Guilty Plea In Tax, COVID Loan Fraud Case For South Jersey Business Owner

GLOUCESTER CITY, NJ — A Camden County business owner admitted Thursday to fraudulently obtaining an emergency COVID-19 relief loan and failing to file personal income tax returns, as well as failing to shell out payroll taxes to the IRS, federal officials said.

John Degan, 69, of Philadelphia, Pa., pleaded guilty in Camden federal court 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, U.S. Attorney Philip R. Sellinger said.

Degan, who served as the owner of Gloucester City-based building maintenance company Companion Services Group Inc., admitted that he failed to file payroll tax returns from 2016 to 2020, as well as failed to pay over $600,629 in withheld employment taxes.

The Philadelphia man also tried to hide over $4.4 million in wages that he paid to himself and his employees from the IRS by not filing and submitting Forms W-2 or Form W-3 to the Social Security Administration (SSA), Sellinger said, adding that Degan also submitted a fraudulent application to a lender to obtain a CARES Act Paycheck Protection Program (PPP) loan. $193,407 in federal COVID-19 emergency relief funds was therefore dispersed to Degan.

Degan also admitted that he failed to file his federal income tax returns for 2016 through 2020 - when he made a yearly salary between $140,000 to $170,000 - and has not filed a tax return since 2003.

The charge of failing to account for payroll taxes carries a maximum penalty of five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense, whichever is greatest. The charge of failing to file income tax returns with the IRS carries a maximum penalty of one year in prison and a fine of $100,000, or twice the gross gain or loss from the offense, whichever is greatest.

The bank fraud count carries a maximum penalty of 30 years in prison and a fine of $1 million.

As part of his guilty plea, Degan agreed to pay the IRS in the full amount of the taxes that he owes, and he agreed to pay the lender in the full amount of the PPP loan.

Sentencing is scheduled for Feb. 14, 2023.