Breon Peace, United States Attorney for the Eastern District of New York, James E. Dennehy, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Patrick J. Freaney, Special Agent in Charge, U.S. Secret Service, New York Office, announced the guilty plea.

“Rather than take lawful steps to wind down his failing businesses, John Mensch resorted to criminality, operating a scheme to defraud two banks into advancing him millions of dollars that neither Mensch nor his company ever had, or had any realistic expectation of obtaining,” stated United States Attorney Peace.  “Mensch’s fraud resulted in the banks unwittingly subsidizing several months of his financial mismanagement.  This Office will continue to aggressively investigate and prosecute criminals like Mensch who, through fraud and deception, seek to use financial institutions as a personal piggy bank.”

“This lengthy investigation brings down a ringleader who willfully swindled banking partners through the extensive use of fraudulent checks – siphoning millions of dollars in ill-gotten gains to his own coffers,” stated Secret Service Special Agent in Charge Freaney. “”I want to commend the many investigators who saw this comprehensive case to a successful conclusion. From the Secret Service Long Island Resident Office to the Federal Bureau of Investigation, and our prosecutorial partners at the Eastern District of New York, the law enforcement community in New York remains steadfast in its commitment to hold these types of insidious criminals accountable.”

FBI Assistant Director in Charge Dennehy stated, “Desperate to restore his failing business, John Mensch, the owner of East End Lines, defrauded two banks of more than $9 million through an elaborate check-bouncing scheme. He exploited company privileges to immediately access fraudulent funds while his business was running on empty. The FBI will continue to investigate individuals who deceptively cash in on financial assistance programs.”

As set forth in the information and statements made during the plea proceeding, Mensch was the owner and operator of East End, a transportation company that provided busing services for students on Long Island and elsewhere.  Between 2017 and September 2018, East End maintained numerous accounts—and was granted expedited check-clearing privileges—at banks located in Suffolk County and Orange County, New York.  Those privileges meant that when East End deposited a check, the company would have near-immediate access to the deposited funds, even before the check cleared.  Mensch and other East End executives abused those privileges by engaging in an elaborate “check-kiting” scheme—that is, passing fraudulent checks between East End’s various accounts to keep East End operational despite being effectively insolvent. 

Specifically, Mensch and other East End executives drew checks on East End’s bank accounts at Financial Institution #1, despite those accounts having insufficient funds to cover the checks.  Those bad checks were deposited into East End’s bank accounts at Financial Institution #2, which, unaware that the checks would eventually bounce, allowed East End immediate access to the funds.  East End withdrew those funds to meet various financial obligations and then, before the checks bounced, conducted the same process in the reverse, drawing bad checks on its Financial Institution #2 accounts and depositing them into its Financial Institution #1 accounts to create the false impression that funds were available to cover the earlier checks.  This reciprocal process continued, with the banks advancing East End non-existent funds for several months until the scheme was detected in September 2018.  By that time, East End had obtained millions of dollars from Financial Institution #1 and Financial Institution #2, all of which it had spent while continuing to operate at a deficit. 

In July 2022, Mr. Peace was selected as the Chairperson of the White Collar Fraud subcommittee for the Attorney General’s Advisory Committee (AGAC).  As the leader of the subcommittee, Mr. Peace plays a key role in making recommendations to the AGAC to facilitate the prevention, investigation and prosecution of various financially motivated, non-violent crimes including frauds directed at financial institutions, such as those Mensch committed.

The government’s case is being handled by the Criminal Section of the Office’s Long Island Division.  Assistant United States Attorneys Anthony Bagnuola and Adam R. Toporovsky are in charge of the prosecution.

The Defendant:

JOHN B. MENSCH
Age:  54
Quogue, New York

E.D.N.Y. Docket No. 24-CR-334 (NJC)