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Commerce Payment Systems CEO Michael Mendlowitz, of Woodmere, was found guilty of one count of conspiracy to commit wire fraud and one count of wire fraud following a four-week trial in Manhattan federal court, U.S. Attorney Geoffrey Berman announced.
A second man, East Meadow resident Richard Hart, who was a CPS manager, previously pleaded guilty to one count of conspiracy to commit an offense against the United States.
Berman said that Mendlowitz and Hart operated their fraud scheme through a payment-processing company that operated under several names, including CPS. The two lured customers in with false claims of “no hidden fees” and false promises that specified rates were “guaranteed for life.”
In reality, Berman said, CPS customers, including thousands of small businesses located throughout the country, were charged all manner of hidden and increased rates and fees. Mendlowitz also ordered employees to significantly increase rates on customer accounts with no disclosure that the rates were going up and they would be charged.
Mendlowitz also was found guilty of deleting three pages from the customers’ contracts that contained terms and conditions that directly contradicted representations made to customers during the sales process. As part of the scheme, Mendlowitz falsely told representatives of CPS’s parent company that those terms and conditions had been provided to customers.
When he sentenced, Mendlowitz, 44, will face up to 20 years in prison on each count. Hart faces a maximum term of five years in prison. No return court dates have been announced.
“Michael Mendlowitz preyed on small business owners, defrauding thousands of them,” Berman said. “Small businesses are entitled to be dealt with fairly and billed at the rates that are actually promised. Mendlowitz’s victims got sold a bill of goods and were duped into overpaying.”
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