Medford bus company owner pleads guilty to fraudulently getting $9 million from banks to keep business going

An owner of a now-defunct Long Island bus company pleaded guilty Wednesday to conspiracy to commit bank fraud in a check-kiting scheme used to obtain more than $9 million from a pair of financial institutions to keep his failing business operational, court records show.

Former East End Bus Lines owner John Mensch, 54, of Quogue, is facing at least 5 years in prison under the plea agreement before U.S. District Judge Nusrat Choudhury at the federal courthouse in Central Islip. He faces a fine of up to $250,000 and will be required to pay $9.6 million in restitution to Bridgehampton National Bank and Wallkill Valley Federal Savings & Loan, records show.

"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," U.S. Attorney for the Eastern District of New York Breon Peace said in a statement. "Mensch’s fraud resulted in the banks unwittingly subsidizing several months of his financial mismanagement."

Prosecutors alleged that, between January 2017 and September 2018, Mensch and other company executives passed a series of bad checks between business accounts set up in Suffolk and Orange counties, withdrawing the cash from one financial institution before the check bounced at the other. The company had near-immediate access to the money since it had obtained expedited checking privileges, prosecutors said.

The executives also moved the funds in reverse to give the appearance the non-existing money was in the accounts, prosecutors said.

The fraudulently obtained funds were used to keep East End Bus Lines, which provided transportation for students on Long Island and elsewhere, in operation, investigators found.

"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," said Agent in Charge Patrick Freaney of the Long Island office of the Secret Service, which worked with the FBI to investigate the scheme. 

The case is being prosecuted by Assistant U.S. Attorneys Anthony Bagnuola and Adam Toporovsky.

Mensch’s attorney, Robert Anello, of Manhattan, did not immediately respond to a request for comment.

Prosecutors said the scheme was detected in September 2018, the same month court records show East End Bus Lines filed for Chapter 11 bankruptcy. One month earlier, Newsday reported that more than 300 school bus drivers, monitors, mechanics and other employees of the Medford company had ratified their first union contract.

“We actually came to a real good contract for the employees. I’m happy with it, the union is happy with it . . . We think it’s really going to help our service and the outlook of the company,” Mensch told Newsday in August 2018. A final decree was issued in the bankruptcy case last March, records show.

East End also made headlines in August and September 2018 when officials with the William Floyd school district said the company had defaulted on its contract, briefly leaving thousands of students without transportation as the 2018-19 school year began. 

Mensch will remain free on bond pending sentencing.

By Grant Parpan

grant.parpan@newsday.com@GrantParpan

Grant Parpan covers Suffolk County courts and federal courts for Newsday. A Long Island native, he joined Newsday in 2022.