Prosecutors charged a Hawaii defense contractor with attempting to defraud $12.8 million from the federal Paycheck Protection Program.
Martin Defence Group CEO Martin Kao, 47, was arrested Wednesday and charged with bank fraud and money laundering in connection with the alleged scheme.
According to U.S. Attorney for the District of Hawaii Kenji Price, Kao misrepresented facts about his company when applying for the loan. In one instance, Kao claimed that “Navatek had 490 employees was false” because, in reality, the company “only had 140 employees combined,” Price said during a press conference.
The case files said Kao successfully received a $10 million loan through the program. “After committing the fraud,” the report said, “KAO transferred approximately $2 million to himself.”
The Paycheck Protection Program was created in March as part of the CARES Act, the massive $2.2 trillion coronavirus relief package. The program was designed to provide loans to small businesses that were shuttered during the coronavirus lockdowns to help keep employees on the payroll.
The program got off to a shaky start and ran out of money less than a month after the relief package was signed into law. Another round of relief was passed that provided more money to the program, but there was controversy as reports began to surface that large companies such as Ruth’s Chris Steak House and the Los Angeles Lakers received millions of dollars through the program. In September, the Justice Department announced dozens of fraud charges involving the Paycheck Protection Program.
The program shut down on Aug. 15, and while Congress struggles to compromise on a new round of coronavirus relief funding before the election, small business owners, particularly those in the hospitality industry, say another round of loans is critical for them to survive.
