Carson gym owner arrested on federal warrant for allegedly selling stolen military ammo

A Carson City businessman was arrested Wednesday in connection with a scheme to defraud the U.S. military and commit money laundering by allegedly selling stolen U.S. military ammunition, according to the Department of Homeland Security. 

Chad Eric O'Kelley, 40, formerly of El Paso, Texas, was arrested on a federal warrant at his Indian Hills home by agents with U.S. Immigration and Customs Enforcement's and Homeland Security. Agents assigned to the Southwest Border Financial Operations and Currency Unified Strike Force and the Defense Criminal Investigative Service's Office of the Inspector General in El Paso conducted the investigation and traveled to Nevada to execute the federal arrest warrant.

O'Kelley, co-owner and manager of Gold's Gym in Carson City, is charged by a federal grand jury indictment with conspiracy to defraud the United States and money laundering.

According to the indictment, in early 2007, O'Kelley was employed as the Iraq deputy in-country manager stationed at the Baghdad Operations Center by Security Operations Consulting, a private company holding U.S. Department of Defense contracts.  O'Kelley's job was to ensure that all bases of operation in Iraq under contract with SOC were supplied with ammunition and other logistical support and supplies.

The indictment alleges that beginning in January 2007 and continuing until July 2008, O'Kelley conspired with others to illegally obtain ammunition belonging to the United States, then resell the ammunition to private individuals and businesses in Iraq. At times, O'Kelley sold the ammunition back to the United States and coalition forces effectively requiring the government to pay for the ammunition twice.

The indictment also alleges that O'Kelley and others, using Federal Express and body couriers, shipped bulk currency derived from these transactions - more than $10,000 at one time - from Iraq to the United States to distribute among the conspirators. After being promoted in August 2007 to Iraq operations senior program manager at SOC headquarters in Minden, O'Kelley continued to receive proceeds from the scheme via Fed Ex. The indictment alleges that O'Kelley took the proceeds and subsequently made four structured cash deposits - each less than $10,000- into an El Paso bank account to avoid financial transaction reporting requirements.

O'Kelley had his initial appearance Thursday in Reno before U.S. Magistrate Judge Valerie P. Cooke who ordered him to report for further court hearings in the El Paso Division of the Western District of Texas.

If convicted of the conspiracy charge, O'Kelley faces up to five years in federal prison for the charge of conspiracy to defraud the U.S. government, and up to 20 years for the money laundering charge. The government is also seeking to forfeit any traceable proceeds from the scheme.