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Boy-band creator Pearlman apprehended in Bali

June 16th, 2007

The music ran out on Thursday for onetime boy-band impresario Lou Pearlman.

After spending months overseas avoiding charges that his Florida-based company ran an elaborate Ponzi scheme, Pearlman was apprehended by Indonesian officials at a hotel in Bali and turned over to the FBI. He was taken to Guam and charged with bank fraud.

The U.S. Attorney’s Office in Tampa said in a criminal complaint filed March 2 and unsealed on Thursday that $100 million owed to investors was missing at his Trans Continental Airlines.

“We expect that he will be returned to Florida,” said Steve Cole, a spokesman for the U.S. Attorney’s Office in Tampa.

The Justice Department likely will be first in line to take on the man who created the Backstreet Boys and ‘N Sync and for a time was seen as one of the most powerful people in the music business.

Florida state officials and others have alleged that Pearlman misappropriated about $317 million from more than 1,800 individual investors and an additional $150 million from banks.
“This is a major league alleged fraud criminal prosecution,” says Roma Theus II, who chairs the Defense Research Institute’s corporate integrity and white-collar crime committee.

“Mr. Pearlman can anticipate that he will probably not be released on bond, in that he has been a fugitive from justice, and that he will remain incarcerated unless a jury comes back and acquits him,” Theus adds.

Pearlman got investors to put money into what he is accused of promoting as a secure, interest-bearing savings fund. But he didn’t reinvest their cash in profit-making ventures, the Florida Office of Financial Regulation said in a circuit court filing early this year.

It also charged that investors received quarterly reports from an accounting firm that was “actually the location of an answering service whose services were paid for in part” by Trans Continental Airlines “to receive, transfer and conceal investor funds.”

The Florida officials were unable to reach Pearlman after he left the country in January, two months after one of his oldest friends and partners committed suicide and as state and federal officials swarmed in on what could be one of Florida’s biggest fraud cases.

A state circuit court in February put Pearlman’s odd collection of entertainment and travel companies into the hands of a receiver, who’s looking for assets to use to repay investors and creditors.

Source: David Lieberman, USA TODAY

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