Even after Lou Pearlman’s con used to be uncovered – and as he sat in a penal advanced cell serving a 25-year sentence – the notorious supervisor of *NSYNC and Backstreet Boys wasn’t ready to present up his moneymaking solutions. He started a choir in the lend a hand of bars and then tried launching a fact television demonstrate.
For a long time, the businessman impressed investors with limo rides, flights on inner most jets, and paraded them by the studio where the giant stars he’d groomed had been rehearsing.
All that flash, and the promise of a fundamental annual return, equipped an image too enticing for investors to face up to. Nonetheless, nobody knew that the performers raking in hundreds and hundreds had been barely making a living wage – and his investors did now not realize the hundreds and hundreds they gave him could well seemingly seemingly be long previous eternally.
Nonetheless some convey if it weren’t for Pearlman’s unchecked greed, these bands that helped to define popular culture in the 1990s and early 2000s would never comprise taken off.
Pearlman gets into blimp biz, then collect boy bands
Pearlman purchased his open in the blimp trade in the early 1980s. Later, he started chartering airplane flights, which he says led him to fulfill New Kids on the Block.
“I stunning didn’t know who they had been and I was stunning questioning, ‘How could well seemingly seemingly also these kids comprise the funds for an airplane?’” Pearlman informed ABC Recordsdata in a 2000 interview. “I was informed these kids did $200 million in legend sales and $800 million in touring and merchandising. I was esteem, ‘I’m in the contaminated trade.’”
He used to be company to perform his comprise neighborhood to rival New Kids on the Block’s success. In 1991, Pearlman moved all his companies to Orlando, Florida, a metropolis that had change into a hub for young abilities who flocked there for roles on the theme parks.
Earlier than long, he had the makings of Backstreet Boys. Nick Carter, AJ McLean and Howie Dorough auditioned. Kevin Richardson used to be stumbled on at Disney World where he used to be playing Aladdin. He immediate his cousin Brian Littrell in Kentucky.
“I attach the money out to succor them,” Pearlman acknowledged. “We would give them choreographers. We would give them vocal lessons. We’d give them tutors. … I contemplate I’m an excellent cultivator.”
In 1997, the neighborhood made it astronomical in The US with the originate of “Stop Enjoying Video games (With My Heart).” The song sold 2 million copies in the U.S. and turned into one of the a success single on the Billboard Scorching 100 chart that year.
Whereas the band rose to status, Pearlman dilapidated a lot of the same easy solutions to form *NSYNC. Justin Timberlake, Chris Kirkpatrick, JC Chasez, Joey Fatone and Lance Bass made up the neighborhood — launching a legendary contention between the 2 bands.
Nonetheless, as Lance Bass informed ABC Recordsdata, while *NSYNC used to be reaching massive success, he and his band mates had been equipped stunning $35 a day, and that used to be for his or her per diem.
Composed, Pearlman wasn’t performed. He started LFO, whose 1999 single “Summer season Ladies” peaked at No. 3 on the Billboard charts. He additionally created C-Ticket and Select Five. He wished to get inquisitive about girl groups as neatly, and created Innosense, a neighborhood that Britney Spears like a flash joined ahead of going solo. Furthermore, Pearlman managed Aaron Carter, Nick Carter’s youthful brother.
TransCon investors lured in by bands’ success
Pearlman dilapidated the excessive profile success of his boy bands to entice investors, many of them retirees, to connect their exhausting earned money into his utterly different companies, which he acknowledged had been all housed inner his corporation named TransContinental.
He claimed his TransContinental empire integrated an airline, a movie and song studio, abilities and commute companies as neatly as ingesting locations and valid property. He even formed a legend company below the umbrella for the length of *NSYNC’s upward push.
Pearlman launched an investment procedure for investors he called an “employee investment financial savings legend.” Forensic accountant Jerry McHale informed ABC Recordsdata,“He additionally procedure up a community of sales of us to sell these products.”
Pearlman promised investors it used to be a stable and stable investment, and equipped immense returns year after year. He additionally claimed the conception used to be FDIC insured and backed by insurance coverage firms AIG and Lloyd’s of London.
Retired FBI Agent Scott Skinner informed “20/20,” “Anytime we peep the illustration coming from one in every of Lou’s firms that the FDIC, or AIG or Lloyd’s of London used to be insuring it, we knew stunning then it used to be a fraud.”
“He would send [a] inner most jet to bewitch you up. Then whenever you happen to landed in Orlando, he would send his inner most limo to get you,” Ragged Backstreet Boys supervisor Johnny Wright informed “20/20.” “You power to his procedure of business, which used to be moderately spectacular. Then whenever you happen to stroll throughout the door, he’s on the mobile phone with Barry Gordy or whoever. ‘Oh yeah, we are going to shut that deal. Don’t disaster about it.’”
“Surely among the first issues they attain is, ‘Welcome to TransCon. Here’s our card. Here’s the total companies we comprise,’ and you would possibly want to well seemingly be having a peep at this card that folds, a trade card that folds with esteem 40, 50 firms that he owns,” acknowledged Jacob Underwood, a member of 1 other band Pearlman created, O-Metropolis. “Supreme away, you would possibly want to well seemingly seemingly also be esteem, ‘Whoa, I indicate, I’m in with anyone if truth be told vital, and it’s miles a astronomical deal. If he owns all these items, then he have to if truth be told realize trade and get it.’”
Wright acknowledged Pearlman would collect investors to the studio, where they’d collect the Backstreet Boys or *NSYNC recording or rehearsing.
“So that you get to peep it firsthand. … Or now not it’s one of the precious characterize in the arena,” Wright acknowledged of Pearlman. “Or now not it’s all valid to a diploma on legend of Backstreet Boys and *NSYNC are a success. They’re there stunning in entrance of you.”
Wright acknowledged at one point, he spoke to one in every of Pearlman’s assistants when he regarded as investing.
“He acknowledged, ‘Johnny, I’m a steady individual to Lou but I additionally such as you… whenever you inquire of me the beautiful query, I could well seemingly seemingly also now not lie to you.’ And I acknowledged to him, ‘I procedure now not have to hear the relaxation. I’m now not providing you with my money,’” Wright acknowledged. “I walked out of his procedure of business. I never invested in that.”
Meanwhile, per Roger Handberg, a federal prosecutor in central Florida, Pearlman had been looking down massive bank loans – some 30 of them totaling $190 million.
“And what he would attain is he would utilize the money to hump no matter gap that he wished to hump. So if he had bank fraud money that he wished to make utilize of to repay an investor, he would attain that. If he had a difficulty where he needed to pay a bank some money, he would utilize the investor money. The total money used to be co-mingled– and it used to be dilapidated but it would succor him,” Handberg informed „20/20.“
Nonetheless Jean Madigan, an investor in TransContinental, remembers what took procedure when she tried to withdraw money from her legend with Pearlman.
“There used to be an procedure of business quantity. … Lou himself answered. … He acknowledged, ‘Hello Jean, I stunning have to repeat you that the full thing’s going good.’ I’m esteem ‘What’s happening?’… I acknowledged, ‘I have to get some money out of my legend. I need my money.’ He goes, ‘Well how worthy attain you wish dear?’ First I acknowledged, ‘The total thing,’ but he says, ‘Oh, neatly I’m able to now not give that to you stunning now.’”
Madigan acknowledged she called her salesman.
“[The salesman said] ‘Something is occurring. … I’m able to’t discuss about it now,’” she acknowledged, adding he never purchased lend a hand to her.
“I contemplate they started shredding the total documents,” she acknowledged.
Exposing the ‘TransCon’ con
Handberg says he discovered of Pearlman’s investment and bank fraud procedure in 2006.
“About eight days after I spread out our investigation, Lou Pearlman fled the nation,” Handberg acknowledged. “There are some cases defendants attain something that demonstrate that they know that they’re guilty. A form of issues is fleeing… At that point, he had my total and total attention.”
Handberg acknowledged when authorities arrived at Pearlman’s mansion in Windermere, Florida, “it regarded esteem any individual had left – in a fling.”
“There had been suspicions that there had been diamonds that he hid in the partitions of his condominium,” acknowledged Soneet Kapila, a court-appointed financial danger trustee. “We if truth be told employed an organization who specializes in X-raying partitions to peep whenever you would possibly want to well seemingly seemingly also comprise something hidden there utterly different than insulation. … We had been now not ready to search out something else on legend of we if truth be told went with a toothpick through your total condominium and even the FBI did now not collect something else aside of what we did.”
Investigators additionally combed through Pearlman’s TransCon workplaces and stumbled on that his so-called TransContinental Airlines had no airplanes, workers or income.
“We never ever flew on a TransContinental airplane,” Lance Bass of *NSYNC informed “20/20.” “We could well seemingly seemingly flit to utterly different locations over in Europe, and we’d always be on these Delta flights, you understand, in coach. And I always thought it used to be queer that anyone that used to be in the airline trade couldn’t succor us out a minute bit bit attending to locations.”
Investigators additionally uncovered a inaccurate accounting company called Cohen and Siegel, which used to be created to procedure TransCon Airlines appear esteem a sound trade. Pearlman had sent investors sham financial statements from the false company to procedure investors imagine that their investments had been being profitable — a fundamental hallmark of a Ponzi procedure.
“With Cohen and Siegel, time and time again we had been discovering that there wasn’t any kernel of truth to something else in any procedure,” Handberg acknowledged. “It if truth be told purchased to be more uncomplicated for us to contemplate and stunning collect the full thing is faux.”
“It used to be exhausting now not to take into legend Pearlman and what he had performed when put next to [Bernie] Madoff,” Handberg acknowledged, referring to the disgraced financier who used to be convicted in 2009 after organizing a multibillion-greenback Ponzi procedure. “They both [committed] unsightly crimes that comprise victimized countless numbers of folk.”
Investigators shut in on Pearlman
In March 2007, Pearlman’s whereabouts had been peaceable unknown. A vacationer in Bali, Indonesia, identified Pearlman and realized that he used to be staying nearby, authorities acknowledged.
The tip used to be forwarded to the FBI, which sent brokers to the island to question him. Pearlman at final agreed to accompany the FBI to Guam, where he used to be arrested and brought lend a hand in Orlando in July 2007.
“For over 20 years he’d gotten away with it,” Handberg acknowledged. “It had all labored. I indicate, he had informed about a of one of the precious lies that you would possibly want to well seemingly seemingly repeat. He had made issues up. He had made up an accounting company. He’d made up a bank. And nobody had ever caught him.”
“So from his perspective, ‘Well, why now? Can not I stunning discuss my capability out of it?’ Nonetheless he couldn’t discuss his capability out of it with me and the brokers on legend of we had the proof,” he acknowledged. “We knew relating to the lies and we knew relating to the deception.”
Fletcher Peacock, the federal public defender who represented Pearlman, spoke to “20/20” relating to the case.
“Surely among the issues we most frequently convey in my trade is, I need I was his felony decent ahead of I was appointed. I contemplate Lou wished anyone to repeat him, ‘No,’” Peacock acknowledged. “I entirely imagine this guy could well seemingly seemingly also had been one in every of one of the proficient of us in the entertainment trade and used to be on his capability to being so. It stunning wasn’t supposed to be.”
Pearlman pleaded guilty to conspiracy to commit bank fraud, money laundering, financial danger and fraud in 2008. Handberg acknowledged he “could well seemingly seemingly also comprise emptied the federal prison code” when charging Pearlman.
“We regarded on the afflict he led to,” he acknowledged. “He used to be ordered to additionally pay $310 million in restitution and to pay a $200 million forfeiture judgment.”
Seth Abramovitch from “The Hollywood Reporter” spoke with Pearlman in 2013, after he’d spent 5 years in penal advanced.
“I wished to listen to what he thought about comparisons to Bernie Madoff. He felt Bernie used to be a stunning prison whereas he used to be now not on legend of he had the boy band thing going,” Abramovitch informed “20/20.” “[Pearlman] fashion of attach [Madoff] at arm’s length and acknowledged, ‘Well, that is a valid prison. I’m a sound guy, and issues stunning fashion of purchased out of my aid watch over, and so I’m now not a valid prison.’”
A clutch equipped Pearlman an uncommon proposal to be ready to direct any funds that Pearlman could well seemingly seemingly comprise hidden: For every million returned to victims, Pearlman would get a month shaved off his penal advanced sentence.
“I contemplate Mr. Pearlman could well seemingly seemingly’ve misinterpreted what the clutch used to be if truth be told getting at,” Handberg acknowledged. “Mr. Pearlman’s thoughts true now went to, ‘Oh, I wanna comprise a fact demonstrate in jail.’”
Pearlman turned into to what he knew biggest and started a Christmas choir inner penal advanced – he even held auditions.
Emily Dorsett, a abilities developer, wished to succor his endeavor in the lend a hand of bars and flew from California to Florida to fulfill him.
“He used to be very upbeat. He wished to recreate “Making the Band,” which used to be his hit TV demonstrate lend a hand in the early 2000s with O-Metropolis,” Dorsett informed ABC Recordsdata. “He wished me to succor him strive to get that going, and I informed him I would.”
Even though Dorsett and Pearlman would cease fervent, the strange song multi-millionaire never created a new television demonstrate from penal advanced. And while some money used to be recovered from the a astronomical collection of hundreds and hundreds that Lou Pearlman took, it used to be a diminutive portion of what investors had misplaced – in some circumstances, their lifestyles financial savings.
“Something that I contemplate gets overpassed [is] that Backstreet Boys seemingly wouldn’t be the Backstreet Boys if he hadn’t stolen all this money from the Ponzi procedure,” Abramovitch acknowledged. “He kept placing an increasing selection of hundreds and hundreds into it until they in the end did take care of with a success single.”
Pearlman never realized his dream of making one more boy band. He died in penal advanced in 2016 of coronary heart failure at 62.
“Once I heard that Lou Pearlman had passed away, I was so perplexed on exactly if truth be told feel on legend of you did comprise every emotion for this guy,” Bass acknowledged. “You loved him. You hated him. And it pissed me off that he passed away.”
“There could be so many lifestyles lessons that you be taught from all americans else’s errors, out of your errors,” Bass added. “He helped open my occupation. He funded it… I procedure now not know where I’d be with out him. So that it’s essential to give him that credit.”