Former East End Bus Lines Owner Admits to $9M Check Kiting Fraud

A Quogue man who owned East End Bus Lines has admitted to defrauding two banks out of $9.6 million during a nearly year-long check kiting scheme, federal prosecutors said.

John Mensch pleaded guilty Wednesday at Central Islip federal court to the fraud conspiracy in which the company passed fraudulent checks between various accounts to stay in business despite being insolvent.

“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,” said Breon Peace, U.S. Attorney for the Eastern District of New York.

Prosecutors said the 54-year-old man and other executives abused expedited check-clearing privileges at banks in Suffolk County and Orange County, where he maintained accounts affiliated with his transportation company that bussed students between Long Island and upstate New York between 2017 and 2018. Those privileges enabled the check-kiting scheme by making funds available nearly immediately.

Executives drew checks from one bank despite having insufficient funds available and then deposited the money into the second bank, which granted access to the money while unaware that the checks would bounce, and the company then withdrew the funds from the second bank to meet its obligations, according to investigators. The executives then did the same scheme in reverse before the checks bounced in a bid to avoid detection, authorities added.

The reciprocal process continued for months until it was uncovered in September 2018, by which time the company owed millions of dollars, prosecutors said.

Mensch faces up to five years in prison, financial penalties and restitution when he is sentenced by U.S. District Judge Nusrat J. Choudhury.