Feds: Former CEO Mendlowitz convicted of wire fraud in increased rates, fees scheme

Federal prosecutors Friday announced the conviction of a Woodmere man who ran a payment-processing business that defrauded its primarily small-business clients by secretly increasing rates and fees.

Jurors returned a guilty verdict Thursday in a Manhattan court against Michael Mendlowitz, 44, the former CEO and part-owner of Commerce Payment Systems. He was convicted of wire fraud and conspiracy to commit wire fraud before U.S. District Judge Vernon S. Broderick.  

The trial lasted four weeks, prosecutors said.

“Michael Mendlowitz preyed on small-business owners, defrauding thousands of them. Small businesses are entitled to be dealt with fairly and billed at the rates that are actually promised,” said Geoffrey S. Berman, U.S. Attorney for the Southern District of New York. “Mendlowitz’s victims got sold a bill of goods and were duped into overpaying.”

Mendlowitz’s attorney could not be reached for comment.

Prosecutors said Mendlowitz and a partner had some 12,000 clients and generated $30 million in revenue between 2013 to 2015.

But those merchants were deceived, authorities said, by CPS operators who charged hidden and increased rates and fees, often without telling their customers about the hikes.

“In addition, Mendlowitz deleted three pages from the customers’ contracts that contained terms and conditions that directly contradicted representations made to customers during the sales process,” prosecutors wrote in a news release about the conviction. “As part of the fraud scheme, Mendlowitz falsely told representatives of CPS’s parent company that those terms and conditions had been provided to customers.”

The offenses are punishable by up to 20 years in prison.

Richard Hart, 39, of East Meadow, who was a sales manager for CPS, recently pleaded guilty to one count of conspiracy to commit an offense against the United States, which carries a maximum term of 5 years in prison, prosecutors said.