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Louis Jay Pearlman (June 19, 1954 – August 19, 2016) was an American record producer, con artist and fraudster. He was the manager of successful 1990s boy bands such as Backstreet Boys and NSYNC. In 2006, he was accused of running one of the largest and longest-running Ponzi schemes in history, leaving more than $300 million in debts. After being apprehended, he pleaded guilty to conspiracy, money laundering, and making false statements during a bankruptcy proceeding. In 2008, Pearlman was convicted and sentenced to up to 25 years in prison.[3][4] He died in federal custody in 2016.

Lou Pearlman
Lou-pearlman-mugshot.jpg
2007 arrest mugshot
Born
Louis Jay Pearlman

(1954-06-19)June 19, 1954
DiedAugust 19, 2016(2016-08-19) (aged 62)
Miami, Florida, U.S.
Resting placeNew Montefiore Cemetery
Other names
  • Big Poppa[1]
  • Incognito Johnson[2]
Criminal charge
Criminal penalty25 years in prison
Criminal statusDeceased
Musical career
GenresDance-pop
Occupation(s)Record producer, manager
Years active1993–2006
Associated acts

Early lifeEdit

Lou Pearlman was born and raised in Flushing, New York, the only child of Jewish parents: Hy Pearlman, who ran a dry cleaning business, and Reenie Pearlman, a school lunchroom aide. He was a first cousin of the musician Art Garfunkel. Pearlman's home at Mitchell Gardens Apartments was located across from Flushing Airport, where he and childhood friend Alan Gross would watch blimps take off and land. According to his autobiography, Bands, Brands, & Billions, it was during this period that he used his position on his school newspaper to earn credentials and get his first ride in a blimp. This is disputed by Gross, who claims he was the school reporter, and allowed Pearlman to tag along.[5][6]

Garfunkel's fame and wealth helped inspire Pearlman's own interest in the music business. As a teenager he managed a band, but when success in music proved elusive, he turned his attention to aviation. During his first year as a student at Queens College, Pearlman wrote a business plan for a class project based on the idea of a helicopter taxi service in New York City. By the late 1970s, he had launched the business based on his business plan, starting with one helicopter.[7] He persuaded German businessman Theodor Wüllenkemper to train him on blimps and subsequently spent some time at Wüllenkemper's facilities in West Germany learning about the airships.

Suspicions of insurance fraud and pump & dumpEdit

Returning to the U.S., Pearlman formed Airship Enterprises Ltd, which leased a blimp to Jordache before actually owning one. He used the funds from Jordache to construct a blimp, which promptly crashed. The two parties sued each other, and seven years later Pearlman was awarded $2.5 million in damages. On the advice of a friend, Pearlman started a new company, Airship International, taking it public to raise the $3 million he needed to purchase a blimp, claiming (falsely) that he had a partnership with Wüllenkemper. He leased the blimp to McDonald's for advertising.[5][6]

Pearlman then relocated Airship International to Orlando, Florida in July 1991, where he signed MetLife and SeaWorld as clients for his blimps. Airship International suffered when one of its clients left and three of the aircraft crashed. The company's stock, which had once been pumped up to $6 a share, dropped to a price of three cents a share, and the company was shut down:[8]

After he took his air charter company, Airship International, public in 1985, Pearlman became personally and professionally close to Jerome Rosen, a partner at small-cap trading outfit Norbay Securities. Based in Bayside, Queens, and frequently in trouble with regulators, Norbay actively traded Airship stock. This sent Airship's stock price consistently higher, enabling Pearlman to sell hundreds of thousands of shares and warrants at ever-higher prices. However, Airship was reporting little revenue, cash flow or net income. In return for keeping his penny stock liquid, Pearlman allegedly paid Rosen handsome commissions, according to a mutual friend, that reached into 'the tens of thousands of dollars' per trade.

Entertainment industry careerEdit

Pearlman became fascinated with the success of the New Kids on the Block, who had made hundreds of millions of dollars in record, tour and merchandise sales. He started Trans Continental Records with the intent of mimicking their boy band business model. The record label's first band, the Backstreet Boys, consisted of five unknown performers selected by Pearlman in a $3 million talent search.[9] Management duties were assigned to a former New Kids on the Block manager, Johnny Wright, and his wife Donna.[10] The Backstreet Boys became the best-selling boy band of all time, with record sales of 130 million,[11] hitting gold, platinum, and diamond in 45 different countries. Pearlman and the Wrights then repeated this formula almost exactly with the band *NSYNC, which sold over 70 million records globally.

With these two major successes under his belt, Pearlman had become a music mogul. Other boy bands managed by Pearlman were O-Town (created during the ABCMTV reality television series Making the Band), LFO, Take 5, Natural and US5, as well as the girl group Innosense (with Britney Spears in the very beginning as a short-term member), co-managed with Lynn Harless (the mother of *NSYNC band member Justin Timberlake). Other artists on the Trans Continental label included Aaron Carter, Jordan Knight, Smilez & Southstar and C-Note. Pearlman also owned a large entertainment complex in Orlando, including a recording studio he called Trans Continental Studios, and a dance studio near Disney World named O-Town.[8] In 2002, Pearlman and Wes Smith co-wrote Bands, Brands and Billions: My Top 10 Rules for Making Any Business Go Platinum.[12]

Band lawsuitsEdit

With the exception of US5, all of the musical acts that worked with Pearlman sued him in federal court for misrepresentation and fraud. All cases against Pearlman either have been won by those who have brought lawsuits against him or have been settled out of court.

The members of Backstreet Boys were the first to file a lawsuit against Pearlman, feeling that their contract—under which Pearlman collected as both manager and producer—was unfair, because Pearlman was also paid as a sixth member of the Backstreet Boys (e.g., one-sixth of the band's own income). The band's dissatisfaction began when member Brian Littrell hired a lawyer to determine why the group had received only $300,000 for all of their work while Pearlman and his record label had made millions. Fellow boy band *NSYNC was having similar issues with Pearlman, and its members soon followed suit.[6]

At the age of 14, Aaron Carter filed a lawsuit in 2002 that accused Pearlman and Trans Continental of cheating him out of hundreds of thousands of dollars and of racketeering in a deliberate pattern of criminal activity. This suit was later settled out of court.[13]

Talent scouting scandalEdit

In September 2002, Pearlman purchased Mark Tolner's internet-based talent company, Options Talent Group – formerly Emodel and Studio 58, – which would subsequently go through several names including Trans Continental Talent (TCT), Wilhelmina Talent Scouting (WSN), Web Style Network, Fashion Rock, and Talent Rock. Regardless of the name, all incarnations were based on the business model used by Emodel founder Ayman "Alec" Difrawi, himself a convicted con artist,[14] who played a principal role in running Options/TCT/WSN[15] and setting up Fashion Rock. The companies received unfavorable press attention, ranging from questions about their business practices to outright declarations that they were scams.[16] After Hotjobs and Monster.com pulled over a thousand of the company's job ads from their boards,[17] they were further advertised on the Difrawi-founded[18] "Industry Magazine" website.

The Better Business Bureau's opinion about Options/TCT/WSN was negative, citing a "pattern of complaints concerning misrepresentation in selling practices."[19] The New York State Consumer Protection Board issued an alert, naming it the largest example they had found of a photo mill scam[20] San Francisco's labor commissioner declared Options/TCT/WSN in violation of California law, and several state agencies were reported to be investigating the company.[21] In Florida, around 2,000 complaints were filed with the then-Attorney General Charlie Crist and the BBB, and an investigation was started by Assistant AG Dowd. However, no charges were filed, as the newly appointed Assistant AG MacGregor was unable to find "any substantial violations" and the company had declared bankruptcy, "leaving no deep pockets to collect damages from."[22]

By June 2004, Fashion Rock, LLC had filed a civil suit for defamation against some who had criticized Pearlman's talent businesses. The case was dismissed and closed in 2006.[23] One of the accused, a Canadian consumer-fraud expert Les Henderson, successfully pursued a libel lawsuit against Pearlman, Tolner, El-Difrawi and several others.[24]

Fashion Rock, LLC lived on until February 2, 2007,[25] when its assets were sold in Pearlman's bankruptcy proceeding.[26] Difrawi continued filing lawsuits that were all dismissed and was most recently running Expand, Inc. dba Softrock.org aka Employer Network, from the same address as former TCT.

Ponzi schemeEdit

In 2006, investigators discovered Pearlman had perpetrated a long-running Ponzi scheme that defrauded investors out of more than $300 million. For more than 20 years, Pearlman had enticed individuals and banks to invest in Trans Continental Airlines Travel Services Inc. and Trans Continental Airlines Inc., both of which existed only on paper.[27] Pearlman used falsified Federal Deposit Insurance Corporation, AIG and Lloyd's of London documents to win investors' confidence in his program titled Employee Investment Savings Account, and he used fake financial statements created by the fictitious accounting firm Cohen and Siegel to secure bank loans.[6]

InvestigationEdit

In February 2007, Florida regulators announced that Pearlman's Trans Continental Savings Program was indeed a massive fraud, and the state took possession of the company.[28] Most of the at least $95 million which was collected from investors was gone. Orange County Circuit Judge Renee Roche ordered Pearlman and two of his associates, Robert Fischetti and Michael Crudelle, to bring back to the United States "any assets taken abroad which were derived from illegal transactions."[29]

Following a flight from officials, over the course of which he reportedly had been seen in Israel and Germany, Pearlman was arrested in Indonesia on June 14, 2007 after being spotted by a tourist couple from Germany.[30] He was living in a tourist hotel in Nusa Dua in Bali. Pearlman had been seen in Orlando in late January 2007, in early February in Germany, including an appearance on German television on February 1. Reportedly he was seen in Russia, Belarus, Israel, Spain, Panama, and Brazil. In early February, an attorney in Florida received a letter from Pearlman sent from Bali.[31] Pearlman was then indicted by a federal grand jury on June 27, 2007.[32] Specifically, Pearlman was charged with three counts of bank fraud, one count of mail fraud and one count of wire fraud.

Conviction and sentencingEdit

Five days before his sentencing, Pearlman requested a telephone and an Internet connection two days a week to continue to promote bands. U. S. District Judge G. Kendall Sharp rejected the request.[33] On May 21, 2008, Sharp sentenced Pearlman to 25 years in prison on charges of conspiracy, money laundering, and making false statements during a bankruptcy proceeding. Pearlman could reduce his prison time by one month for every million dollars he helped a bankruptcy trustee recover. He also ordered individual investors to be paid before institutions in distributing any eventual assets.[34]

BankruptcyEdit

Pearlman and his companies were forced into involuntary bankruptcy in March 2007.[35] Trustees and lenders auctioned off Pearlman's assets and personal belongings through eBay and a traditional bankruptcy auction.[36] Church Street Station, a historic train station in downtown Orlando which Pearlman had purchased in 2002, was sold at a bankruptcy auction in April 2007 for $34 million.[35] Several of Pearlman's belongings, including his college degrees, were purchased by The A.V. Club journalist and film critic Nathan Rabin during the eBay auction.[37]

Molestation allegationsEdit

In a 2009 interview with Howard Stern, Rich Cronin, the former lead singer of band LFO, said that he only had received a fraction of the money owed to him from record sales, and claimed that Pearlman had "wanted to bang everyone", and had attempted to seduce him multiple times. Cronin also alleged that those who did oblige Pearlman were looked after.[38]

Fellow LFO band member Brad Fischetti, who continued to refer to Lou Pearlman as a friend, expressed sadness at the news of his arrest, imprisonment, and death.[39] Nick Carter, when asked if the allegations were true, did not confirm it, and hinted that bitterness might be a motivating factor for the sexual gossip.[40] In an interview conducted by the Orlando Sentinel, former *NSYNC member Lance Bass, when asked about the allegations, stated that Pearlman never had behaved inappropriately with them.[41]

DeathEdit

In 2008, Pearlman began his prison sentence with a projected release date of March 24, 2029. However, he suffered a stroke in 2010 while incarcerated.[33] Pearlman died, while still in custody at the Federal Correctional Institution in Miami, Florida, on August 19, 2016, from cardiac arrest, that followed an infection of the interline of the heart valve. Pearlman had surgery to replace a heart valve a few weeks before his death. The prison took him to a hospital where he was scheduled for another surgery and he ultimately died. He was buried ten days later on August 29, 2016, in the family burial area. He was 62 years old.[42]

In popular cultureEdit

Pearlman was featured in a January 2019 episode of the true crime podcast Swindled.[43]

The documentary The Boy Band Con: The Lou Pearlman Story premiered at SXSW on March 13, 2019. It was released on YouTube Premium in April 2019.[44][45]

ReferencesEdit

  1. ^ Roche, Timothy; Handy, Bruce (February 1, 1999). "Big Poppa's Bubble Gum Machine". Time Magazine. Retrieved April 9, 2009.
  2. ^ Handy, Bruce (June 18, 2007). "Lou Pearlman appears at hearing in Guam". USA Today. Retrieved April 9, 2009.
  3. ^ a b "Boy band founder to plead guilty in $300M suit". Associated Press. March 4, 2008. Retrieved April 9, 2009.
  4. ^ Liston, Barbara (May 21, 2008). "Boy band mogul Pearlman sentenced to 25 years". Reuters. Retrieved April 9, 2009.
    - Huntley, Helen. "Special report: Unraveling a transcontinental fraud". tampabay.com. Archived from the original on June 8, 2009. Retrieved April 9, 2009.
    - "More coverage of the Lou Pearlman saga". Orlando Sentinel. Archived from the original on December 23, 2008. Retrieved April 9, 2009.
  5. ^ a b St. Petersburg Times By Helen Huntley, October 21, 2007 In humble Queens, Lou Pearlman was king
  6. ^ a b c d "Mad About the Boys". Vanity Fair.
  7. ^ Henderson 2006, p. 174.
  8. ^ a b Orlando Sentinel Archived October 5, 2007, at the Wayback Machine April 1, 2007 A world out of sync
    - "BOY BAND KINGPIN'S PENNY ROOTS SHOWING". New York Post. February 22, 2007. Archived from the original on February 22, 2007.
  9. ^ Gray, Tyler (October 7, 2007). "The Fat Man Sings". Radar. p. 91. Cite magazine requires |magazine= (help); Italic or bold markup not allowed in: |publisher= (help)
  10. ^ St. Petersburg Times The starmaker
  11. ^ Garcia, Cathy Rose A. (February 22, 2010). "Backstreet Boys Share Secrets to Success". The Korea Times. Retrieved January 24, 2011.
  12. ^ "A World Out Of Sync".
  13. ^ St. Petersburg Times June 25, 2002. Lawsuit: Pop star's manager a racketeer Archived February 19, 2007, at the Wayback Machine
  14. ^ SEC Info Trans Continental Entertainment Group Inc – 8-K For 10/7/02 The SEC about the nature of the business relations between Trans Continental and Ayman "Alec" Difrawi, Ralph Edward Bell, Cortes Wesley Randell and Jason Hoffman, the felony records of Difrawi and Randell, and the FTC sanctions against Bell and Hoffman.
  15. ^ Barker, Tim (October 5, 2003). "Scouting Network's History Troubles Pearlman". Orlando Sentinel. Retrieved October 20, 2010.
  16. ^ Olson, Wyatt (September 6, 2001). "Hustling for Models". Broward-Palm Beach New Times. Retrieved April 8, 2009.
    - Barack, Lauren (January 26, 2002). "MANNEQUIN MESS TOP AGENCIES DENY CONNECTION TO EMODEL". New York Post. Archived from the original on July 14, 2011. Retrieved April 8, 2009.
    - Kimberlin, Joanne (January 28, 2002). "Cashing in on dreams of glamour". Pilotonline. Archived from the original on February 4, 2002.
    - "Is eModel Golden Opportunity Or Big Business?". Ksat.com. February 12, 2002. Archived from the original on July 20, 2011.
    - Reed, Travis (May 13, 2002). "Options Talent Group: An I-Team Investigation". Fox Atlanta. Archived from the original on November 7, 2005. Retrieved April 8, 2009.
    - Thompson, Connie (August 13, 2002). "Buyer Beware: Ever Thought About Being A Model?". Komo News. Archived from the original on December 13, 2006. Retrieved April 8, 2009.
    - Reed, Travis (November 14, 2002). "Trans Continental Talent". Fox Atlanta. Archived from the original on October 29, 2005. Retrieved April 8, 2009.
    - "Hidden Cameras Expose Talent Agency Scam". ClickOnDetroit.com. November 15, 2002. Archived from the original on May 12, 2006.
    - "I Am Not A Model", Jane, March 2003
  17. ^ Braiker, Brian (July 18, 2003). "Model Misbehavior". Newsweek. Retrieved April 8, 2009.
  18. ^ National Arbitration Forum Decision – Industry Publications LLC v. Industry magazine
  19. ^ BBB Orlando Archived November 23, 2010, at the Wayback Machine report on Web Style Network a/k/a Options Talent, TC Talent, Trans Continental Talent, Wilhelmina Scouting Network, Wilhelmina Scouts, WSN. Quote: "Based on BBB files, this company has an unsatisfactory record with the BBB due to a pattern of complaints concerning misrepresentation in selling practices"
  20. ^ "Model Agency Labeled A Scam" PageSix, New York Post, October 20, 2003
  21. ^ "Modeling Agency- Big Fees, Small Return", KRON-4 San Francisco, February 18, 2003.
  22. ^ "State Ends Probe Into Pearlman's Former Model-Scouting Company". July 21, 2004. Archived from the original on September 27, 2007. Retrieved September 27, 2007.CS1 maint: unfit url (link)
    - "Options Talent, Inc., etc" (PDF). Office of the Attorney general, Florida. November 5, 2004. Archived from the original on February 25, 2007. Retrieved February 25, 2007.CS1 maint: unfit url (link)
  23. ^ Billman, Jeffrey C. "Pearlman's jihad". Orlando Weekly.
    - Clerk Circuit Court Orange County Florida Archived July 10, 2013, at the Wayback Machine, search case number 2004-CA-004844-O
  24. ^ CanLII Archived January 9, 2016, at the Wayback Machine Court File No. C-8937-05, Henderson v. Pearlman, Tolner, Difrawi a.o., 2006 Ontario Superior Court of Justice
    - "LOUIE WASN'T 'N SYNC / LAWSUIT BACKFIRES "LOU Pearlman picked the wrong guy to sue"", New York Post. September 24, 2006. Archived December 23, 2008, at the Wayback Machine
    - Court File No. C-8937-05 – Henderson v. Pearlman a.o., a case in the Ontario Superior Court of Justice Archived February 4, 2012, at the Wayback Machine
  25. ^ Scott Powers and Sara K. Clarke (March 24, 2007). "Pearlman's talent-scout company sold". Orlando Sentinel. Archived from the original on October 14, 2007.
    - St. Petersburg Times Blog: Money Talk February 9, 2007 State shuts down Fashion Rock Archived February 7, 2007, at the Wayback Machine
  26. ^ Orlando Sentinel Pearlman's talent-scout company sold at the Wayback Machine (archived October 14, 2007[Date mismatch])
    - "BBB of Central Florida, Inc".
  27. ^ USDOJ press release March 4, 2008 Archived September 11, 2008, at the Wayback Machine LOU PEARLMAN SIGNS PLEA AGREEMENT THAT INCLUDES ADDITIONAL CHARGES THAT HE DEFRAUDED INVESTORS
  28. ^ "State Takes Over Lou Pearlman's Embattled Orlando Company". wftv.com. February 2, 2007. Archived from the original on February 5, 2007.
  29. ^ "State: Trans Continental Savings Program a Fraud". February 2, 2007. Archived from the original on March 2, 2008. Retrieved June 29, 2012.
  30. ^ Lou Pearlman Taken Into Custody In Indonesia Archived January 1, 2010, at the Wayback Machine
  31. ^ Sentinel, Pedro Ruz Gutierrez, Scott Powers and Sara K. Clarke/The Orlando. "Boy-band mogul expelled from Indonesia, in FBI custody".
  32. ^ Tampa Bay's WTSP 10 News Pearlman indicted on fraud charges
  33. ^ a b Abramovitch, Seth. "Boy Band Mogul Lou Pearlman's Prison Interview: My Ponzi Scheme Was Smarter Than Madoff's". The Hollywood Reporter. Retrieved August 20, 2016.
  34. ^ "Boy band founder to plead guilty in $300M suit". March 5, 2008.
    - "Boy band mogul Pearlman sentenced to 25 years", Reuters
  35. ^ a b Huntley, Helen. "Lou Pearlman gets 25 years in scam, time off for loot". Tampa Bay Times. Retrieved August 21, 2016.
  36. ^ Johnston, Maura (February 29, 2008). "If You Want A Piece Of Lou Pearlman, You Can Find One On EBay | Idolator". Idolator. Retrieved August 21, 2016.
    - Reed, Travis (June 12, 2007). "Boy-Band Loot Sold at Bankruptcy Auction". The Washington Post. Retrieved August 21, 2016.
  37. ^ Rabin, Nathan (July 31, 2009). "Why Do I Own This?: Lou Pearlman 20th Century Republican Leader Certificate". The A.V. Club. Retrieved August 21, 2016.
  38. ^ "Rich Cronin of LFO Visits". Howard Stern. Retrieved August 22, 2016.
  39. ^ "Brad Fischetti Comments On Former Manager Lou Pearlman's Arrest". popdirt.com.
    - Fischetti. "God rest your soul Lou Pearlman". Twitter.
  40. ^ "Backstreet Boys Open Up To John Norris About Disgraced Boy-Band Mogul Lou Pearlman: 'Karma's Karma'". MTV. October 2007.
  41. ^ Abott, Jim (October 2007). "Lance Bass book comes out". Orlando Sentinel.
  42. ^ "Inmate Locator". Federal Bureau of Prisons. Retrieved August 20, 2016.
    - Stackaug, Liam (August 22, 2016). "Lou Pearlman, Svengali Behind Backstreet Boys and 'NSync, Dies at 62". The New York Times. Retrieved August 23, 2016.
  43. ^ "Episode 09: The Mogul". Swindled | A true crime podcast about white-collar criminals, con artists, and corporate evil. January 5, 2019. Retrieved April 28, 2019.
  44. ^ Andreeva, Nellie (April 24, 2018). "YouTube Orders Lou Pearlman Documentary About Disgraced Music Producer from Lance Bass & Craig Piligian". Deadline. Retrieved April 25, 2018.
  45. ^ Brooker, Heather (April 2, 2019). "Lance Bass Brings 'The Boy Band Con' to YouTube and Select Theaters". NBC 4 Los Angeles. Retrieved April 30, 2019.

Further readingEdit

External linksEdit

  • Lou Pearlman case
  • Page Six Story on Pearlman
  • Interview, HitQuarters Jul 2005
  • The CNBC program American Greed, narrated by Stacy Keach Jr., describes, in episode #18 titled "Lou Pearlman: Boy Band Bandit," the massive fraud and Ponzi scheme, victim outrage at the federal offer to reduce Pearlman's sentence, and his proposed "Jailhouse Rock" (gag) reality series, and it also discusses the issue of sex with underage boys. Bryan Burrough, interviewed for the episode, noted of this last that he had not expected to hear about sexual improprieties, and ascribed the lack of willingness to come forward about them to Pearlman's repeated usage of the tactic of veiled threats to intimidate those who would have otherwise done so.
  • Lou Pearlman on IMDb