that's a pretty good thing. What you told me really
03:11PM 11 doesn't move the needle of necessity; so that's the context I'm
03:11PM 12 putting it in. I'm putting it in the context of the
03:11PM 13 21-year-old that I need to sentence who has been sexually,
03:11PM 14 physically abused in his childhood, his addictions started
03:11PM 15 because his parents started giving him meth when he was nine or
03:11PM 16 10, your kids' age -- this kid didn't have a chance -- and he
03:12PM 17 has an addiction and he agrees to carry a bag or receive or
03:12PM 18 whatever. 60 months, five years out of his life, mandatory
03:12PM 19 mandatory minimum. So that's the context I'm looking at it.
03:12PM 20 And then I look at you, and I look at you with this
03:12PM 21 tremendously privileged life, tremendous intelligence,
03:12PM 22 tremendous abilities, you come from a good family, that you
03:12PM 23 have a good family, that you have the kind of material goods in
03:12PM 24 your life, beautiful homes, rental properties, luxury cars.
03:12PM 25 That 21-year-old never had a chance coming out.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 56 of 68 PageID.1476
56
03:12PM 1 Now the law is what the law is and I have to sentence
03:12PM 2 him to five years in prison. How that's going to help him get
03:12PM 3 a GED, hopefully he will get it in prison and then come back
03:12PM 4 out and work with probation and I'll meet with him regularly
03:12PM 5 because no one has ever taught him that this is the way that
03:12PM 6 you need to proceed in the world. And it's tough and you have
03:12PM 7 all this trauma, whether you can do this.
03:13PM 8 It's really hard. I hear what you are saying. I'm
03:13PM 9 sure it has been devastating for you to be indicted and
03:13PM 10 arrested and have to look at serious time. The dilemma I have
03:13PM 11 is, in many ways, thinking this through, going through the
03:13PM 12 materials, there is a thing called upward departure, and I
03:13PM 13 think the egregious actions by you in this case really could
03:13PM 14 justify an upward departure way past the top of the guidelines
03:13PM 15 in this case. Because what you did there was no need to do
03:13PM 16 except for entitlement and greed.
03:13PM 17 On the other hand, I think, how does this help the
03:13PM 18 victims, right? So there is just punishment, that's a
03:13PM 19 component, to prevent you and others from committing this kind
03:13PM 20 of fraud, so the next time there is a government program that
03:13PM 21 people can apply for, people are going to remember Martin Kao
03:14PM 22 and they are going to say, you know what, the government might
03:14PM 23 come after me, it's not worth the risk.
03:14PM 24 But then there is the other component of this, how do
03:14PM 25 we make amends for the victims, and having you come out of
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 57 of 68 PageID.1477
57
03:14PM 1 prison earlier rather than later, and I know you are able to
03:14PM 2 work, whether it's going to be at the Cheesecake Factory or
03:14PM 3 someplace else, there is an ability to earn money that you can
03:14PM 4 do that may provide some recompense to the victims. So that's
03:14PM 5 really what I'm weighing on.
03:14PM 6 The government is saying low end of the guidelines,
03:14PM 7 I've told you that I think there is some basis to upwardly
03:14PM 8 depart to you having a significant amount. When I think about
03:14PM 9 the 21-year-old kid who gets the 60-month mandatory minimum for
03:14PM 10 being stupid, being poor, being traumatized, and then I hear
03:14PM 11 your story, I look at 12.8 million, it's really, really hard to
03:15PM 12 evaluate. But I need to concentrate on your 3553(a) factors,
03:15PM 13 your personal characteristics, the facts of the offense, the
03:15PM 14 harm that's done to our community by your actions. And that's
03:15PM 15 what I'm going to do.
03:15PM 16 But I appreciate you sharing your thoughts. I hope
03:15PM 17 that you will think about what I've said and think about what
03:15PM 18 you can do when you get out in terms of making amends.
03:15PM 19 So the Court is going to state the sentence and
03:15PM 20 reasons for the sentence and then I'll invite the attorneys for
03:15PM 21 any legal objections with regard to the sentence.
03:15PM 22 So the guideline range of imprisonment is 87 to
03:15PM 23 108 months for Counts 1 through 3 and Count 1 and Counts 4
03:15PM 24 through 8 as to each of them. There are separate counts that
03:16PM 25 could run concurrent or consecutive, which means it would have
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 58 of 68 PageID.1478
58
03:16PM 1 to be served one at a time.
03:16PM 2 So upon consideration of all the 3553(a) factors, you
03:16PM 3 are committed to the custody of the Bureau of Prisons for a
03:16PM 4 term of 87 months as to each -- let's see, let's make it
03:16PM 5 specific. As to Counts 1 through 3 under Criminal Number
03:16PM 6 21-61, and Count 1 under Criminal Number 23-03, and Counts 4
03:16PM 7 through 8 under Criminal Number 21-61, to run concurrently.
03:16PM 8 Supervised release of five years as to Counts 1
03:16PM 9 through 3 under Criminal Number 21-61, and Count 1 under
03:16PM 10 Criminal Number 23-03, and three years as to Counts 4 through 8
03:16PM 11 under Criminal Number 21-61. And that's to run concurrently.
03:17PM 12 No fine. And I'm making the specific finding that you
03:17PM 13 have financial obligations to the victims. And rather than
03:17PM 14 imposing a fine that would be paid only to the government after
03:17PM 15 the forfeiture any other financial holdings that you have, I
03:17PM 16 believe should be made available through court means to the
03:17PM 17 victims.
03:17PM 18 Special assessment of $900, $100 for each count for a
03:17PM 19 total of $100.
03:17PM 20 And then the conditions of your supervised release are
03:17PM 21 as follows. You were previously provided with the 13 standard
03:17PM 22 conditions of release.
03:17PM 23 Do we have a stipulation, Mr. Bakke and Ms. Yamaga?
03:17PM 24 MR. BAKKE: Yes, Your Honor.
03:17PM 25 MS. YAMAGA: Yes, Your Honor.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 59 of 68 PageID.1479
59
03:17PM 1 THE COURT: So the Court doesn't need to -- those are
03:17PM 2 imposed without the Court reading it.
03:17PM 3 You must abide by the mandatory and standard
03:17PM 4 conditions of supervision including the following:
03:18PM 5 You do not have a recent history of substance abuse
03:18PM 6 and the offense is not drug related, so I waive the mandatory
03:18PM 7 drug test condition.
03:18PM 8 You must cooperate in the collection of DNA as
03:18PM 9 directed by probation.
03:18PM 10 You must report to the probation office in the federal
03:18PM 11 judicial district where you authorized to reside within 72
03:18PM 12 hours of the time you are released, unless probation instructs
03:18PM 13 you to report to a different probation office or within a
03:18PM 14 different time frame.
03:18PM 15 You must abide by the follow special conditions:
03:18PM 16 You must not possess or use alcohol during the term of
03:18PM 17 your supervision. You must warn any other residents or guests
03:18PM 18 that you are prohibited from possessing any alcohol on your
03:18PM 19 residence and on your property. You must submit to alcohol
03:18PM 20 testing at the direction of probation.
03:18PM 21 You must participate in an outpatient mental health
03:18PM 22 treatment program and follow the rules and regulations of that
03:18PM 23 program. The probation officer, in consultation with the
03:18PM 24 treatment provider, will supervise your participation in the
03:18PM 25 program such as provider, location, modality, duration, and
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 60 of 68 PageID.1480
60
03:19PM 1 intensity.
03:19PM 2 Restitution of $12,841,490 is due, less any amounts
03:19PM 3 paid to the Small Business Administration, 721, 19th Street,
03:19PM 4 3rd Floor, Room 301, Denver, Colorado 80202. Any unpaid
03:19PM 5 balance is to be paid during the period of supervision through
03:19PM 6 a monthly installments of 10% of your gross monthly income
03:19PM 7 commencing 30 days after the start of supervision. The Court
03:19PM 8 may order this requirement to be changed from time to time, as
03:19PM 9 circumstances warrant, but no court order shall be required for
03:19PM 10 your voluntary agreement to pay more than the court-ordered
03:19PM 11 amount. Interest will begin accruing 30 days after the start
03:19PM 12 of supervision. Payments must be made by payroll deduction
03:19PM 13 when applicable. You must notify the probation officer of any
03:19PM 14 change in your financial circumstances that affect your ability
03:19PM 15 to pay. Your financial circumstances must be reviewed by the
03:20PM 16 probation officer on at least an annual basis.
03:20PM 17 You must provide the probation officer access to any
03:20PM 18 requested financial information and authorize the release of
03:20PM 19 any financial information. The probation office may share
03:20PM 20 financial information with the U.S. Attorney's office.
03:20PM 21 You must apply all monies received from income tax
03:20PM 22 refunds, lottery winnings, inheritance, judgments and any
03:20PM 23 anticipated or unexpected financial gains to the outstanding
03:20PM 24 court-ordered financial obligation, at the discretion and
03:20PM 25 direction of the Court.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 61 of 68 PageID.1481
61
03:20PM 1 You must not incur new credit charges, or open
03:20PM 2 additional lines of credit, or apply for any loans without
03:20PM 3 prior approval of probation. You must not borrow money or take
03:20PM 4 personal loans from any individual without prior approval of
03:20PM 5 the probation officer.
03:20PM 6 You must maintain a single personal bank account,
03:20PM 7 separate and apart from your spouse, any family members or
03:20PM 8 others, into which all income, financial proceeds, and gains
03:20PM 9 must be deposited and from which all expenses must be paid.
03:20PM 10 You must notify the probation officer of any
03:21PM 11 contemplated employment and must obtain approval from the
03:21PM 12 probation officer for all employment. Unless you are
03:21PM 13 self-employed, you may not be employed in any capacity wherein
03:21PM 14 you have custody, control or management of your employees'
03:21PM 15 funds.
03:21PM 16 You must complete 12,800 hours of community service.
03:21PM 17 The probation officer will supervise your completion of
03:21PM 18 community service hours, including approving the community
03:21PM 19 service site, the frequency of participation, etcetera. You
03:21PM 20 must provide written verification of completed hours to the
03:21PM 21 probation officer.
03:21PM 22 Finally, you must submit your person, property house,
03:21PM 23 residence, vehicle, papers or office to a search conducted by a
03:21PM 24 United States probation officer. Failure to submit to a search
03:21PM 25 may be grounds for revocation of release. You must warn any
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 62 of 68 PageID.1482
62
03:21PM 1 other occupants that the premises may be subject to searches
03:21PM 2 pursuant to this condition. The probation officer may conduct
03:21PM 3 the search under this condition only when reasonable suspicion
03:22PM 4 exists that you have violated a condition of supervision and
03:22PM 5 that the areas to be searched contains evidence of this
03:22PM 6 violation. Any search must be conducted at a reasonable time
03:22PM 7 and in a reasonable manner.
03:22PM 8 Before I impose the sentence as stated, any legal
03:22PM 9 objections from the government?
03:22PM 10 MR. NOLAN: Your Honor, I just wanted to ask the Court
03:22PM 11 in 21-61 to incorporate the forfeiture orders at the PPP case
03:22PM 12 at ECF numbers 116 and 123. And then you've said you are going
03:22PM 13 to give the defense some time I think in 23-3.
03:22PM 14 THE COURT: Yes. And so in 21-61 that will be
03:22PM 15 incorporated -- the order of forfeiture will be incorporated
03:22PM 16 into the judgment. We'll just have to wait for the amount.
03:22PM 17 MR. NOLAN: And no legal objections.
03:22PM 18 THE COURT: All right.
03:22PM 19 Mr. Bakke.
03:22PM 20 MR. BAKKE: No legal objections, Your Honor.
03:22PM 21 THE COURT: Ms. Yamaga.
03:22PM 22 MS. YAMAGA: So I do -- I'm asking that the order of
03:23PM 23 forfeiture in 23-03-LEK not be made final today. It's not
03:23PM 24 titled as a preliminary order of forfeiture, but I'm acting as
03:23PM 25 if it is a preliminary, and I'm asking that it not be made
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 63 of 68 PageID.1483
63
03:23PM 1 final so that I may make legal objections if needed.
03:23PM 2 THE COURT: Okay, very well. So I'm going to give you
03:23PM 3 a week.
03:23PM 4 And what date would that be, Ms. Cortez?
03:23PM 5 So if you could file any objections and then, Mr.
03:23PM 6 Nolan, if you want to file a response, let me know.
03:23PM 7 MR. NOLAN: Okay, thank you.
03:23PM 8 THE CLERK: Your Honor, February 20th.
03:23PM 9 THE COURT: Any objection? By February 20th, of
03:23PM 10 course, meet and confer. If you can work it out, that would be
03:23PM 11 great.
03:23PM 12 MS. YAMAGA: Thank you.
03:23PM 13 THE COURT: And the import of the 12,800 community
03:23PM 14 service hours, which is the most I've ever imposed, obviously
03:23PM 15 is to reflect the harm to the community of $12,800,000.
03:23PM 16 All right. So I impose the sentence as stated. I
03:24PM 17 have considered the advisory guideline computations and the
03:24PM 18 sentencing factors under 18 U.S.C., Section 3553(a). As I
03:24PM 19 explained more fully in my assessment of the specific
03:24PM 20 aggravating and mitigating factors in your case, Mr. Kao, I
03:24PM 21 have considered your history and characteristics as well as the
03:24PM 22 serious harm to our community caused by your offenses.
03:24PM 23 I have read the letters received on your behalf, I
03:24PM 24 believe the sentence provides just punishment and, equally
03:24PM 25 important, I hope it serves as an adequate deterrence to others
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 64 of 68 PageID.1484
64
03:24PM 1 who may consider this type of fraud.
03:24PM 2 I hope that this sentence will discourage others from
03:24PM 3 heading down such a life-altering path. I have considered the
03:24PM 4 sentencing guidelines and the policy statements and the law.
03:24PM 5 So I impose the sentence as stated.
03:24PM 6 You do have the right to appeal your sentence and the
03:25PM 7 manner in which it was determined. But the deadline to file
03:25PM 8 your notice of appeal is 14 days after your judgment is filed.
03:25PM 9 If you file after those 14 days, you may be found to be too
03:25PM 10 late and given up your right to appeal. Do you understand
03:25PM 11 this?
03:25PM 12 THE DEFENDANT: Yes, Your Honor.
03:25PM 13 THE COURT: All right. So do you want me to make any
03:25PM 14 recommendations to the Bureau of Prisons as to designation?
03:25PM 15 MR. BAKKE: Yes, Your Honor. To Sheridan. I think
03:25PM 16 it's FCI Sheridan.
03:25PM 17 THE COURT: Okay, FCI Sheridan. That's it? There is
03:25PM 18 no programming or anything. He doesn't have a drug problem,
03:25PM 19 he's already got a college degree.
03:25PM 20 MR. BAKKE: Well, Your Honor, he would like help with
03:25PM 21 the RDAP program for the alcohol.
03:25PM 22 THE COURT: I can make a recommendation for the
03:25PM 23 500-hour residential drug treatment program.
03:25PM 24 MR. BAKKE: Yes, if you could.
03:25PM 25 THE COURT: Okay. All right. And so any objection to
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 65 of 68 PageID.1485
65
03:25PM 1 self-surrender?
03:25PM 2 MR. NOLAN: No, Your Honor. It was recommended by the
03:25PM 3 probation office and the government will follow their
03:25PM 4 recommendation.
03:25PM 5 THE COURT: All right, very good. Let's have a date
03:26PM 6 for the self-surrender.
03:26PM 7 THE CLERK: Yes, Your Honor. Self-surrender to the
03:26PM 8 facility will be March 25, 2025.
03:26PM 9 THE COURT: All right, March 25, 2025, Mr. Bakke and
03:26PM 10 Ms. Yamaga.
03:26PM 11 Mr. Kao, do you intend to pay for your own way and
03:26PM 12 self-surrender, or do you want to turn yourself into the
03:26PM 13 marshals here?
03:26PM 14 MR. BAKKE: I'll discuss with that with him because we
03:26PM 15 still have that case in DC to deal with logistically.
03:26PM 16 THE COURT: I understand that, but he has to
03:26PM 17 self-surrender on March 25th.
03:26PM 18 MR. BAKKE: Correct. But I'm just saying between
03:26PM 19 turning himself -- I'm sorry, did you say turn himself into
03:26PM 20 FDC?
03:26PM 21 THE COURT: So Bureau of Prisons is going to designate
03:26PM 22 him to the facility that he is going to be serving the time at.
03:26PM 23 So he can either fly on his own expense or he can turn himself
03:26PM 24 in to the marshals and be held here and then the marshals will
03:26PM 25 transport him.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 66 of 68 PageID.1486
66
03:26PM 1 MR. BAKKE: Right, I understand that. Just so I
03:27PM 2 understand -- yes, we want to self-surrender.
03:27PM 3 THE COURT: Right. And so you are ordered to
03:27PM 4 self-surrender by March 25, noon of the time zone in which the
03:27PM 5 facility you've been designated to serve your term of
03:27PM 6 incarceration. If you fail to show up or you show up late, a
03:27PM 7 bench warrant can issue for your arrest and that would not be a
03:27PM 8 good thing.
03:27PM 9 So you have the date, you can work with pretrial
03:27PM 10 services on what you need to do in order to turn yourself in at
03:27PM 11 the Bureau of Prisons facility.
03:27PM 12 Anything else?
03:27PM 13 MR. NOLAN: No, Your Honor. Thank you.
03:27PM 14 THE COURT: All right. And then I guess I would want
03:27PM 15 briefing or something from you on what we should do with
03:27PM 16 Navatek's restitution request. So I would suggest that you
03:27PM 17 confer with counsel and maybe Navatek and then write me a
03:27PM 18 letter with a CC to everybody, this is the discussion, this is
03:27PM 19 what we believe we want from the Court.
03:27PM 20 MR. NOLAN: Could we have two weeks to do that?
03:28PM 21 THE COURT: Absolutely, yes. I don't think there is
03:28PM 22 any rush.
03:28PM 23 MR. NOLAN: Okay. Thank you.
03:28PM 24 THE COURT: Two weeks would be.
03:28PM 25 THE CLERK: February 27, 2025.
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 67 of 68 PageID.1487
67
03:28PM 1 THE COURT: All right, February 27th, see if you could
03:28PM 2 get me that.
03:28PM 3 MR. NOLAN: Thank you.
03:28PM 4 THE COURT: Very good. Nothing further, Ms. Yamaga.
03:28PM 5 MS. YAMAGA: No, Your Honor. Thank you.
03:28PM 6 THE COURT: Mr. Bakke.
03:28PM 7 MR. BAKKE: Nothing, Your Honor.
03:28PM 8 THE COURT: And, Ms. Nieling, anything else?
03:28PM 9 MS. NIELING: No, Your Honor.
03:28PM 10 THE COURT: All right. So good luck to you, Mr. Kao.
03:28PM 11 We stand in recess. Thank you everyone.
03:28PM 12 (Proceedings were concluded at 3:28 p.m.)
13
14
15
16
17
18
19
20
21
22
23
24
25
Case 1:21-cr-00061-LEK Document 165 Filed 03/19/25 Page 68 of 68 PageID.1488
68
1 COURT REPORTER'S CERTIFICATE
2 I, Gloria T. Bediamol, Official Court Reporter, United
3 States District Court, District of Hawaii, do hereby certify
4 that pursuant to 28 U.S.C. §753 the foregoing is a complete,
5 true, and correct transcript from the stenographically reported
6 proceedings held in the above-entitled matter and that the
7 transcript page format is in conformance with the regulations
8 of the Judicial Conference of the United States.
9
10 DATED at Honolulu, Hawaii, February 28, 2025.
11
12
13 /s/ Gloria T. Bediamol
14 GLORIA T. BEDIAMOL.
15 RMR, CRR, FCR
16
17
18
19
20
21
22
23
24
25
File and source
- File
- gov.uscourts.hid.154417.165.0.pdf
- Size
- 456,694 bytes
- SHA-256
- b7f917dbe826bd6e173ef9642a78ca3546c7519e6ee43ca625a6acb4505b4c4f
- Original
- www.justice.gov