Lou Pearlman Created the Backstreet Boys. Then He Went to Prison for One of the Biggest Ponzi Schemes in History.
Before Lou Pearlman was exposed as a grifter of the finest degree and an orchestrator of one of the biggest Ponzi schemes in U.S. history, he was a star-maker. He put together acts like Backstreet Boys, N*SYNC, and O-Town and transformed Orlando into the mecca of pop music. Now, his rise-and notorious downfall-are on display in a YouTube Originals documentary, The Boy Band Con: The Lou Pearlma Story, produced by Lance Bass.
It all began with a lawsuit.
As the first cousin of Art Garfunkel, Pearlman was interested in getting rich via the music industry from a young age. But while he managed a band in high school, that’s not how the Flushing, New York native found his first cash windfall. Instead, it was a settlement from a lawsuit he filed that made Pearlman a millionaire. In the 1980s, one of his first companies, Airship Enterprises Ltd-not the aviation company(-ies) that would eventually put him in jail-dealt blimps. Except, and this was a problem, they didn’t have any blimps to deal. So when Pearlman persuaded the Jordache Jeans ownership to sign a lease with him, he scrambled.
As Vanity Fair recounted in their 2007 expose, he found the balloon materials in California and a contractor in New Jersey and the vehicle never survived its first flight. After a years-long battle with his insurer, Pearlman was awarded $2.5 million in damages. His next move, Airship International, also in the business of leasing blimps, raised $3 million in a 1985 public offering and earned a contract with McDonalds. By 1989, as that same VF report says, Pearlman was flying private and owned a 6,000-square-foot vacation home on a leafy street in Orlando.
Backstreet begins…
Pearlman relocated with his business to Florida in 1991 and shortly after, in early 1992, began jockeying for an entry point into music. He placed an ad in the Orlando Sentinel calling for teenage boys to audition for a new act he was putting together. Several dozen young men auditioned for Pearlman in his home (A.J. McLean was actually one of the first respondents) and several hundred more arrived at the open casting call he held the next year. Eventually the lineup that catapulted to superstardom was Backstreet Boys, which joined Brian Littrell, Nick Carter, Kevin Richardson, and Howie Dorough with McLean. And while Pearlman’s blimp business began to fail, the rest of his varied portfolio, which included the Chippendales, several TCBY yogurt outposts, N*SYNC, O-Town, and more, took off.
And so does the inappropriate behavior.
“I tried to expose him for what he was years ago,” Jane Carter, Nick Carter’s mother, told Vanity Fair in 2007. “The financial [scandal] is the least of his injustices.” Allegations of Pearlman making inappropriate overtures towards members of his groups, especially to the youngest member of BSB, began in the late ‘90s. (VF’s 2007 investigation a decade later is the most comprehensive; several artists and family members went on record, recalling a wide swath of questionable actions, ranging from Pearlman exposing himself to watching porn with the boys.) None of the men who have been rumored to have been coerced into sexual acts with Pearlman, though, have gone on record. “None of these kids will ever admit anything happened,” one attorney who has sued Pearlman told VF. “They’re all too ashamed, and if the truth came out it would ruin their careers.”
As Jezebel notes, The Boy Band Con spends surprisingly little time on this subject, though it does include an anecdote from O-Town’s Ashley Parker Angel who recalls an uncomfortable encounter with Pearlman in the manager’s hotel room. Pearlman asked to give Angel a massage, saying he minored in physical therapy in college. “All the red flags start pumping up, like, oh this is what everyone has been talking about,” the singer says in the doc. “Then the phone rings and its my manager. He goes to answer the phone and I got the hell out of there. That’s the only experience I had with Lou that felt like, okay, this definitely feels like its crossing some sort of line.”
And the shitty contracts.
Pearlman’s acts dominated the late ‘90s and early ‘00s, selling millions upon millions of records and even more tickets on global tours. But the only person getting rich was Pearlman. As the Washington Post reports, one scene in the documentary recalls a dinner between N*SYNC, their families, and Pearlman in Los Angeles. Their self-titled debut had officially sold 10 million copies and the five men were excitedly waiting for their first real paychecks. “I’m thinking I’m the king of the castle at this point,” Chris Kirkpatrick says to the camera. That feeling crashed upon opening their envelopes: barely four figures awaited each of the young men. A "knowledgeable source" confirmed to Billboard in 2014 that members of Backstreet Boys never earned more than $300,000 despite their remarkable success. Pearlman, of course, made millions.
There are a great many precedents for Pearlman in the music industry. New Order famously cut ties with their manager, Maurice Starr, who also repped New Kids on the Block, when he presented them each with a check for $1.87 following a massive, country-wide tour. Elvis Presley could never tour abroad because Colonel Tom Parker-who, by the way, was taking 25 percent, and sometimes more, rather than the standard 10 percent of the King’s contracts-was an illegal alien in the United States and would risk being turned away upon re-entry. When David Bowie parted ways with Tony Defries, who was living lavishly while Bowie struggled to afford rent and food, he had to give him 50 percent of his back royalties and 16 percent of his gross earnings over the next seven years.
But also, one of the largest Ponzi schemes in history.
In 2006, Pearlman was sued by the State of Florida, and eventually found guilty, of defrauding more than 2,000 investors out of more than $317 million over the course of 15 years. A dozen banks also filed suits against him for more than $130 million in bank loans. His companies, Trans Continental Airlines Travel Services Inc. and Trans Continental Airlines Inc., which he moved to the state in 1991, were total shams. He fled the authorities and was eventually captured in Indonesia in 2007. He was charged with three counts of bank fraud, one count of mail fraud, and one count of wire fraud. He was sentenced to 25 years in prison; he died while incarcerated in August of 2016.
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