Lou Pearlman is a man of many talents. He could not only successfully manage two boy bands to fame, *NSYNC and Backstreet Boys, but also effectively hide the fact that he had stolen from these same boy bands’ members for years (Abramovitch, 2014, p. 1). However, this Ponzi scheme he created started well before he started in the music industry. Seth Abramovitch reported in “Lou Pearlman Clings to His Boy-Band Dreams: The First Prison Interview” that Pearlman stole as much as $500 million spanning over two decades, from nearly 1,700 investors (2014, p. 1). Additionally, Pearlman stole $150 million from banks, for a total close to nearly half a billion dollars (Lieberman, 2007).
Pearlman is thought to have started his criminal career in the 1980s with a sketchy, but not proven to be illegal, penny-stock operation (Abramovitch, 2014, p. 1). Abramovitch describes the operation, saying, “An initial public offering in 1985 fir Airship International raised $3 million in a widely suspected ‘pump and dump’ scheme. By 1989, he was traveling in a private jet and had relocated to temperate Orlando,” (2014, p. 2). From there, in Orlando, he began to promote his start-up of a company, Trans International Airlines (Abramovitch, 2014, p. 1).
Pearlman started this company on paper and asked investors to support his fleet of charter-jets for celebrities, eventually employed by celebrities, such as Paul McCartney, The Rolling Stones, Michael Jackson, and Madonna (Lieberman, 2007). The investors were unaware of the fact that these airplanes they were shown only existed within the brochures and that, as officials later found, that the plane depicted in the brochure was not even real, but just a toy that Lou Pearlman bought and kept on his bedroom dresser (Abramovitch, 2014, p. 2). The money invested in Trans Continental Airline, as told to investors, went into EISA (Employee Investment Savings Accounts) (Lieberman, 2007). Lieberman explains:
Pearlman got investors to put money into what he is accused of billing as a secure, interest-bearing savings fund. But he didn’t reinvest their cash in profit-making ventures… The filing alleges that he pocketed much of the money and often hid the fact by shuffling money among dozens of companies he controlled, including his best-known firm, Trans Continental Enterprises. (2007)
However, as explained in Lieberman’s article, these accounts do not correlate with anything in the corporate business world (2007). It is suspected that he named this opportunity for investors based on, “ERISA (an acronym for the federal Employee Retirement Income Security Act that guarantees pensions,)” to increase the confusion of its legitimacy (Lieberman, 2007).
The scam of Trans Continental is what spurred the creation of Pearlman’s empire of Ponzi schemes with 84 business, all under the head of Trans Continental Enterprises (Abramovitch, 2014, p. 2). Another one of these businesses came about, as told by Pearlman, when he remembered...