Boy band mogul Lou Pearlman was sentenced this morning to 25 years in federal prison for running a lengthy, systematic con that artificially inflated his net worth and cheated people out of $300 million.
Pearlman was responsible for the rise of such groups as The Backstreet Boys, N'Sync, and O-Town. It turns out however, that a large portion of his wealth was derived from various Ponzi schemes and other scams.
Pearlman, 53, was once the toast of Orlando. His financial empire included popular musical acts the Backstreet Boys and 'N Sync, an airplane charter business, and Church Street Station, an iconic piece of real estate in Orlando's downtown.
The boy band impresario admitted in a March plea hearing to running the scam. He pleaded guilty to two counts of conspiracy, one count of money laundering and one count of making a false claim in a bankruptcy during that hearing, charges worth a maximum 25-year prison sentence.
Investors' claims in a bankruptcy case have approached a half-billion dollars.
What amazes me is that this guy was all over TV for years as this music mogul like Simon Cowell. Besides, the music business this guy's entire life was a giant scam. I can't believe he was able to get away with it for so many years.
...Pearlman received a key to the city in 1998, and in 2003 arranged a deal to buy and revitalize the Church Street Station entertainment district in downtown Orlando.
But as Pearlman's reputation grew, so did complaints about his financial dealings. Complaints first arose in 1995 about Trans Continental Airlines' so-called "employee investment savings program," which he promised was a safe investment insured by the FDIC and others. He admitted in March that the program was a Ponzi scheme.
Members of the bands he formed sued him throughout the late 1990s, saying he cheated them out of money. In 2002, state regulators investigated Pearlman's modeling company, Trans Continental Talent, after allegations that the company reneged on promises to give clients modeling work in return for spending money on an online listing service. He was later cleared.
But new investigations began, and his luck ran out in December 2006, when the state Office of Financial Regulation sued Pearlman and forced him to close his airline's "employee investment savings program," which was open to the public.
The prosecutor rightly points out that this guy operated a "successful airline" for years, but nobody ever saw any of the planes flying around.
Pearlman pretty much committed every white collar crime on the books including falsifying bank accounts, creating falsified corporate and personal income tax documents. Pearlman missed his calling, he really should have been an Enron executive.
The interesting thing about his prison sentence is the deal the judge made him. Pearlman owes around $300 million to the investors he defrauded, and the judge sentenced him to 300 months (25 years) in a Federal prison.
However, Senior U.S. District Judge G. Kendall Sharp told Pearlman that for every $1 million dollars he pays back he can get 1-month taken off his sentence.
So if he can come up with $300 million dollars he can avoid prison time all together. Pearlman's attorney said that was a nice offer, but Pearlman really doesn't have any money left. The courts have already auctioned off all of his real estate, cars, and music memorabilia.
Pearlman's victims aren't buying it, and claim the fraudulent music mogul has assets hidden away somewhere.
The one thing I just don't get and maybe it all goes back to greed, is why he would become involved in all those scams?
Pearlman was responsible for creating and managing some of the biggest acts in music at the time. That alone should have made him a tremendously wealthy man, without pulling any scams. It just seems totally insane to be up to your eyeballs in crime when you have a legitimate business already worth millions.