Jailed Hawaii defense contractor claims he never got a fair hearing

Hawaii justices are weighing how courts should handle overlapping civil and criminal cases.

by Jeremy Yurow, Court House News, May 12, 2026

HONOLULU (CN) — Martin Kao could not speak for himself.

That, in essence, was the argument his attorney made Tuesday before the Hawaii Supreme Court, as justices considered whether a civil arbitration proceeding should have been put on hold years ago while Kao faced federal criminal charges that would eventually send him to prison.

Kao, the former president and chief executive of a Honolulu defense contractor once known as Navatek and now called PacMar Technologies, is serving an 87-month federal sentence for Covid-relief wire fraud, money laundering and bank fraud. He received an additional 33 months in October 2025 for orchestrating more than $200,000 in illegal campaign contributions to U.S. Senator Susan Collins’ 2020 reelection campaign.

While those criminal cases were still playing out in federal court, investor Navatek Capital pursued separate arbitration claims against Kao, accusing him of breach of fiduciary duty, fraud and gross negligence.

Kao asked the arbitrator to pause the proceedings until his criminal case was resolved, arguing he could not fully defend himself without risking his constitutional right to remain silent. The arbitrator denied the request, proceeded with the hearing, and ultimately awarded compensatory and punitive damages against Kao.

Kao has been fighting that award ever since. Both the Oahu First Circuit Court and the Intermediate Court of Appeals sided against him.

Now the Hawaii Supreme Court is weighing in and addressing an issue no Hawaii appellate court has settled before: What standard should apply when someone faces civil and criminal proceedings at the same time, and when does that situation justify a pause?

“It really comes down to what the invocation of the Fifth Amendment prevented,” Kao’s attorney, Keith Kiuchi, told the court. “In this case, it prevented him from testifying. It prevented him from getting a fundamentally fair hearing, because he was the key witness in his own defense.”

Kiuchi argued that the arbitrator applied the wrong legal framework in denying the stay. Lower courts relied on a test drawn from the Ninth Circuit’s decision in Keating v. Office of Thrift Supervision, which weighs factors including the plaintiff’s interest in moving forward, the burden on the defendant and the public interest.

Kiuchi said that test is tilted against defendants, with three of its five factors favoring the plaintiff’s side, and that it does not account for the stronger protections Hawaii’s own constitution provides.

Unlike federal law, Hawaii prohibits courts from drawing any negative inference when someone invokes their right against self-incrimination. That protection is written into the Hawaii Rules of Evidence.

“I would not advocate adopting Keating,” Kiuchi said. “I think this court was correct that it has never actually adopted Keating, and I think there are reasons why it should not.”

Attorneys for Navatek Capital had a different view. David Louie, arguing for the investor group, said the company was fighting for its life when the arbitration took place in September and October 2021.

Louie said the company had already lost a quarter of its employees. Its federal facility clearance, required to work on sensitive defense contracts, was under review. And as long as Kao remained a 99% owner, Louie said the company would have had to disclose that fact on every new contract application submitted to the government.

“Justice delayed would have been justice denied for Navatek,” Louie said. “Quite frankly, they really were going to die if they couldn’t have gotten some relief.”

Louie argued the arbitrator properly weighed all of those factors and reached a reasonable decision, and that the court should uphold it regardless of what legal standard it ultimately adopts.

“I believe, under these circumstances, unless this court were to disregard the existential threat or the discretion of the arbitrator, we win,” he said.

The justices pushed back on both sides.

Acting Chief Justice Sabrina McKenna noted Kao’s previous attorney had floated the idea of splitting the proceedings into separate phases, a process known as bifurcation, which might have allowed some issues to move forward without requiring Kao to testify. That idea was never pursued, and Kiuchi opposed it when it came up during Tuesday’s hearing.

Kiuchi said bifurcation would not have solved the problem, because Kao still could not have testified on any part of the case while his federal criminal exposure remained unresolved.

Justice Lisa Ginoza asked whether the claims at the center of the case, specifically those dealing with removing Kao from his ownership role in the company, could have been separated from the damages claims so Kao might have had some opportunity to participate.

Louie said the issues were too tangled to pull apart, because proving the severity of Kao’s conduct was necessary to justify his removal and to support the damages claims.

“It is not an easy thing for a 1% owner to disassociate a 99% owner,” Louie said.

Justice Todd Eddins questioned whether it mattered that Kao’s request to pause the arbitration was filed before he had been formally indicted, though he had already been arrested. He suggested the court might want to draw a line between someone who is under investigation and someone who has actually been charged.

Throughout the hearing, the justices returned to the question of whether Hawaii’s Constitution demands more than the federal standard. McKenna noted Hawaii law is clear that no adverse inference can be drawn from silence, a protection that goes further than what the Keating framework contemplates.

Louie pointed out the arbitrator had explicitly stated, on multiple occasions, that he was drawing no such inference against Kao.

The justices took the matter under advisement. Their ruling could set the standard for how Hawaii courts and arbitrators handle future cases where civil and criminal proceedings overlap.