When a businessman makes deals he can't broker, it doesn't matter how successful he becomes with legitimate enterprises, because getting something for nothing will always entice him. This is where Lou Pearlman comes in.
Pearlman's start in business began with his fascination with inflated marketing in 1984, and ended just the same in 2007.
Lou Pearlman and Blimp Advertising
Pearlman's first enterprise was a company called Airship Enterprises Ltd. For New Yorkers or Floridians who recall blimps flying the logos of McDonald's, MetLife Insurance, or Sea World, those were the brain children of Pearlman.
It was a great idea but ended in a crash; three to be exact. From this failed legitimate business enterprise, Pearlman decided it would be easier to make more money getting people to invest their money into a fake airline, so he purchased a small jet and called it Trans Continental Airlines. Sadly, the jet's only purpose was to fly himself and investors around.
With TCA and continuously flowing records from a fictitious accounting firm, Pearlman was able to gather more money than would have been possible for a personal plane operation. The idea was that investors were getting in on the ground floor of a company that was going to go public just as Airship Enterprises Ltd. had.
Pearlman began to have a growing number of investors to include several banks and decided it was time to broaden his horizons.
Pearlman is Crazy About Boy Bands
Lou Pearlman may have had the music bug his entire life having a successful cousin like Art Garfunkel. Through the 1980's, Pearlman witnessed the phenomenon of boy bands in The New Kids on the Block.
With $3 million dollars from TCA investors, he held a talent audition and formed the Backstreet Boys. Following their success, he formed *NSync. Collectively, both bands sold nearly 200 million albums. Pearlman went on to form more bands, and was then sued by all but one of them.
Pearlman's typical contract with these groups involved him paying them hundreds of dollars each month while he received management fees, took care of all the money, and was even cut in as a member of the band in terms of profit sharing. Over time, the entertainers would grow tired and bring legal action.
If this wasn't bad enough, it was also exposed by Pearlman's personal assistant for two years, Steve Mooney, in Vanity Fair's November, 2007 issue that the music mogul was "a sexual predator," possibly getting into the music industry mostly to have young men around him. Pearlman is noted in Vanity as having routinely had teenage singers to his room late at night and would even jump into their beds naked to have a tickle fight.
While the money he stole can be easily measured, what he took from young aspiring singers cannot be. And it was this huge success in music that propelled him into his next scam of taking millions through another investment fraud.
Lou Pearlman's Final Scheme in the Ponzi Sandwich
Pearlman was a household name with a television show, rising stars all around him, and thousands of people who would have loved to have done business with this visionary.
Having already taken in millions so easily through his phony Trans Continental Airline scheme when it should have been apparent to someone that there were no TCA planes flying into and out of major airports, Pearlman knew it would be even easier to invest in something they weren't likely to see, like a retirement account.
With the use of his fake accounting firm, Pearlman was able to boost up an Employee Investment Savings Account (EISA). The genius may have been in the simplicity of the name.
According to interviews from CBNC's American Greed episode on Pearlman many of the investors were enamored with Pearlman because of his past successes. And so, they entrusted him with approximately $95 million before it was all over.
After more than 20 years, it was found that Trans Continental Airlines was nothing at all, just a company on paper. This all began to come out when Pearlman owed banks over $130 million. In the end, Pearlman was charged with money laundering, conspiracy, and making false statements during a bankruptcy proceeding. His 2008 sentence was 25 years with an option to reduce it by one month for every million dollars he pays back to those he defrauded.
Although Pearlman may die in prison, he may also survive and end up serving less time in jail than he spent living the high life on other people's money.
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