Home Builder Pleads Guilty to Tax Conspiracy

A former Massachusetts home builder pleaded guilty yesterday to conspiring to defraud the United States and creating false documents to help one of his clients obtain a mortgage.

According to court documents and statements made in court, Kent Pecoy owned and operated Kent Pecoy & Sons, Construction Inc., a West Springfield-based commercial and luxury home construction company.

From 2009 through 2016, Pecoy conspired with others to conceal income from the IRS by dealing in cash. Specifically, Pecoy received $1,116,900 in cash payments from Kevin Kennedy, who was sentenced to prison last month for tax crimes, for the purchase and construction of custom-built homes in East Longmeadow and on Cape Cod. Pecoy did not deposit most of the cash into the businesses’ bank accounts, but rather distributed the cash directly to vendors and subcontractors. For example, Pecoy used approximately $135,700 of that cash to pay subcontractors under the table for work performed at the Cape Cod home. Pecoy also created and maintained separate ledgers documenting Kennedy’s cash payments, created and maintained false contracts and cover sheets and created false entries in the company’s accounting system to conceal the cash payments.

For the payments Pecoy did deposit, he deposited the cash in amounts less than $10,000 to avoid the filing of currency transaction reports.

For the East Longmeadow home, in January 2010, Kennedy and Pecoy created two contracts, one with the agreed-upon purchase price and one with a deflated purchase price. The latter contract listed a purchase price that was $160,000 lower than the contract price, which was the amount Kennedy had paid to Pecoy in cash as a down payment for the home. Kennedy then submitted the deflated home purchase contract to the bank to induce it to provide him a mortgage for part of the East Longmeadow home.

In total, Pecoy caused a loss to the IRS of more than $250,000.

Pecoy also obstructed the IRS after it opened an investigation. The IRS served a grand jury subpoena on Pecoy, to which he responded. However, when IRS special agents executed a search warrant at Pecoy’s construction business, they found dozens of documents responsive to the subpoena that Pecoy had not turned over to the government even though he was legally required to have done so.

Pecoy is scheduled to be sentenced on Aug. 20. He faces a maximum penalty of five years in prison for conspiring to defraud the United States and 30 years in prison for making a false statement to a bank. He also faces a period of supervised release, restitution and monetary penalties. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and Acting U.S. Attorney Joshua S. Levy for the District of Massachusetts made the announcement.

IRS Criminal Investigation is investigating the case.

Assistant Chief Eric B. Powers of the Tax Division and Assistant U.S. Attorney Neil Desroches for the District of Massachusetts are prosecuting the case.