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Pearlman can't pay up

The court-appointed receiver says Pearlman's assets are barely a drop in the bucket compared with the $477-million owed to investors and banks.

By HELEN HUNTLEY
Published March 13, 2007

The government's got Lou Pearlman's 2004 Rolls-Royce Phantom, but Jerry McHale said Monday he's still a long way from finding enough assets to make any meaningful restitution to investors in Trans Continental Airlines.

"We are faced with an arduous task," said McHale, the court-appointed receiver for the remains of music promoter Pearlman's Orlando empire.

Trans Continental owes more than $317-million to investors and about $160-million more to banks. More than 1,800 people invested in Pearlman's enterprises, most of them thinking they were getting an FDIC-insured savings account.

McHale said he will be "very surprised" if he can find as much as $100,000 in cash. He said Pearlman owes Bank of America $130,000 on the Rolls, which had a $6,600 monthly payment. McHale said he also has recovered a 2005 Cadillac limousine and two trucks, and expects to be able to recover two touring buses.

"The only airplanes that we have located are fully encumbered, non-operational or have been repossessed prior to my appointment as a receiver," he said.

McHale said he expects to net $150,000 to $200,000 from the sale of the smaller of Pearlman's two Windermere homes after paying off the $1.5-million mortgage plus overdue taxes and closing costs. However, he said he doubts that Pearlman's mansion will bring enough to retire its $15-million mortgage.

McHale said he will need to hire a German lawyer to try to establish rights to royalties being earned by Pearlman's current hit boy band, US 5.

Pearlman is believed to be out of the country. The German newspaper Express published a story Friday quoting an unnamed source who claimed Pearlman recently showed authorities where his money was being kept in the Cayman Islands and Switzerland.

The story said the person blamed a missing former business partner and a lawyer for Pearlman's problems.

Adding to the drama, lenders are trying to force Pearlman, Trans Continental Airlines and Trans Continental Records into involuntary chapter 11 bankruptcy.

As a result of that process, McHale could be displaced as receiver at some of the Pearlman companies.

Church Street Station, the Orlando office, retail and entertainment complex, will be auctioned April 5 by the U.S. Bankruptcy Court in Orlando. It is owned by F.F. Station, another Pearlman company in bankruptcy.

Helen Huntley can be reached at hhuntley@sptimes.com or (727) 893-8230.

[Last modified March 12, 2007, 22:44:53]