How Lou Pearlman got banks to give him millions

A document filed in the Integra Bank lawsuit (click here) provides a glimpse into how Lou Pearlman and Trans Continental Airlines were able to borrow so much money from banks. Integra Bank said the keys were false financial statements and the issuance of phony stock as collateral. The accountants who supposedly prepared the company's financial statements either didn't exist or were unlicensed and the statements failed to mention at least $62-million in debt owed other banks.

According to Integra, Trans Continental Airlines was only authorized to issue 60 shares of comon stock and the 190,000 shares of convertible preferred stock it pledged to Integra as collateral. But that didn't stop Pearlman from issuing additional shares that Integra says were invalid. The bank said Trans Continental pledged the very same bogus shares to two other banks.

A final judgment for $9.8-million has been recorded against Pearlman in Seminole County Circuit Court records in favor of Washington Mutual Bank. The bank gets Pearlman's interest in Back street Boys Productions Inc. and 'NSync Productions Inc., which were pledged as security for the loan. 

Today's New York Post has a story about Pearlman's association with Jerome Rosen of Norbay Securities and what the paper called a "pump and dump" scheme to inflate the price of stock in Pearlman's company Airship International.

Comments

Kenneth is Alec Defrawy. He writes the same way and says the same things he said on his website and in numerous other posts online in forums.

Anyway, where is John MacGregor today? Is he still working in Tampa for the OAG?

Should Tampa scam victims in the Pearlman Ponzi Scheme send complaints to him?

Trevor, had a chance to read your sympathetic noble post about Faschetti. He deserves any unpleasantness he has to endure. He thought nothing of calling MY home to lie to me about where my money was-in HIS personal bank account shared with Pearlman. See the states lawsuit.
The man has seriously affected our families future and well being, to say nothing about sucking the joy right out of our lives, and had the gall to try and con me into believing all was well.
What kind of person does that? You tell me.

[anonymous]

Is this the same Alec Defrawy that I have been reading about in this blog?

from the SEC filings for Pearlman's Trans Continental Talent, Inc.

http://www.sec.gov/Archives/edgar/data/741012/000109000202000477/otg10ksba1.htm
FORM 10-KSB

OPTIONS TALENT GROUP

ALEC DEFRAWY AND RELATIONSHIP TO THE PARAMOUNT TRUST AND GENERAL SERVICES CORPORATION

General. Through a consulting agreement between the Company and General Services Corporation (“GSC”), Ayman A. El-Difrawi (who is referred to herein as “Alec DeFrawy”) renders consulting services to the Company and TCTI, as described below. Mr. DeFrawy is the son of Rafiah Kashmiri, a director of the Company. Ms. Kashmiri is also the trustee and a beneficiary of The Paramount Trust, which Trust, as previously disclosed, is the record owner of 53,788 shares of Common Stock and 1,060,606 shares of Series C Preferred Stock, which convert into 636,364 shares of Common Stock, totaling, assuming conversion of the Series C Preferred Stock, 690,152 shares of Common Stock, or 13.0% of the Company’s Common Stock as of October 15, 2002. See “Item 12. Security Ownership of Management and Principal Stockholders” for additional information.

In relation of a 1991 offence, in 1995, Mr. DeFrawy pled guilty to a criminal charge of conspiracy to commit bank fraud and wire fraud. This charge arose from the same indictment to which Mr. Elliot pled guilty in the United States District Court for the District of Columbia. As part of his sentence, Mr. DeFrawy was ordered to pay restitution.

[Constitutional]

Les---Cold Fusion. Those two words can put you in prison.

[Klaas de Vries Jr]

And I am sorry I am lacking the skills in English language to write a rant as beautiful as yours, Les. Regards from Groningen, the Netherlands.

[Kenneth]

Les/Klaas

I’ll answer your questions together as you are both the same person

First to the Klaas identity

When two people independently tell the truth it usually sound pretty much the same, so surprisingly my version and Alec’s sounded the same.

Now to the Les identity

First, I am not Jason Hoffman

Second before Hoffman/Bell ever got involved with emodel they hired an attorney to describe the business to the FTC and ask whether their involvement at any level would violate the FTC order. In addition every 6 months the same attorney met with the FTC to apprise them of any changes in the business model and to ask for the FTC’s suggestions. Each time the company’s position was that if the FTC had any suggestions the company would immediately implement them. n 5 or 6 such meetings the only suggestion the FTC had was to include a minimum of 5 photo’s in the base digital composite card (up from the one emodel was offering) and emodel immediately complied including the number of photos offered to 10.

So your assumption that Bell/Hoffman were hiding from the FTC is 100% wrong, they refused any involvement until they gained the approval of the FTC. Those meetings were the reason the FTC never acted against the company, they had full knowledge of all company activities from day one.

Defrawy was paid a salary as a consultant. What he did with his salary was his business and irrelevant to the company or whether it was legitimate.

The company promoted over 1,000 agencies because as the number grew daily the company did not wish to keep changing marketing materials. Pundits such as yourself would simply point to two varying numbers and show it as proof that the information was fraudulent. The real number was well over 10,000 agents and clients and I also have the list – I acquired it through legitimate means and I can cite over 1,000 very legit companies using the service.

I never indicated anywhere that I was aware of the savings plan scam. I found out about it for the first time during the recent press articles in late 2006 early 2007. The difference is I didn’t write a pamphlet and hold myself out to be a great investigator. I did not investigate maybe the largest scam in history for years and write a pamphlet about it all the while being 100% wrong.

You did

You owe these investors an apology, why don’t you be man enough to apologize with one of your identities.

[Constitutional]

Don't forget--all of the sales transactions were recorded. All of it. And the consumer submitted affidavits contradicted the consumers own recorded statements in the sales transaction. Now where are we going to find an attorney to file suit with those facts. Probably a piss poor one or one from Canada?

[Constitutional]

And one more matter to address: if you review the high pressured sales tactic complaint, which I understand was one of Dowd's counts in her poorly drafted and rather unfinished complaint, it would be legally impossible to allege and prove such activity when there was a three day waiting period, where the consumers were asked to read all the literature provided by the company, before the consumation of the sales transaction. Three days. Right---good one Jackie.

[Constitutional]

Les, taking it that you are not an attorney, and you are from dreadful limp-wristed Canada---you probably aren't familiar with the US Constitution--which is a constituting document for all that lies below the border--you may want to specifically review this amendment that wizer men than you required to be done before ratification of the US Constitution.

Amendment IV

The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

[Constitutional]

Let's jolly well see--part of the problem with the investigation involves two words: cold fusion. When a governmental agency assists (willingly) private individuals as they hack into a company's computer (that is being investigated by that government agency)---it becomes a rather sticky wicket. We all suspect that Ms. Dowd liked getting those "intercepted" emails sent to her public email address. It's all public records---go see. And ask the Florida Bar if this is a problem.

BTW---hacking into a database is a felony in federal and state courts.

TaTa.

[Les Henderson]

Okay, so you are Jason Hoffman aka Jay Wallace or whatever name you used to avoid being in violation of an FTC order prohibiting you from running the same model scam (according to them, not me) you had with Ralph Edward Bell and Alec Defrawy. Did I say run? I meant "consult."

It doesn't matter who you are but clearly, when you suggest that a 512 page book freely available to peruse at Google books or order on Amazon is a pamphlet, your own credibility is diminished far more than mine.

By the way, I have the entire agency and client list which you now claim had 10,000 entries. Even the promoted number of 1000 was fraudulent. Plus, if you extract all the scammy scammers who simply used your service to double dupe your victims you might have been left with 10.

Of the over $60 million the operation brought in, how much of that do you suppose Alec Defrawy used to repay the court-ordered restitution of $2.3 million he stole from victims of an earlier employment scam? None.

Since you clearly knew about the savings plan scam long ago, why exactly are you blaming me for not notifying the authorities?

That's like saying I should now be notifying them about Defrawy's phishing scams instead of his continued model business. Unless you are aware of some crime he is committing that is even more serious, that is? I'd be happy to avoid your future wrath by getting with the program right away.

[kenneth]

Les,

You when you say book, I assume you are talking about the pamphlet you stapled together have been trying to hawk online. Basically you have gathered some public documents and created a set of conclusions that were 100% wrong.

Then when the state cleared TCT you immediately concluded that the whole thing was a conspiracy.

Here are the facts

Defrawy et al built a modeling business that grew quickly and needed cash and a face.

Pearlman needed a front after losing the Bands to continue with savings plan scam.

He promised the world to the Modeling business owners to be able to take control.

He lied did not keep his promises and even put his lackeys on payroll of the modeling company.

The modeling company received complaints from two sources

1. Models – after signing up if they did not achieve immediate success they complained.
2. Scouts – In sales there is something known as the 80 – 20 rule, 20% of the people do 80% of the work.

With the media happy to jump on a sexy story heavy on sizzle and light on facts it increased the complaints.

Dowd a government employee seeking stardom, but quite lazy was happy to jump into the mix giving interview after interview. After two years she could not get a case together. Finally the state told her to stop doing interviews – either file a cse or drop it.

When she kept doing the interviews she was fired.

When McGregor investigated he found that:
1. The number of complaints were grossly exaggerated
2. The complaints did not allege illegal activities – for example many complaints were saying such things as the company did not get back to me in two days etc
3. Many complaints relied on inaccurate posts. For example modsels signing up and then saying they read that no agencies used the service. The models assuming the posts were true, whn in fact the modeling business had over 10,000 agencies and clients using the service.
4. The scouts and moidels had signed explicit contracts stating what they were getting and what the terms were. So complaining afterwards was just sour grapes.

McGregor was not looking for a financial crime because at that time none was alleged by the modeling company (none has to this point). The company was separated from the Pearlman businesses until Defrawy left – then Pearlman did what he wanted and who knows what happened to the books.

The problem for Pearlman was that the negative publicity started to cause investors in his unrelated savings program to pull money out.

Defrawy and his team left after less than a year with Pearlman out of disgust with his business ethics – the last straw came when Pearlman let on he intended to shut down the offices screwing the franchise owners.

Pearlman filed the hundred million dollar suit as a publicity stunt, to reassure his investors that the “bad element” was gone.

Naturally the media all took the bait and ran the story. No one noticed that the lawsuit had never been served and later quietly dropped.

Les, you and others like you that focused the government on the modeling company and saying models and scouts were ripped off were the problem. Lou was happy to fight that battle and that is why he sued you over and over. He was keeping people away from the real scam.

You owe everyone who lost money an apology – you were a key part (even as a ignorant dupe) in the gigantic cover-up

PS - I am going to save you the trouble of calling me Defrawy as you do with anyone who posts something you do not like - I am not Defrawy

[Les Henderson]

Kenneth,

When you say the modeling scam was clean I think you mean to say "cleaned out." Lou managed to transfer all the assets out of Options Talent immediately prior to its going into bankruptcy, leaving his creditors on the hook while he kept the assets.

It's that kind of preferential treatment and unjust enrichment that screams bankruptcy fraud, not even mentioning his highly unorthorodox meeting with the trustee while she was on vacation in Mexico.

Then he has the nerve to sue me and other fraud awareness advocates using his new company Fashion Rock, for offences which are alleged to have occured at the bankrupt company he has dissavowed ever belonging to, after magically rescinding the merger.

And don't forget that Lou himself sued several of his associates including Defrawy, Bell and Randell because they were "running a scam" and ruined his good name. If you can't believe Lou on this, who can you believe?

Certainly not any of the thousands of models or scouts who officially complained to the AG's office since you will suggest that sworn affidavits carry no weight.

And never mind the hundreds of negative news reports or the fact that New York chased them out of the state after declaring it was a big scam.

I also have the financial records provided by Mark Tolner to John MacGregor but since three auditors quit while examining the company's books and their own bookkeeper reported fraud, I don't know how accurate they really are. Still, perhaps Helen will post a link to them for all to see?

I could argue with you for days as you attempt to rewrite history but by then my entire book would be posted here, not that you would believe any one of the five hundred pages.

People should just get "Under Investigation" at Amazon.com and make up their own minds before they listen to any more drivel from a supporter of the criminal Alec Defrawy who ran the model scam or the wayward Lou Pearlman who suckered even him.

It sure sounds to me like someone involved in the model scam sure doesn't want to share a cell with Lou and Tolner for tax fraud, franchise fraud, investment fraud, racketeering, etc.

[anonymous]

Kenneth

So in this McGregor investigation, it was not necessary to depose the main players and other internal people to get their statements on record regarding the modeling frauds?

Tell you what, lets see what the former employees, including several in the "accounting department" that have now come forward to offer data showing that the modeling/talent business was a fraud have to say.

It will also be interesting to see what the 3 auditing firms have to say about the "missing" $20 million and other discrepancies in the accounts of Trans Continental Talent, Inc.

I am sure that the millions of dollars that were "transferred" to Tolner, Defrawy and Daly from Trans Continental Talent, Inc. will be fully investigated by the multi-agency task force. It will be interesting how this would compare to the conclusions of a "clean" modeling/talent company that McGregor came up with.

In fact, speaking of depositions, I am sure that McGregor himself will be deposed for several days in order to determine how he could have concluded that Pearlman's Trans Continental Talent, Inc. was "clean".

[Kenneth]

To answer your question he did not subpoena any records because TCT (at the time) told the state (Including Dowd) that they would provide 100% access. The state was invited to come to the office talk to any and all employees and search through any records.

The forensic investigator was able to access every bank account and view any information he wanted. Subpoena’s are required when the company is stonewalling..

Also you failed to mention that Dowd did not issue any Subpoena’s in her two-year investigation.

The Feds will find what the state did – modeling was clean. And Lou had no reason to siphon funds – he simply placed his flunkies (and himself) on the modeling company payroll.

[anonymous]

Kenneth

Lets talk about this 3 month investigation of the frauds at the talent company by John McGregor of the Florida Attorney General's Office.

How many supoenas did he issue and how many depositions did he take during the investigation? - believe it or not, he issued Zero supoenas and took Zero Depositions. Now, can you please tell us how complete McGregor's investigation could be without issuing supoenas and taking depositions?

and another question:

You say that McGregor checked all of the accounting records. By any chance do you know if he found whether funds from the talent company were transferred for the payroll of Trans Continental Records, Inc. a totally unrelated company that was fully owned by him?....but don't worry about these accounting irregularities, the Federal Government will fully investigate this matter.

[Kenneth]

Your facts are wrong. I federal forensic investigator spent 2 weeks going through every record of the modeling company. He checked all accounting records, and checked every complaint.

John McGregor spent 3 months investigating the company, which by the way was investigated and cleared by 6 other states.

I don’t care or know what will happen to Tolner, the link was to the document filed by the AG’s office.

The issue is the modeling company was clean. The complaints were basically people told to complain by a smear campaign of bloggers generating complaints.

Pearlman did not buy his way out of that mess, criminals cannot buy their way out of criminal activity. They couldn’t at Enron, Worldcom, or Adelphia. Michael Milken, Bill Gates, and Martha Stewart could not buy their way out of legal problems.

If the modeling company was dirty Christ (the AG at the time) would have gotten more PR mileage by taking down Pearlman than Pearlman could ever pay. Even Elliott Spitzer in NY looked into the modeling company and did not pursue it.

The shame is that because everyone yelled fire about the squeaky clean modeling company, when complaints about the real scam surfaced they were overlooked.

[anonymous]

Kenneth

What do you mean by "poured through the records"

A couple of hours of briefly reviewing a few documents does not mean "poured through the records"

I believe the "records" themselves that are in the possesion of the FAGO show the massive fraud committed by Pearlman, Tolner, Defrawy et al at the talent company.

and now you are saying that the government overlooked the largest ponzi scheme ever and the bank fraud by Pearlman because they were too busy spending 2 hours in their review of the scam talent business?

At the end of the day you are going to see a full goverment investigation of McGregor's actions on this matter, followed by dozens of civil lawsuits against him.

This time there will not be any private meetings in Mexico with bankruptcy trustees.

By the way, is the "Tolner" on the web address of the link that you provided the same Mark R. Tolner, the longtime Pearlman business associate, that was the CEO of Trans Continental Talent, Inc. and a senior officer of Fashion Rock, LLC, two of the relief defendants in the State fraud lawsuit that received $2.4 million in stolen funds from the Savings Plan?

What do you think will be the chances that he will be a co-defendant in the upcoming criminal indictments of Pearlman?

[trevor]

Angry:
Oh I see so your the only one who reads this blog who can comment uless of course they agree with you.

I doubt Fischetti's family had anything to do with your money being taken, least of all his daughter and wife.
I couldn't care less if a retired persons money was taken or a 30 yr olds was taken, age shouldn't matter theft is theft and those responsible should be punsihed their families however should not. Grow up!

[Kenneth]

What evidence do you have that the modeling business was covered up by the state?

Jackie Dowd was not fired for investigating the company. She was fired for giving interviews to the media without evidence of any wrongdoing. Christ told her to file a case if she had one and if not quit going on TV every other day saying she was investigating.

When she kept giving interviews but could file no case (she had over 2 years to do so), they fired her and replaced her with a seasoned well respected AG (John McGregor). He brought in and FBI forensic business investigator and they poured through the records. After a thorough investigation they found no basis for a suit and dropped the case (see his report here http://www.tolner.com/docs/2006_02_03_10_27_41.pdf

The problem is after that modeling fiasco any real complaints were ignored as Lou Bashing. Had the press and many of the people posting on this board (such as Les Henderson) not screamed so loud and without basis that the modeling company was a scam other complaints would have been given more credibility.

The media and Internet pundits that attacked the modeling company are responsible for allowing Lou to get away with this scam. They owe the investors an apology for helping put them in this situation.

[adam]

Helen,

Please continue the coverage.

This is far from over.

Adam

[anonymous]

Kenneth,

you are wrong here

The modeling business did not come out clean. Charlie Crist's Attorney General's Office covered up Pearlman's massive frauds that were committed in the talent/modeling business.

"The fact is everybody was screaming about modeling. The state (and other states) looked thoroughly into the modeling business and it came up 100% clean."

[Angry]

trevor,
I didn't know you were such an expert in class. Maybe if your family, including 4 retirees, were ripped off by a man whom youve known for 30 years, would change your opinion. ripped off for 1.8 million, of which much went through the hands of Fischetti. As for the authorities, we see how that has turned out in the past. MIND YOUR OWN BUSINESS!!!!!!

[trevor]

Angry:

I can understand being upset if you invested money but why would you resort to calling a man's house and bringing his family into it? The authorities are more than capable of handling this and if they can back it up than he will be included in an indictment.
I'm just amazed that the moderator wouldn't delete such a post which invites people to hound a man's family. Classless without a doubt.

[amazed]

Where is Mike Crudelle? He also had a Firm and go invertors for money?

[Angry]

Fischetti is alive and well in Orlando. I personally spoke to his wife 2-19-07. He actually has his daughter answering the phone at his house, gives the phone to her mother and she claims to know nothing and always has an excuse why this bumb can't come to the phone. I encourage all to call Robert Fischetti, the fatmans current or former partner? His orlando home # is 1-407-370-6614

Is Fischetti also missing?

He's got names of people possably, that can only pray he stays in hiding-forever.

Pearlman has fled the country and is in hiding. The main objective now should be to find him and bring him to justice. PLease come up with suggestions to find him. He has all the money.

[Trevor]

So Dowd was right and anyone who disagreed with her "legal" opinions was a political hack? You have no idea what your talking about but facts mean little to you.

I sent my letters. Expecting the state to set precedent and take responsability could be a long shot. This opens them up voluntarily and its another legal circus with careers in the balance. Compelling evidence might do it. No one asked for this on the investors part, the state had its chance and blew it, or something less than incompetance. The man was allowed to run his game in the face of a financial investigation. He is still doing it, through the courts.

[Klaas de Vries Jr]

"Kenneth", so "the state (and other states) looked thoroughly into the modeling business and it came up 100% clean."

Yeah, but only after Jacqueline Dowd was forced to resign and corruption (John MacGregor, appointed by ...?) took over.

Give my regards to Defrawy.

[Helen Huntley]

Hi Charlene-
The blog is the way that I keep investors informed, so you'll need to check back here for updates on future developments.

[Kenneth]

Irish,

Your post misses the boat entirely. The problem is the media and some others kept attacking the modeling business so much that people missed the real scam.

The fact is everybody was screaming about modeling. The state (and other states) looked thoroughly into the modeling business and it came up 100% clean.

Had these “investigators” and “media types” not wanted so bad to turn modeling into a scam they would have maybe looked at the other businesses. Pearlman was brilliant like a magician – in that he focused everyone on modeling (and before that boy bands) which were clean yet high profile – and everyone missed the real scam – financial.

[the fightin' irish]

After the fun Pearlman and Rosen enjoyed with Airships International, Pearlman repeated the game with Entertainment International (ENTI) and Clean Systems Technology (CSTM). The latter still trades on the over the counter market. As the writer in the New York Post states, it is truly a shame that many of Florida's investors could not or did not take advantage of the internet in order to learn more about Pearlman. At least three posters on CSTM's message board at Lycos Raging Bull maintained a steady barrage of insults and warnings about the man for several years.
Pearlman worked his cons so effectively, that even well-informed, educated investors took the bait. Many people believed what they really wanted to believe about him and all the rational, logical evidence to the contrary was simply out of the question. There was absolutely no excuse for anyone on the planet to invest in any of Pearlman's scams after the evidence of the talent scandal. Regardless of his verdict of innocence, Pearlman worked that scam with several known convicted felons. That fact alone should have been enough to say no way to this guy.

[charlene connelly]

Dear Ms Huntley,
I invested 60,000 in the Transcontinental airline scheme. Could you please keep me informed at the above e-mail of any further developements regards the case and/or anything I should do at this time.
Thanks,
Charlene Connelly

[scammedbypearlman.com]

Thank you for your continued coverage, Ms. Huntley. Some of us who have invested in this scam are feeling so stupid to have let this happen. I feel better knowing that this man was cunning enough to scam banking institutions. Regular people like me were just easy pickin's for Pearlman. This man needs to pay for all the damage he has caused.

We have been encouraging investors to visit our website and using our sample letters, write to your elected officials. I apologize if you tried and the site was down. Our internet service was interrupted earlier today, but seems fine now. Please try again. Thanks!

[John of Clearwater]

Helen--there seems to be no end to this scoudrel's corruption or depravity.