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Thursday, June 13, 2024 | Back issues
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Veteran sentenced to three years in federal prison for $11 million Army benefits scam

Federal officials seized over $600,000 in 14 of the defendants’ bank accounts in 2021, as well as 43 cars, 120 designer bags, jewelry and 12 real estate properties in central Texas.

WACO, Texas (CN) — A former soldier from Texas was sentenced to three years in federal prison Monday for using the personal information of over 1,000 active duty soldiers to steal up to $11 million in U.S. Army van pool benefits that was spent on over 120 designer bags, jewelry, a fleet of cars and real estate.

Kevin Romulus Pelayo, 45, stared straight ahead as he was sentenced by U.S. District Judge David Counts in Waco federal court. Dressed in a dark gray suit and black glasses, Pelayo’s voice cracked as he apologized for his crimes.

“I want to express my deepest sincere apologies and shame,” he said. “I let my greed overtake my integrity.”

His wife, Christine Furio Fredericks, 40, was sentenced to five years of probation for her role in the scam. She is also a veteran of the Army.

“I am sorry and I am ashamed,” she told Counts. “I ask for your mercy in sentencing me today.”

The judge also ordered each defendant to pay over $6.1 million in restitution.

Pelayo and Fredericks pleaded guilty in June 2021 to two counts of engaging in monetary transactions with criminally derived property, while Pelayo also pleaded guilty to one count of conspiracy to commit wire fraud. Fredericks faced up to 10 years in federal prison, while Pelayo faced up to 20 years.

The couple admitted to providing false documentation for six years regarding a ride-share program at nearby Fort Cavazos in Killeen called Soldiers Vanpools LLC. Prosecutors say Pelayo had access to soldier personnel records under his command as a platoon sergeant, while his wife worked for Army human resources.

The Department of the Army began paying the benefits in 2001 to soldiers and civilian employees to encourage the use of van pools and mass transit to get to work. Pelayo told the Fort Cavazos Sentinel in 2012 that he was drawn to the program to save money on gas, that he helped establish the program at the base the year prior.

Pelayo began registering soldiers for subsidies of over $250 per month without their knowledge beginning in 2014 and collected as much as $200,000 in fraudulent benefits per month, according to a sworn affidavit.

Prosecutors say Pelayo illegally paid co-conspirators for soldier names at least six times in 2019. He paid $2,500 from his USAA account for 200 soldier names on March 1, 2019, while paying $6,000 from his USAA account for 200 more names on November 1, 2019, according to the complaint

Federal officials seized over $600,000 in 14 of the defendants’ bank accounts in 2021, as well as 43 cars, 120 designer bags and jewelry and 12 real estate properties in Killeen, Harker Heights, Copperas Cove and Kempner.

Pelayo served for over two decades, including deployments to Iraq, Afghanistan and Bosnia-Herzegovina, according to the Army. Fredericks served for a decade and deployed to Iraq and Afghanistan.

Pelayo’s attorney, Neal Davis of Houston, said his client exercised “really bad judgement” in running the scam “in an otherwise good life.” He expressed faith that all restitution in the case would be paid, citing his client’s cooperation with authorities. He urged for mercy, citing Pelayo’s post-traumatic stress disorder from his time in the Army.

Fredericks’ attorney, Dan Cogdell of Houston, told the judge his client served three tours of duty and that the couple is responsible for five children.

Davis said the children range in age from 8 to 16-years-old and are all straight-A students. No friends or family of the defendants appeared to be present in the gallery during sentencing.

Counts allowed Pelayo to surrender himself to the Bureau of Prisons within 60 days.

Follow @davejourno
Categories / Criminal, Government, Law

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