There are a few errors
1) it needs to be "for file in ...", not "for files in ....". Notice how later on you're referencing $file, this needs to match the variable you are using at the start of the for loop.
2) you can't prefix the file with new_"$file" if you give it the full path, otherwise it'll stick the new_ before the directory structure (ie: FilesToProcess/file.txt becomes new_FilesToProcess/file.txt). You'll need to use a combination of dirname and basename if you want to prefix it:
for file in /path/to/files/* ; do dir=$(dirname "$file"); base=$(basename "$file"); cat "$file" | java -cp (java program stuff) > "$dir/new_$base" ; done