Texas couple defrauded Army out of millions

| July 20, 2020

 

 

DALLAS (AP) — 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 about 150 miles (240 kilometres) southwest of Dallas, 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 brief phone call Wednesday and did not respond to a subsequent message asking for his attorneys’ names.

“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.”

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.

The Sentinel, an official publication overseen by Army commanders, touted the van pool’s growth in stories and quoted staff who said it saved them time and money. In 2013, one rider said, “It works perfectly, like a well-greased wheel.”

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.

Starting around 2014, according to the affidavit, Pelayo registered soldiers around the country for subsidies of $255 or $265 a month. Several enrolled soldiers said they had never ridden in the van pool and investigators found that many were not even at Fort Hood.

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.

Pelayo and Fredericks moved the money into an array of bank accounts, investigators wrote in the court filing, saying they own more than 20 properties in Texas, New York, Washington and Hawaii. Pelayo also allegedly transferred money to an unidentified person in the Philippines.

Pelayo spent more than two decades with the Army and Army Reserve, including deployments to Iraq, Afghanistan and Bosnia-Herzegovina, according to an Army spokesperson. Fredericks served for about a decade and also deployed to Iraq and Afghanistan.

A spokesman for the Army Criminal Investigations Division and one for the U.S. Attorney’s Office of the Western District of Texas said they do not confirm nor comment on investigations unless charges are brought publicly. A Fort Hood spokesman declined to answer questions, saying he’d defer to those agencies’ statements.

During the search of the couple’s Killeen home, investigators seized documents, computer hard drives, cellphones and more than 100 designer items such as purses, jewelry and clothing, mostly from Chanel, according to a handwritten list of what was collected. It also lists 23 cars, trucks, SUVs and other vehicles, and a box containing 64 license plates from “various states.” The affidavit, which was filed in court before the raid and unsealed last week, suggests that investigators felt that they had to move quickly.

On March 24, investigators say they watched the couple load vehicles onto trailers and a flatbed truck. They were driven to the parking lot of used car company in Austin. ___

Associated Press writer James LaPorta in Delray Beach, Florida, and researcher Randy Herschaft in New York contributed to this report.

Curious to see how much of that money gets recovered.

Source: Investigators: Texas couple defrauded Army out of millions

Category: Crime

Comments (25)

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  1. ninja says:

    KoB and other members of the US Army Field Artillery Community are going to get ticked off after reading this January 2018 article:

    “Osan Air Base Celebrates The Patron Saint of Artillery”

    https://www.army.mil/article/199729/osan_air_base_celebrates_the_patron_saint_of_artillery

    “Sgt. 1st Class Kevin R. Pelayo, operations NCOIC, all from the 3rd BCD, were presented with the Honorable Order of St. Barbara.”

    For those unfamiliar with the Honorable Order of St Barbara:

    https://en.wikipedia.org/wiki/Order_of_Saint_Barbara

    “The Honorable Order of Saint Barbara is awarded to those individuals who have demonstrated the highest standards of integrity and moral character, displayed an outstanding degree of professional competence, served the Artillery with selflessness; and contributed to the promotion of the Artillery branch”.

    Can we say “BRANDED?”

    “They say he ran away…”

    • Ret_25X says:

      he must have been a stellar “team” player who made all around him shine while stealing their identities for his fraud.

      What a guy!

      • ninja says:

        Ret_25X nailed it!!

        😂🤣😅😆😉😎👏👏👍👍👌👌

        • ninja says:

          From the article Dave posted:

          “This scheme allegedly continued for years, even while Pelayo was stationed in South Korea before his retirement last August.”

          Yep..it is the same guy.

          As shared, KoB and others are going to get P.O..

          😉😎

          • 5th/77th FA says:

            Yep!!! GRRRRRRRRR! FIRST read about this last week in a news feed, got PO’d then because he was a thieving POS. Think there is a similar investigation going on locally that was instigated by a Compatriot of mine. We may have a pattern of abuse of this program in several places. My man had availed himself of the service for awhile until he was promoted and went back to driving his POV. He dropped a dime on ’em when he received a survey re the service.

            May the tortures of St. Barbara be visited upon this POS AND his wife as they enjoy the ministrations available from their soon to be “mess mates” at the Iron Bar Barracks. Embrace the suck…

  2. Ret_25X says:

    In truth, these types of subsidies are nothing but fraud to begin with.

    So how surprised should I be that someone saw that opportunity and jumped on it?

    • pookysgirl (WC wife) says:

      I’m not surprised. These “green initiatives” seem to attract companies that need the subsidies to keep their business afloat. Instead of focusing on their customers, they focus on keeping that sweet government cash coming…. by whatever means they can get away with.

    • Slow Joe says:

      Absolutely.

      Every green initiative is a distortion of the market that will be exploited by unsavory characters. Every time.

      • rgr769 says:

        Yup, any federal or state program to give away taxpayer dollars ends up, to some degree, exploited by the fraudsters. Who doesn’t love free money that was earned by some other poor bastard, but subsequently confiscated in taxes.

        I once had a major insurance company claims executive tell me the company believed that about 25% if every dollar expended on claims was paid out on fraudulent claims. One of my cases I took to trial was a staged accident set up by two Palestinian immigrants and their wives. I defensed the case, but I couldn’t prove the fraud (the stagecraft) to the jury because one of the fraudsters was my client, the defendant. But the false testimony of the plaintiff and his wife were sufficient to prove they were both lying about the “accident” and their fake injuries.

  3. IS1 (SW) says:

    Cocksuckers.

  4. ninja says:

    Dave wrote: “Curious to see how much of that money gets recovered.”

    You can’t get blood outta Two Turnips…

    😉😎

    • Hondo says:

      Federal RICO statutes allow the seizure of property obtained from “ill gotten gains”, under perhaps overly broad circumstances. However, IMO it seems appropriate here – and the “nice couple” apparently has amassed some substantial real-estate and business property holdings.

      Retirement pay can also be garnished post-release.

      • Green Thumb says:

        It seems like they were doing this a long time.

        I wonder if they got caught because they got greedy.

        Unsure of the specifics of their crimes, but it seemed to work for quite a while. It would also seem that many of the items listed above (cash, properties, cars, etc.) would have been enough.

  5. JTB says:

    I think the money is hidden in his Five Head…

  6. E4 Mafia '83-'87 says:

    This is what we in the accounting/finance/audit business call ‘Lack of Internal Controls’. He probably started the van service as way to make extra cash but realized the cracks in system. He exploited for so much for so long that his greed finally brought him down. Its like the story of the guy that stole $5 a week from petty cash. He kept upping the amount until finally someone else noticed. Greed is ugly, and its a deadly sin.

    • 11B-Mailclerk says:

      Genius programs the Bank’s computers to make an “always round down” error and put the resultant half-cents in his father’s bank account.

      Didn’t want to share, so didn’t tell father. Planned to loot it later with a transfer.

      Father decides he needs some walking around money, and makes a small withdrawn. Receipt has a million plus more than he expected. He reports it.

      Son gets busted.

    • Ex-PH2 says:

      If you really want to scam the system, don’t buy all kinds of glam stuff like extra cars and a big house.
      Wait until you’re long gone and out of sight before you do such things.
      That was Bernie Madoff’s biggest mistake: he spent all his account holders’ cash on himself and his collaborator kids, but when it came time to pay shareholders their next “amount due”, he was out of cash.
      His “customers” are still getting paid off.

  7. Skippy says:

    Damn
    What a pile of crap
    Nothing like ones leaders
    Screwing one from behind

  8. Green Thumb says:

    I wonder if these two clowns ever taught any courses at All-Points Logistics?

    The talent and technique that they would bring to the False Commander “Phony” Phil Monkress and his business philosophies are staggering.

  9. NHSparky says:

    $2.3 to $11.3 million? That’s a pretty healthy spread.

    Here’s hoping the have to pay back the higher figure, just to be sure. It wouldn’t exactly be a deterrent of they stole $11m and only paid back barely 20 percent of that.

  10. RGR 4-78 says:

    ” Pelayo also allegedly transferred money to an unidentified person in the Philippines.”

    “On March 24, investigators say they watched the couple load vehicles onto trailers and a flatbed truck. They were driven to the parking lot of used car company in Austin”

    Sounds like they were liquidating assets and fixing to abscond to the P.I.

  11. JustALurkinAround says:

    All I have to say to Kevin Pelayo and Cristine Fredericks is….

    ….thank you for your service.

  12. LG says:

    This is the wrong picture for this story!!! The person pictured was a well known san António singer who died of COVID last week