Lou Pearlman

• 1. A Sighting in Bali

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  In June 2007, a tourist couple from Germany noticed a man staying at a hotel in Nusa Dua, on the Indonesian island of Bali. Their sighting ended a search that had stretched across several continents. On the 14th of June 2007, the man was arrested. He was Lou Pearlman, the manager and financier behind some of the best-known boy bands of the 1990s. Only months earlier he had disappeared, and officials in Florida had been looking for him ever since. How did a boy from Queens who loved blimps become the force behind the biggest teen pop acts in America? And how much of the empire he built was ever real? The answers begin beside a small airfield in Flushing.

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• 2. Queens Boyhood

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  Louis Jay Pearlman was born on the 19th of June 1954 in Flushing, Queens, to Jewish parents. His father owned a dry-cleaning business and his mother stayed at home. The family lived at the Mitchell Gardens Apartments, directly across from Flushing Airport. From there, Pearlman and his childhood friend Alan Gross watched blimps take off and land.

  His first ride in a blimp is a matter of dispute. In his autobiography, Bands, Brands, & Billions, Pearlman says he used his post at the school newspaper to gather press credentials and earn the flight. Gross disagrees. He says he was the school reporter and simply let Pearlman tag along.

  Music tugged at him first. Pearlman was a cousin of Art Garfunkel, and that cousin's fame and wealth helped spark his interest in the music business. As a teenager he managed a band. Success never arrived, so he turned his attention to aviation.

  During his first year at Queens College, Pearlman wrote a class business plan for a helicopter taxi service in New York City. By the late 1970s he had launched it, starting with a single helicopter. Then he persuaded Theodor Wüllenkemper, a German businessman and Luftwaffe veteran, to teach him about blimps. Pearlman spent time at Wüllenkemper's facilities in West Germany learning how the airships worked. Back in the United States, the helicopter entrepreneur was ready to make airships his next business.

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• 3. Blimps and Penny Stocks

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  The company called Airship Enterprises Ltd leased a blimp to Jordache before it actually owned one. Pearlman used Jordache's money to build the aircraft, and it promptly crashed. The two parties sued each other. Seven years later, Pearlman was awarded $2.5 million in damages.

  On a friend's advice, he then started Airship International and took it public in 1985. The goal was to raise the $3 million he needed to buy a blimp. To win confidence, he falsely claimed a partnership with Wüllenkemper. He then leased the finished blimp to McDonald's for advertising.

  In July 1991, Pearlman moved Airship International to Orlando, Florida. There he signed MetLife and SeaWorld as clients. Trouble followed quickly. One client left, and three of the company's aircraft crashed. The stock, once pumped up to $6 a share, fell to three cents. The company was shut down.

  Behind that climbing share price stood Jerome Rosen, a partner at the small-cap trading firm Norbay Securities. Based in Bayside, Queens, Norbay was frequently in trouble with regulators. After the 1985 public offering, Pearlman became personally and professionally close to Rosen. Norbay actively traded Airship stock and pushed the price steadily higher. That let Pearlman sell hundreds of thousands of shares and warrants at ever-rising prices, even though Airship reported little revenue, cash flow or net income. A mutual friend alleged that Pearlman paid Rosen commissions reaching "the tens of thousands of dollars" per trade.

  As Airship collapsed, Pearlman was already studying a very different business. It belonged to the New Kids on the Block.

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• 4. The Boy Band Formula

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  The New Kids on the Block had earned hundreds of millions of dollars from records, tours and merchandise, and Pearlman was fascinated. In early 1992 he started Trans Continental Records with a plan to copy their business model. His first act was the Backstreet Boys, five unknown performers chosen through a $3 million talent search.

  Johnny Wright, a former New Kids manager, and his wife Donna took charge of managing the group. The Backstreet Boys became the best-selling boy band of all time. They sold 130 million records and reached gold, platinum and diamond status in 45 countries.

  Pearlman and the Wrights were next introduced to NSYNC, a group formed by Chris Kirkpatrick. They funded and managed it in much the same way. NSYNC went on to sell more than 70 million records worldwide.

  The roster kept growing. O-Town was created during the ABC-MTV reality series Making the Band. LFO, Take 5, Natural and US5 followed, along with Marshall Dyllon, co-created with country artist Kenny Rogers. Pearlman also managed the girl groups Solid HarmoniE and Innosense, together with Lynn Harless, the mother of NSYNC member Justin Timberlake. The Trans Continental label also released music by Aaron Carter, Jordan Knight, Smilez & Southstar and C-Note.

  Pearlman owned the Church Street Station entertainment complex in Orlando, which housed a recording studio he named Trans Continental Studios. Near Disney World, he ran a dance studio called O-Town. In 2002, he and Wes Smith co-wrote Bands, Brands and Billions: My Top 10 Rules for Making Any Business Go Platinum. The bands that made him famous would soon be the ones taking him to court.

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• 5. Contracts and Accusations

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  Brian Littrell of the Backstreet Boys hired a lawyer to find out why the group had received only $300,000 for all its work. Meanwhile, Pearlman and his record label had made millions. The band felt its contract was unfair. Pearlman collected money as both manager and producer, and he was also paid as a sixth member of the group, taking one-sixth of its income. The Backstreet Boys were the first to file a lawsuit. NSYNC had similar complaints, and its members soon followed.

  In 2002, Aaron Carter sued at the age of 14. He accused Pearlman and Trans Continental of cheating him out of hundreds of thousands of dollars and of racketeering. That suit was later settled out of court. In the end, every act that worked with Pearlman except US5 and Marshall Dyllon sued him in federal court for misrepresentation and fraud. Every one of those cases was either won by the plaintiffs or settled.

  In a 2009 interview with Howard Stern, Rich Cronin, the former lead singer of LFO, said he had received only a fraction of the money owed to him from record sales. He also said that Pearlman had tried to seduce him on multiple occasions. Those statements were never confirmed. When asked, Nick Carter suggested that bitterness might be motivating Cronin.

  Others saw Pearlman differently. Cronin's bandmate Brad Fischetti kept calling Pearlman a friend and expressed sadness at the news of his arrest and imprisonment. Lance Bass told the Orlando Sentinel that Pearlman had never behaved inappropriately with the members of NSYNC. Jay Khan of US5, however, described inappropriate behavior of a sexual nature in his autobiography.

  In September 2002, Pearlman bought an internet talent company that would soon draw complaints from regulators in several states.

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• 6. The Talent Scouting Scam

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  Mark Tolner's internet-based Options Talent Group, formerly Emodel and Studio 58, became Pearlman's in September 2002. It then passed through many names, including Trans Continental Talent, Wilhelmina Talent Scouting, Web Style Network, Fashion Rock and Talent Rock. Under every name it followed the business model of Emodel founder Ayman "Alec" Difrawi, himself a convicted con artist. Difrawi played a principal role in running the operation.

  The press attention was unfavorable. Some reports questioned its business practices, and others declared it a scam outright. Hotjobs and Monster.com pulled more than a thousand of the company's job ads. The company then advertised on the "Industry Magazine" website, which Difrawi had founded.

  Official opinion was just as harsh. The Better Business Bureau cited a "pattern of complaints concerning misrepresentation in selling practices". The New York State Consumer Protection Board called the company the largest example of a photo mill scam it had found. The California Labor Commissioner's Office declared it in violation of California law. In Florida, around 2,000 complaints reached then-Attorney General Charlie Crist and the Better Business Bureau. Assistant Attorney General Dowd began an investigation. But the newly appointed Assistant Attorney General MacGregor could not find "any substantial violations", and no charges were filed. The company had also declared bankruptcy, "leaving no deep pockets from which to collect damages."

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

  Fashion Rock survived until early 2007, when its assets were sold in Pearlman's bankruptcy proceeding. Difrawi kept filing lawsuits, and all of them were dismissed. The bankruptcy that swallowed Fashion Rock had a far larger cause, a scheme Pearlman had been running for more than twenty years.

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• 7. A Paper Empire

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  For more than 20 years, Pearlman enticed individuals and banks to invest in Trans Continental Airlines Inc., TransCon Records and their parent, Trans Continental International Inc. All three companies existed only on paper. That changed only when his boy bands took off and TransCon Records began earning money from signed acts. In 2006, investigators uncovered what was then thought to be the longest-running Ponzi scheme in American history. Investors had lost more than $1 billion, and $300 million was still missing as of March 2008.

  The fame of the Backstreet Boys and NSYNC became the engine that expanded the fraud. To win investors' trust in his Employee Investment Savings Account program, Pearlman used falsified documents bearing the names of the Federal Deposit Insurance Corporation, AIG and Lloyd's of London. To secure bank loans, he used fake financial statements from a fictitious accounting firm called Cohen and Siegel.

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

  Pearlman had already fled. He was seen in Orlando in late January 2007 and in Germany in early February, where he appeared on German television on the 1st of February. Reports also placed him in Russia, Belarus, Israel, Spain, Panama and Brazil. In early February, an attorney in Florida received a letter from Pearlman sent from Bali.

  A federal grand jury indicted him on the 27th of June 2007 on charges of conspiracy, money laundering and filing false bankruptcy documents.

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• 8. Collapse and Legacy

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  Pearlman and his companies were forced into involuntary bankruptcy in March 2007. Trustees and lenders planned to auction off his assets and personal belongings, including a mansion full of well-known works of art and priceless memorabilia. They quickly discovered that most of the art and memorabilia was fake. Whatever could be sold went through eBay and a traditional bankruptcy auction house. Church Street Station, a historic train station in downtown Orlando, sold at a bankruptcy auction in April 2007 for $34 million. At the eBay auction, Nathan Rabin, a journalist and film critic at The A.V. Club, bought several of Pearlman's belongings, including his college degrees.

  Five days before his sentencing in May 2008, Pearlman asked for a telephone and an internet connection two days a week so he could keep promoting bands. Federal judge G. Kendall Sharp of the U.S. District Court for the Middle District of Florida refused. On the 21st of May 2008, Sharp sentenced him to 25 years in prison for conspiracy, money laundering and false statements during bankruptcy proceedings. Pearlman could cut one month from his time for every million dollars he helped a bankruptcy trustee recover. Sharp also ordered that individual investors be paid before institutions.

  Pearlman began his sentence in 2008 with a projected release date of the 24th of March 2029. He suffered a stroke in 2010 and was diagnosed with an infection of a heart valve. A few weeks before his death he had surgery to replace the valve, and another operation was scheduled. He died in custody at the Federal Correctional Institution in Miami on the 19th of August 2016. His autopsy listed the cause as infection of the inner lining of the heart. He was buried ten days later in his family's burial plot, at the age of 62.

  His story has been retold on screen several times. American Greed covered him in 2009 in an episode called "Boy Band Mogul". The Boy Band Con: The Lou Pearlman Story, produced by NSYNC member Lance Bass, premiered at SXSW on the 13th of March 2019. ABC's 20/20 followed in December 2019 with "The Hitman: From Pop to Prison". Most recently, Netflix released the series Dirty Pop: The Boy Band Scam on the 24th of July 2024.

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