All About the Charity Fraud Pulled off by a Disgraced Hawaiian Defense Contractor

Defense is considered a crucial sector for any country and the safety of its citizens, which is all the more reason to protect it from scams. Following a recent fraudulent scheme that hit the defense industry, Martin Kao, a disgraced contractor, who was arrested in a $12.8 million fraud case in 2020, faces yet another lawsuit. The new case alleges that Kao and several of his family members, of embezzlement and misappropriation of charitable dollars, some of which was donated by the company, as per Entrepreneur.

Defendants of the case

The Marty & Mickey Kao Foundation, which Kao and his wife Tiffany Lam launched in 2019 along with Kao’s parents George and Rachel Kao, is at the center of the lawsuit. Kao claimed that the charity was launched to support low-income students.

As per the lawsuit and other court filings, the foundation bought a $2.9 million luxury condo in San Francisco shortly after it was created as a tax-exempt charity. The condo was sold for $3.1 million two years later and the proceeds were transferred to Kao’s parents’ account. The suit alleges that this account was used as a piggy bank for Kao’s non-charitable and fraudulent activities.

It is also alleged that a number of inappropriate uses of the foundation’s funds including the acquisition of Kao’s stake in two family-owned properties for $641,000.

Importance of the timing of the purchases

The purchases were made at a time when Kao was already facing criminal charges for pandemic relief fraud and illegal campaign donations to US Sen. Susan Collins. Kao later pleaded guilty in both cases and is currently awaiting sentencing.

The transactions also came after PacMar Technologies and its founder, Steven Loui, effectively stripped Kao of his ownership interest in the company by winning an arbitration case. As a result, Kao was ordered to pay $6 million in damages, a ruling which Kao has appealed, as per the report.

What is PacMar Technologies seeking?

Through the new lawsuit, the company is seeking to recoup $107,000 that Kao allegedly stole to help pay for foundation expenses. Another $130,000 is sought by the company which it had donated to the charity when it was launched in 2019. PacMar Technologies has also requested the court to freeze the remaining funds in the account of Kao’s parents to prevent further alleged misappropriation of the money. The Hawaii Attorney General’s Office has also been requested to investigate the foundation to find out if its assets can be recovered.

Kao’s initial arrest

Kao, who was working as a high-profile Hawaii-based defense contractor, was arrested on charges of swindling $12.8 million in funds in 2020. The funds were collected by his charity which intended to prop up small businesses during COVID-19. Kao was also a generous political donor, at the time.

In 2020, Kao was initially charged with bank fraud and money laundering. He was further accused of siphoning off $2 million from a fraudulent loan into his own bank account. Further, the Department of Justice also alleged that Kao falsified loan applications so that he could receive more money than he would get under the Paycheck Protection Program (PPP).