Lou Pearlman was born on June 19, 1954 in Flushing, Queens. His father ran a dry-cleaning business and would take Lou with him on delivery rides where Lou developed his own entrepreneurial spirit. At nine years old, Lou set up his own lemonade stand by his neighborhood bus stop. He continued to pick up odd jobs as a kid, including paper boy, cleaning up Goodyear blimps, and became the manager of a band using his connections as Art Garfunkel’s cousin. Lou attended Queens College where he studied accounting. For a class project, Lou had to come up with a business plan. His plan was to create a helicopter taxi service in New York City.
Once Lou graduated, he started his helicopter service with one helicopter and then his uncle helped him buy his second helicopter that shuttled businessmen from their wall street offices to local airports. After a couple years, Lou sold the helicopter business to Island Helicopters which became the largest helicopter service for tourists in New York City. Lou used the money from the merger to start a charter plane business he named Transcom Airways in 1976. Lou then created Trans Continental Airlines in 1978 with backing from a wealthy passenger of his charter plane. Trans Continental Airlines started out by leasing planes from Transcom Airways and made a lot of money from banks using his planes to deliver checks to their clearinghouses across the country. With that money and more wealthy investors, Trans Continental Airlines was able to start buying their own large planes.
By 1980, Lou decided to expand his air travel business again and created Airship Enterprises which specialized in blimps. His first blimp was a complete failure. Lou could only raise enough money from investors to purchase the outside envelope of the blimp. Lou and his friends decided to build the inside frame themselves. Lou had it painted gold, but in the sun it turned a shade of brown that was described as “doodie” colored. During it’s maiden voyage, the blimp only got about 30 feet in the air and could only turn right until it crashed into a bunch of pine trees at the same naval base where the Hindenburg had went down in flames in 1937. However, Lou got $2.5 million out of a settlement with the insurance company he bought a policy on the blimp with. Many believed this was all an insurance scam from the beginning since the blimp was so poorly made. However, this gave Lou enough money to buy a professionally made blimp from Germany and was able to convince McDonald’s in signing an advertising contract with him.
In 1982, at 28 years old, Lou claimed that he had already made $400 million dollars from a combination of all his different businesses, however, who knows if that was true or how much he actually made in net profit. He also finally moved out of his parents’ apartment in 1982 into his own penthouse in Queens. Lou started to sell shares of Trans Continental Travel Service and Trans Continental Airlines to his friends and family around $5,000 a share. Lou claimed that Trans Con had around 50 aircraft and annual revenues of around $80 million. He also sold retirement investment accounts through Trans Con, that he swore was backed by the FDIC and Lloyd’s of London. Then Airship International became a publicly traded company. Lou used a Colorado brokerage house to sell Airship stocks to investors and raised about $17 million dollars by overstating the worth of Airship’s stocks and even taking investors’ orders for one stock and buying Airship shares instead.
Lou also began to seek outside investors for Trans Con using shares and the retirement investment accounts to draw them in. Investors ranged from middle aged couples hoping to have a comfortable retirement in a few years to very wealthy people across the country. The Trans con stock paid annual dividends of about 10 percent and the investment account paid annual returns of around 8 percent, which made both very appealing.
Lou bought a 6,000 square foot vacation home in Orlando, Florida and moved Airship International’s office to Orlando in 1991. Lou brought some of his long time friends like Francisco Vazquez with him to continue working in the company. Orlando is filled with theme parks, much like Los Angeles, but it is much more affordable to live in. Which means that young performers flocked to Orlando to sing, dance, and dress up as characters at the parks hoping to make it big someday. This was also around the time that Lou became amazed at the success of New Kids On The Block when they leased one of his planes and the $100 million a year that they made from album sales, concert tickets, and merchandise. Lou decided that that boy bands were going to be his next big money maker.
Lou put out advertisements for young men that could sing and dance to audition for the next big boy band. Lou selected five boys in 1993 and named the band the Backstreet Boys. He bought the boys a house and told them to quit their jobs and school. He hired tutors for those that were still under 18 and vocal coaches for all the boys. He sent the boys to what he called bootcamp, where they would sing and learn choreography in his blimp hanger for 6 to 8 hours a day.
Backstreet Boys started touring and then released their first album in the summer of 1996. Backstreet Boys were a hit and became instant teen heartthrobs. Lou said where there was Coca Cola, there was Pepsi and if anyone was going to try to replicate the success of Backstreet Boys it was going to be him. So after getting Justin Timberlake to sign on, Lou recruited four other boys and formed the group NSYNC. Lou offered NSYNC all the same perks as Backstreet Boys: a house, tutors, vocal coaches, etc. Everything was paid for by Lou and the boys also got a $35 per diem with the promise of getting real paychecks once they made it big. NSYNC started off by touring in Europe and after making it big there, came to America. After having one of their concerts televised by the Disney Channel, they instantly became just as popular as the Backstreet Boys.
The two bands began to compete for the very same market. Young girls were either Backstreet Boys fans or NSYNC fans. Both bands were constantly touring, performing in concerts, appearing for radio interviews, and showing up on TRL on MTV. Lou had plans to continue riding out the boy bands phenomenon. He kept holding auditions and putting bands together, though Backstreet Boys and NSYNC were always the largest. Lou told the boys in his bands to call him Big Poppa. He liked to see himself as both a father figure to the boys and part of the bands.
After Steve Mooney, an aspiring singer who auditioned to join Lou’s band O-Town, he was hired by Lou to be his personal assistant and told that if he did a good job, he would be put in the band. Mooney ended up moving in with Lou. Mooney recalled being told by Lou to leave the house for hours at a time. When he would return, Mooney would see young singers leaving from Lou’s bedroom buttoning their pants back up and looking very embarrassed, though most denied that anything improper ever occurred. Mooney recalled that Lou began to wear less and less clothes around his house, eventually just walking around naked. When Mooney asked Lou when he was finally going to put him in the band, Lou sat down naked, spread his legs, and said “Figure it out.”
When Nick Carter turned 17 in 1997, AJ McLean’s mother said that AJ mentioned that Nick felt uncomfortable staying at Lou’s house and she overheard that some kind of inappropriate behavior had occurred. Nick nor his parents ever said anything, but there were other band member’s mothers that called Lou a sexual predator. Nick Carter’s mother, Jane Carter, in an interview said “Certain things happened and it almost destroyed our family. I tried to warn everyone. I tried to warn all the mothers… I tried to expose him for what he was years ago. I can’t say anything more. These children are fearful and they want to go on with their careers.” There were also several stories of some of the boys, some as young as 13, having sleepovers at Lou’s house and him appearing at the foot of their beds in nothing but a towel. He then jumped on the bed with the boys in it and tried to wrestle them while the towel fell off.
During this time, Lou also purchased the Chippendales dancer franchise, and created Trans Con Foods which owned several TCBY yogurt franchises and a chain of pizzerias named NYPD Pizza.
When Lou gave the boys in NSYNC their first paycheck, the boys were disappointed when they each only received $10,000. This was after they had already been touring for years at sold out stadiums and selling millions of albums.
Immediately, the boys began to ask where all of the money was going. Lou had made himself the sixth member of both bands, which meant that he was, at least in the contract, to a cut of their profits. Lou also charged everything to the bands, including the dinners, houses, planes, coaches, tutors, Lou’s manager fees, and Lou’s publisher’s fee. Lou was taking 90% of everything that each band was making. The boys from both bands were livid and each band worked on their own plans to get out of their contracts with Lou.
After meeting with a lawyer, they were able to break their contract with Lou because Lou had signed them to a German recording label instead of an American label. The band tried to sign with Jive records, but Lou sued NSYNC for $150 million over the name, because he said there would be no NSYNC without him and he was NSYNC. The judge ruled in favor of the boys saying that her teenage daughter who had a poster of NSYNC would immediately recognize the five boys as NSYNC and most definitely not think that Lou had anything to do with them.
Over the next few years, all of his bands either disbanded or sued him to get out of their contracts with him. Though he no longer had his hands in any of the bands’ business, he was still receiving royalties from both NSYNC and Backstreet Boys. Lou bought a 12,000 square foot lake house, two condos in Orlando, two penthouse in Vegas, a house in Hollywood, an apartment in Manhattan, and two Rolls’-Royces. He tried to sign other musical acts, but the only one that had any success was Aaron Carter. Lou then co-produced a tv series called Making the Band. The first season focused on Lou holding auditions across the country for a new boy band Lou was putting together that would then be signed to his very own record label, Transcontinental Records.
None of his other musical groups were able to bring in the kind of cash NSYNC and Backstreet Boys did and by 2003, Lou started taking out loans to cover the cost of his high living. He put up everything he owned as collateral, all the houses, airplanes, and his band royalties which got him about $156 million in return.
In 2004, a Chicago man named Joseph Chow died of pancreatic cancer at the age of 72. Chow had invested a lot of money into Trans Con and saw it as an investment that would help his family after he died. He had also loaned Lou a large amount of money that totaled around $14 million after interest. When he did die, his family approached Lou and told him that they would like to pull all the money out of Trans Con. Lou said that he could put together a payment plan of $100,000 every quarter until the $14 million was paid out, which would take about 35 years to pay off if interest no longer accrued. When they asked about their father’s shares in Trans Con, Lou said Chow’s shares were worth about 10 cents on the dollar.
The Chows hired a lawyer and almost immediately Pearlman sued them, seeking to stop the repayment of the loans. Lou said he had a forbearance letter signed by Joseph Chow that said his loans to Lou would be forgiven if Lou didn’t want to repay them. The Chows filed a counterclaim against Pearlman and their lawyer started his discovery into Lou’s finances. The lawyer subpoenaed the accounting firm that certified all of Lou’s financial statements. However, when the server went to deliver the subpoena, he had to call the lawyer back and say “there’s no accounting firm at this address, just a secretarial service.” The secretary that worked at the building told Chow’s lawyer that Lou paid her take calls for him. When a call came in for Lou, she would just forward it to Lou.
It was becoming more and more obvious to Chow’s lawyer that Trans Con was a massive ponzi scheme. Lou was using his other businesses and several bank loans to pay for the interest checks he would send to his hundreds of investors. Lou took out his last loan in August 2006 to pay investors, but he wasn’t able to find anyone else to loan to him after that. When the investors stopped receiving their interest checks, they soon started to look into Lou’s business dealings as well. Some tried to get back their life savings, but there was no money there to recuperate. When Lou’s childhood friend, Francisco Vasquez, tried to take out $100,000 from his account with Lou, Lou had to tell him that the money was gone. On November 11, neighbors called the cops to check on Vasquez because he had heard Vasquez’s car running in his garage for several hours. The police found Vasquez dead in his 1987 Porsche with a T-shirt wrapped around his head.
The Florida Office of Financial Regulations began to investigate the Trans Con retirement account program in the fall of 2006. Lou started to sell off all of his vehicles, laid off Trans Con employees, and stopped paying on his loans. In January of 2007, an Orlando judge placed Trans Con in bankruptcy after a group of banks submitted a petition to do so. Then a few days later, Florida charged Lou Pearlman with operating a Ponzi scheme. The FBI raided Lou’s home in Orlando to find evidence of how deep this ponzi scheme went. They found $317 millions were missing from the Trans Con retirement accounts along with the $156 million that Lou had received in bank loans. Lou had been able to escape to Germany before this all went down. He tried to transfer $250,000 from his account at the Bank of New York, but the account was frozen before the transfer went through.
After that, there were reported sightings of Lou in Israel, Belarus, and Brazil over the next few months, but no one was able to pin him down. Then in June, a German couple was vacationing in Bali and noticed a man who looked like Lou Pearlman at their resort. The man ran into Pearlman later at the resort and just knew it was him, so he secretly took a picture of Lou. The German man emailed the picture to a Florida journalist who had written several articles about Lou, who then turned over the photo and information to the FBI. FBI agents working at the American Embassy in Jakarta arrived at the resort the next day. They arrested Lou, who had been registered at the resort using the alias “A. Incognito Johnson.” Checking his passport, they saw that Lou had been in Panama right before coming to Bali. US Marshalls flew Lou to Guam where he stayed in jail for a month before being moved to Orlando in July. Federal prosecutors indicted Lou Pearlman on three counts of bank fraud and single counts of both mail and wire fraud which, combined, carried a maximum sentence of 130 years.
The judge deemed him a flight risk and denied him bail. Lou stated that he was too poor to hire his own lawyers so he was assigned a public defender. While in prison awaiting his trial, Lou decided to work on a new television show he was creating. It was called “Second Chances”, would feature losers from competition shows like American Idol and America’s Next Top Model and would try to create a comeback. The show would be hosted by a celebrity that had had run-ins with the law, some of Lou’s picks were Paris Hilton, Mel Gibson, and Kelsey Grammar.
In March of 2008, Lou entered a plea deal where he plead guilty to money laundering, bank fraud, bankruptcy fraud, and investment fraud in exchange for a maximum 25 year sentence with a reduction in sentence of one month for every million dollars that he was able to put back into investor’s pockets while he was in prison.
Lou suffered a stroke in 2010 while serving his sentence in prison and was diagnosed with an infection in a heart valve. Pearlman received surgery to replace the heart valve. Pearlman survived for another six years and then died on August 19, 2016 from cardiac arrest at 62 years old. It is estimated that Lou scammed around 1,800 investors out of their money and stole about $500 million.
“The Boy Band Con: The Lou Pearlman Story” a documentary by director Aaron Kunkel and producer Lance Bass
“Mad About The Boys” Episode 9 from Season 1 of Vanity Fair Confidential
“The Hit Charade: Lou Pearlman, Boy Bands, and the Biggest Ponzi Scheme in U.S. History” by Tyler Gray