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The former boy band producer agrees to cooperate fully to untangle his web of lies.
By HELEN HUNTLEY, Personal Finance Editor
Published March 5, 2008
Now that former music producer Lou Pearlman has agreed to plead guilty to federal fraud charges, prosecutors are expecting him to talk. A lot.
His plea agreement, filed in federal court Tuesday, calls for him to "cooperate fully" in the identification and recovery of assets, to give interviews and to produce documents. The objective: recovery of some of the more than $300-million he admits he stole from investors and banks.
Pearlman, who is scheduled to enter his guilty plea in court Thursday, hopes to earn a reduction in the 25-year maximum sentence U.S. District Judge G. Kendall Sharp could impose.
The onetime music mogul, who launched *NSYNC and the Backstreet Boys, agreed to make full restitution to his victims. However, he's already told the court he doesn't have any money he qualified for a public defender and there is no penalty for poverty. But if he ever acquires any assets in the future, the obligation to make repayment is there.
The plea agreement contains a substantial penalty for failing to provide full and honest disclosure and cooperation. Pearlman, 53, could be prosecuted for perjury and numerous additional fraud charges could be brought against him.
Pearlman has agreed to plead guilty to four counts, two of them conspiracy charges related to investment fraud and bank fraud, and involving mail and wire fraud, one count of money laundering and one count of bankruptcy fraud.
He admits in the agreement to running a double Ponzi scheme, raising money from both investors and banks through lies and falsified documents and then using part of that to pay off earlier investors and lenders as well as appropriating money for himself.
Disclosures in the plea agreement include:
- Trans Continental Airlines, which Pearlman presented to investors and banks as a successful charter airline, had no revenues, no planes, no employees and no contracts with airlines.
- The last tax return Pearlman filed, for 2001, showed a loss of $3-million. Fake tax returns he supplied banks to get loans showed income of more than $10-million every year.
- While he was on the run last year, Pearlman used e-mail to keep up to date on his personal and corporate bankruptcy cases and to direct others to prepare false documents to be filed in bankruptcy court.
- Documents found in Pearlman's briefcase when he was caught in Indonesia last year show he was creating a seal and other documents to try to make German Savings Bank look like a legitimate institution.
- Unnamed co-conspirators played key roles in the frauds, including preparing false documents, lying to investors about how the savings program worked, covering up facts to keep government investigators at bay and using investor and bank money for their own benefit.
Helen Huntley can be reached at email@example.com or (727) 893-8230. Go to blogs.tampabay.com/money to see a copy of the plea agreement and read more about the Lou Pearlman case.
[Last modified March 5, 2008, 15:36:30]