U.S. Attorney: Gloucester City business owner sentenced to 30 months in prison for payroll tax fraud and pandemic loan fraud

The owner of a business in Gloucester City was sentenced Tuesday to 30 months in prison for failing to pay over payroll taxes to the IRS, failing to file personal income tax returns, and fraudulently obtaining a Paycheck Protection Program loan, U.S. Attorney Philip R. Sellinger announced.

John Degan, 69, of Philadelphia, Pa. previously pleaded guilty before U.S. District Judge Robert Kugler to an information charging him with one count of failing to collect, account for, and pay over payroll taxes, one count of failure to file income tax returns with the IRS, and one count of bank fraud. Judge Kugler imposed the sentence Tuesday at the federal court in Camden.

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

Degan admitted that for tax years 2016 through 2020, he willfully failed to file payroll tax returns and failed to pay over $600,629 in withheld employment taxes on behalf of his employees, according to court documents. Degan 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 Forms W-2 or Form W-3 to the Social Security Administration.

Degan admitted that he received a yearly salary that ranged from $140,000 to $170,000 from Companion, willfully failed to file his federal income tax returns for tax years 2016 through 2020, and has not filed a tax return since 2003. He also failed to file the corporate tax returns for Companion, a business that generated more than $1.4 million in gross receipts yearly, according to court documents.

Degan also submitted a fraudulent application to a lender to obtain a PPP loan, according to court documents. In April 2020, Degan submitted a PPP application for Companion in which he falsely represented to the lender that Companion had employees and payroll expenses. In further support of his application, Degan submitted various IRS Forms to establish that he was paying compensation to his employees. Those forms were never actually submitted to the IRS. According to court documents, they were false forms that were only created and used for the purpose of securing the loan.

Based on Degan’s misrepresentations, the lender approved the PPP loan and disbursed $193,407 in federal COVID-19 emergency relief funds to him.

In addition to the prison term, Kugler sentenced Degan to three years of supervised release. Restitution will be determined at a later date, officials said.