Texas couple swindled Army
Military defrauded out of up to $11M, investigation alleges
DALLAS — Federal agents have seized more than 20 vehicles and the money from 10 bank accounts belonging to married U.S. Army veterans in Texas, saying the pair used personal information stolen from soldiers to defraud the military out of as much as $11 million.
Army investigators obtained warrants last month to confiscate the funds and property and to collect evidence of the alleged fraud during their search of the home of the retired sergeants, according to recently unsealed federal court records.
In an affidavit seeking to search Kevin Pelayo and Cristine Fredericks’ home in Killeen, a city near Fort Hood, investigators described how the couple allegedly used a transportation reimbursement program for federal employees to swindle the Army out of $2.3 million to $11.3 million.
Investigators told the court there was probable cause to believe the couple committed crimes including wire fraud, identity theft and money laundering. But there is no record that either of them has been criminally charged.
Pelayo declined to comment during a phone call Wednesday and did not respond to a subsequent message asking for his attorneys’ names.
After arriving at Fort Hood in 2010, Pelayo set up a van company to give employees rides to and from the base under a federal program that subsidizes government workers using mass transit in an effort to reduce traffic and pollution. He told the Fort Hood
Sentinel that he was first drawn to the initiative by the chance to save on gas.
Military investigators allege that it turned into a highly lucrative fraud.
As a platoon sergeant, Pelayo had access to the personnel records of soldiers under his command, and Fredericks had worked for Army human resources, according to the affidavit. Investigators said Pelayo used this access to sign soldiers up for the mass transportation subsidy without their knowledge and then routed the payments to his business’ bank accounts.
This scheme allegedly continued for years, even while Pelayo was stationed in South Korea before his retirement last August. In some months, the affidavit states, the subsidies gave the couple an income of more than $200,000.