Federal agents are investigating a US military couple in Texas for allegedly defrauding the military of as much as $ 11 million, according to an unsealed affidavit last week.
The affidavit, filed in court before a raid on the home of Kevin Pelayo and Cristine Fredericks near Fort Hood, accuses the couple of using a transportation reimbursement program for federal employees to defraud the army of $ 2.3 million to $ 11.3 million. The raid by federal agents brought in more than 20 vehicles and money from 10 bank accounts belonging to US Army veterans married in Texas, according to the affidavit.
Army investigators obtained warrants last month to confiscate funds and property and collect evidence of the alleged fraud when they searched the homes of retired sergeants, Federal Court files recently revealed.
Investigators told the court that there were good reasons to believe that the couple had committed crimes, including wire fraud, identity theft and money laundering. There is no evidence that either has been charged with a criminal offense.
During the couple’s home search, investigators seized documents, computer hard drives, cell phones and more than 100 designer items, according to a list of what was collected. It also lists 23 cars, trucks, SUVs and other vehicles, and a box containing more than 60 “various state” license plates.
After arriving at Fort Hood in 2010, Pelayo established a pickup truck business to allow employees to get to and from the base as part of a federal program that subsidizes government employees using public transportation to reduce traffic and pollution. Military investigators say it has turned into very lucrative fraud.
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As a section sergeant, Pelayo had access to the personnel files of the soldiers under his command, and Fredericks had worked for army human resources, according to the affidavit. Investigators said Pelayo used this access to register soldiers for the mass transportation subsidy without their knowledge, and then routed payments to his company’s bank accounts.
The affidavit alleges that from around 2014, Pelayo registered soldiers across the country for grants of $ 255 or $ 265 per month. Several enlisted soldiers said they had never gotten into the van, and investigators found that many were not even at Fort Hood.
This program would have continued for years, even if Pelayo was stationed in South Korea before his retirement last August. Pelayo and Fredericks have transferred the money to a range of bank accounts, the investigators wrote in the court records, claiming that they own more than 20 properties in Texas, New York, Washington and Hawaii.
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It was not immediately clear if the couple had a lawyer who could speak to their behavior.
The Associated Press contributed to this report.