Kent Pecoy, a former home builder from Massachusetts, pleaded guilty yesterday to charges of conspiring to defraud the United States and creating false documents to facilitate a mortgage for one of his clients. The case highlights a series of fraudulent activities spanning several years, during which Pecoy concealed substantial income and manipulated financial records to evade taxes.
The Fraudulent Scheme of Kent Pecoy
Kent Pecoy owned and operated Kent Pecoy & Sons, Construction Inc., a commercial and luxury home construction company based in West Springfield, Massachusetts. From 2009 to 2016, Pecoy engaged in a conspiracy with others to hide income from the IRS by dealing primarily in cash transactions. This scheme involved significant payments from a client, Kevin Kennedy, who has already been sentenced to prison for related tax crimes.
According to court documents, Pecoy received $1,116,900 in cash from Kennedy for the construction and purchase of custom-built homes in East Longmeadow and Cape Cod. Instead of depositing the majority of these cash payments into his business’s bank accounts, Pecoy distributed the cash directly to vendors and subcontractors. For instance, Pecoy paid approximately $135,700 in cash to subcontractors for work on the Cape Cod home. To conceal these transactions, Pecoy maintained separate ledgers documenting Kennedy’s cash payments, created false contracts and cover sheets, and made misleading entries in the company’s accounting system.
Structuring Cash Deposits
To further evade detection, Pecoy structured the cash deposits he did make in amounts less than $10,000 to avoid triggering currency transaction reports, which are required for larger deposits. This practice of structuring is a common method used to avoid the financial scrutiny associated with large cash transactions.
Fraudulent Mortgage Application
In addition to tax evasion, Pecoy and Kennedy also collaborated to create fraudulent documents to secure a mortgage. In January 2010, they drafted two contracts for the purchase of a home in East Longmeadow. One contract reflected the actual agreed-upon purchase price, while the other listed a deflated price that was $160,000 lower. This lower price accounted for the cash Kennedy had paid as a down payment. Kennedy then used the deflated contract to deceive the bank into providing a mortgage based on the false, lower purchase price.
Obstruction of IRS Investigation
Pecoy’s fraudulent activities came under investigation by the IRS. When the IRS served Kent Pecoy with a grand jury subpoena, he failed to produce all requested documents. During a search of his construction business, IRS agents discovered dozens of subpoena-responsive documents that Pecoy had withheld, thereby obstructing the investigation.
Legal Proceedings and Sentencing
Pecoy faces harsh punishments as a result of his guilty plea. For conspiring to defraud the United States, he might spend up to five years in jail; for lying to a bank, he could spend up to thirty years. Kent Pecoy can also be subject to financial penalties, restitution, and a period of supervised release. A federal district court judge will consider the U.S. Sentencing Guidelines and other relevant statutory factors before determining the exact sentence.
Acting U.S. Attorney Joshua S. Levy for the District of Massachusetts and Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division announced Pecoy’s guilty plea. Assistant Chief Eric B. Powers of the Tax Division, Assistant Chief of the IRS Criminal Investigation Division, and Assistant U.S. Attorney Neil Desroches for the District of Massachusetts are leading the prosecution.
Kent Pecoy’s sentencing is scheduled for August 20, and it marks a significant conclusion to a long-running scheme that defrauded the government and disrupted the integrity of financial and tax systems. This case underscores the severe consequences of engaging in fraudulent activities and the relentless efforts of the IRS and the Justice Department to uphold the law and ensure that justice is served.
Broader Implications
The Kent Pecoy case serves as a cautionary tale for business owners and individuals who might consider engaging in similar fraudulent schemes. It illustrates the rigorous scrutiny that tax authorities and law enforcement agencies apply to financial transactions and the severe penalties that can result from attempts to evade taxes or deceive financial institutions. Moreover, the case highlights the importance of maintaining transparent and honest financial practices to avoid legal repercussions and contribute to the integrity of the economic system.
