South Jersey Business Owner Charged with PPP, Tax Fraud

A Gloucester City business owner has admitted to failing to pay payroll taxes to the Internal Revenue Service, failing to file personal income tax returns, and fraudulently obtaining a Paycheck Protection Program loan, federal prosecutors in New Jersey said Thursday.

John Degan, 69, of Philadelphia, pleaded guilty in federal court in Camden before U.S. District Judge Robert B. Kugler to one count of failing to collect, account for, and pay payroll taxes, one count of failure to file income tax returns with the IRS, and one count of bank fraud. He was charged via criminal information, which usually means a defendant is cooperating with prosecutors.

Degan was the owner and operator of Companion Services Group Inc., a building maintenance and restoration service company in Gloucester City. Companion offered architectural maintenance and restoration services, which includes restroom maintenance, glass restoration, and graffiti removal.

Prosecutors said Degan admitted that for tax years 2016 through 2020, he willfully failed to file payroll tax returns and failed to pay $600,629 in withheld employment taxes on behalf of his employees. Degan allegedly attempted to conceal from the IRS over $4.4 million in wages that he paid to himself and his employees by not filing and submitting W-2 or W-3 forms to the Social Security Administration.

Degan admitted that he received a yearly salary that ranged from $140,000 to $170,000 from Companion. He has not filed a tax return since 2003, prosecutors said. In addition to his federal income tax returns, he also failed to file the corporate tax returns for Companion, a business that prosecutors said generated more than $1.4 million in gross receipts yearly. Degan also allegedly submitted a fraudulent application to a lender to obtain a PPP loan.

Prosecutors said Degan submitted a PPP application for Companion in April 2020 in which he falsely represented to the lender that the company had employees and payroll expenses. In further support of his application, prosecutors said Degan submitted various IRS forms to establish that he was paying compensation to his employees. Prosecutors said those forms were never actually submitted to the IRS. Instead, they were allegedly false forms that were only created and used for the purpose of securing the loan.

Based on Degan’s misrepresentations, prosecutors said a lender approved the PPP loan and disbursed $193,407 in federal Covid-19 emergency relief funds.

As part of the guilty plea, Degan has agreed to make restitution to the IRS in the full amount of taxes owed and to the lender for the full amount of the PPP loan, documents showed.

The charges collectively carry a maximum 36 year prison sentence and upwards of $1.35 million in fines, the vast majority of which comes from the bank fraud count, which carries a maximum fine of $1 million. Degan’s sentencing is scheduled for February.

SOURCE: Jeff Blumenthal, Philadelphia Business Journal
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