Remorse lacking from Lou Pearlman in court
Pearlman admits his guilt, but offers no apologies for his scam.
By HELEN HUNTLEY, Personal Finance Editor
Published March 7, 2008
Lou Pearlman, in his Orlando office before his empire unraveled, pleaded guilty on Thursday to stealing more than $300-million from banks and investors. His sentencing is set for May 21.
[AP photo (2006)]
ORLANDO - Lou Pearlman faced a federal judge Thursday and, to the snickers of some in the courtroom, swore to tell the truth. That truth, he said, is that he lied - over and over again for years on end, spinning an illusion of prosperity that allowed him to steal more than $300-million from banks and investors.
"I am accepting full responsibility," he told U.S. District Judge G. Kendall Sharp, who set sentencing for May 21. However, Pearlman did not apologize or show any sign of remorse.
Pearlman, 53, lived a glamorous life as the producer behind the boy band phenomenon of the 1990s, launching the Backstreet Boys, *NSYNC and other bands. Now he faces up to 25 years in prison after admitting guilt to four counts of conspiracy to defraud banks and investors, money laundering and submitting a false claim in bankruptcy court. Under the plea agreement worked out with prosecutors, he hopes to win a lesser sentence by helping the government find assets and by pointing the finger at accomplices.
Prosecutors and bankruptcy trustee Soneet Kapila say they plan to quiz Pearlman and follow the leads he offers as they try to recover money for his victims. As further incentive to cooperate, Pearlman faces the possibility of additional criminal charges, including perjury, if he lies to them.
But no one knows how much money might be out there to potentially recover. While Pearlman was on the run last year, he lived on credit cards, and after his arrest, he qualified for a public defender.
"There is a fair amount of money still unaccounted for," bankruptcy trustee Kapila said. He said he hopes Pearlman will be able to lead investigators to assets that were transferred to other people. Creditors have filed more than $500-million in claims against Pearlman and his companies in bankruptcy court, and so far Kapila hasn't recovered enough to pay even his own fees.
"I hope they find something," said Domingo Lozada, 60, who watched the proceedings. The unemployed Spring Hill truck driver said he and his wife invested $200,000 with Pearlman thinking they were making a safe investment. "We're really struggling," Lozada said. "The money we put in there was our life savings."
But another investor in the courtroom said he's not optimistic.
"I've already written it off," said Dave Mueller, 66, of Brandon. The retired seafood salesman said he and his wife invested about $50,000 on an adviser's recommendation. "If they put him in prison for 25 years, it isn't going to do me any good. But if he got out, he'd probably just try another Ponzi scheme."
The balding Pearlman looked visibly healthier than he did at his arraignment last July. His complexion was rosy and he had slimmed down from size 6X to size 5X prison garb. He stood at a wooden lectern flanked by his lawyers as Judge Sharp went through the plea agreement point by point, asking him if he did what the government accused him of doing.
"Yes," Pearlman replied over and over in a clear voice. Yes, he lied about investors' funds being FDIC-insured. Yes, he lied about having a $50-million trust fund. Yes, he gave banks phony tax returns. Yes, he used a dead man's name on company documents. Yes, he understood that he was pleading guilty.
Periodically Pearlman elaborated, sometimes referring to unnamed accomplices. When Sharp asked if Pearlman had prepared the false financial statements attributed to a fictitious account firm, Pearlman replied, "They were prepared by someone else for us."
Sharp asked Pearlman several times about the money he raised. Pearlman said he spent it on "different investments, different expenses I had." He said those included "artist development, living expenses, working capital" and costs at Church Street Station, where his companies had their headquarters.
Although the crimes Pearlman acknowledged carry a potential $1-million in penalties, Sharp indicated there is "no need to additionally impose a fine" since a $200-million judgment is being entered against Pearlman and he is being required to forfeit all his assets toward that judgment. He also is being ordered to pay restitution.
However, more assets have to be recovered for investors to see any benefit.
"I've never seen any substantial payments under court-ordered restitution," said Jerry McHale, the former state-appointed receiver in the Pearlman case. "The court is doing exactly as it should do, but the judge can't get blood out of a stone. It's cruel to have people thinking that because the court orders restitution that the restitution fairy is going to leave it under their pillow some night."
Pearlman's Windermere mansion, where he once entertained his boy bands, is scheduled to be auctioned Saturday afternoon. But like most of Pearlman's other assets, it was heavily mortgaged and banks with liens get paid from the sale of property before other creditors.
Helen Huntley can be reached at email@example.com or (727) 893-8230.
Lou Pearlman is scheduled to be sentenced May 21. Victims who would like to explain the impact his crimes had on their lives can do so by writing John Mason, supervisor, U.S. Probation Office, Suite 1400, U.S. Courthouse, 401 West Central Blvd., Orlando, FL 32801-0140. The probation office will prepare a report for U.S. District Judge G. Kendall Sharp to consider in Pearlman's sentencing.
[Last modified March 6, 2008, 23:22:57]
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