Two U.S. Army veterans in Texas are accused of using personal information stolen from soldiers to defraud the military out of nearly $11 million.
Kevin Pelayo and Cristine Fredericks allegedly defrauded the Army by exploiting a transportation reimbursement program meant for federal employees, The Associated Press reported last week. Federal agents raided the pair’s home in Killeen, Texas, and confiscated over 20 vehicles and money from 10 bank accounts after Army investigators obtained warrants in June.
During the search, investigators confiscated documents, computer hard drives, cellphones, and designer items like purses, jewelry, and clothing, The Associated Press reported. Agents also collected evidence of the alleged fraud, federal court records revealed.
“There is probable cause to believe that evidence of wire fraud, theft of government funds, identity theft, and money laundering, as well as, attempts and/or conspiracies to commit these offenses, in violation of Title 18, United States Code, Sections 641, 1343, 1028A, 1956h, and 371, respectively, will be found in the target locations,” the court document stated.
“According to financial records, it is determined that the U.S. Army may be at a loss of approximately $2.3 million and up to $11.3 million or more,” the affidavit said.
According to The Associated Press, Pelayo arrived at Fort Hood in 2010, where he set up a van company that gave employees rides to and from the base. His business operated under a federal program that subsidizes government workers using mass transit “in an effort to reduce traffic and pollution.”
Both Pelayo and Fredericks had access to personnel records of soldiers, according to the affidavit. Pelayo allegedly used his access to sign soldiers up for the transportation subsidy without their knowledge.
According to the affidavit, Pelayo started the scam around 2014, registering soldiers around the country for subsidies of $255 or $265 a month. Multiple enrolled soldiers said they had never used the van pool and many were not even at Fort Hood. The subsidies allegedly gave the couple an income of over $200,000 in some months.
Investigators claim the business turned into a “highly lucrative fraud.”
Pelayo declined to comment during a phone call with The Associated Press.
“I think it’s still an ongoing investigation,” he told The Associated Press. “I can’t really say anything about it. I have to talk to my lawyers.”
The Army Criminal Investigations Division and the U.S. Attorney’s Office of the Western District of Texas spokesmen said they do not confirm nor comment on investigations unless charges are brought publicly.