 |
|
« May 2007 | Main | July 2007 »
Lou Pearlman is "in transit," according to the Bureau of Prisons Web site. That means he has left Los Angeles and most likely is on his way to Oklahoma City, which was expected to be an intermediate stop before heading back to Florida. Here's a photo of the transfer facility at Oklahoma City.
(Photo credit: Bureau of Prisons Web site)
Lou Pearlman did a lot of strange things to keep banks and investors from asking too many questions about their money. One of the more bizarre was having a dead man sign documents. As outlined in the indictment, Harry Milner "signed" fake corporate tax returns for 2003 and 2004 that were used to obtain loans from Integra Bank. He also "signed" a letter to investors mailed in December in an attempt to calm those alarmed by their inability to get their money. On May 4, a poster who identified himself as Harry Milner's son, posted on my blog that Harry Milner died in 2003. The posting said:
"He was not involved with Lou since formation of the company in the 80's and never received a dime. He died with $44 in the bank. Lou told him the company was dissolved shortly after formation and he was not heard from again. In the late 80's Harry Milner saw Budweiser about the first blimp deal and was told it was not in the budget that year but they signed the next year. He was never paid his commission of over $300,000! I know all this because he was my father. He could not have signed that letter in 2006 as he was deceased. Just another Fraudulent action knowingly committed by Transcontinental. I emailed Lou's website shortly after my fathers death in 2003 and told him of his death. I received an answer that it was passed on to Lou."
While I was on vacation, bankrupty trustee Soneet Kapila apparently was pretty busy pursuing Lou Pearlman's assets. He has subpoenaed the Westin Hotel in Bali, as well as Deutsche Bank Group to get info on money transfers and (presumably) on how Lou paid his hotel bills. A hearing will be held today related to the subpoenas. Kapila was scheduled to take Mandy Newland's deposition yesterday afternoon and has Kamla Bacchus scheduled for a deposition July 2, both at his lawyer's office in Orlando.
In addition, Kapila has filed this document to abandon a property Lou owns in Los Angeles--apparently there is no equity.
Today's St. Petersburg Times story
Today's Orlando Sentinel story.
Update: Kapila's motion to shorten the time to respond to the subpoenas was granted. Date was set for July 13. Also the date for filing a complaint objecting to the discharge of debts was extended to July 18.
Orlando Sentinel update on the bankruptcy case.
A federal grand jury in Orlando today indicted Lou Pearlman on three counts of bank fraud and one count each of wire and mail fraud in connection with the loans from Integra Bank. This indictment supports the charge of bank fraud used to arrest Pearlman in Bali and was needed to keep him in custody. In my opinion, additional charges related to other banks and to the investment scheme are likely.
It may not be for long, but Lou is currently bedding down at the Metropolitan Detention Center in Los Angeles. This Bureau of Prisons Web site offers some more info on federal prisoners and allows you to find the location of any inmate in the system.
Also, here is bankruptcy trustee Soneet Kapila's most recent report if you missed it (the link was posted as a comment while I was gone.)
(Photo credit: Federal Bureau of Prisons)
I see that while I was gone, Lou made it from Guam to LA and the Money Talk posters have been very busy. Unfortunately, a few of you just will not obey the rules about posting, so I have some work to do to clean up the blog. I am still on vacation until Monday, but since I am back in town, I will return to posting and policing the blog. One of the problems with a blog is that it is a very demanding taskmaster. However, I appreciate the important role that this one plays in keeping people up to date.
For those of you who are interested (others can stop reading now), I had a great vacation in the northwest. Glacier National Park in Montana is one of the most beautiful places in the world, with gorgeous clear blue lakes, snow-capped peaks and wonderful hiking trails, waterfalls and creeks. We also spent some time in Idaho. A highlight was taking a jet boat ride on the Snake River (which runs along the Idaho border with Oregon and Washington) in Hells Canyon through the white water down to the Hells Canyon dam. In addition, we were able to follow some of the Lewis and Clark trail in Idaho and Montana. Before I went out, I read Stephen Ambrose's book, Undaunted Courage, which really gave me a great appreciation for the hardships those explorers endured. It was a wonderful trip, although it still seems hard to believe that this morning I was in Spokane, Washington and Salt Lake City and now I am back home. Here's a New York Times story about the Going-to-the-Sun Road through Glacier park.
Please be patient with me while I catch up. I have a big stack of newspapers to look through.
Do you think federal prisoners in Guam get special meals on their birthdays?
I'm off on a vacation and won't be posting for the next week. But I hope you will keep each other up to date by posting news links in the comments section. And, of course, your own comments are always welcome. My colleague, Jim Thorner, will be filling in for me on the Lou beat in the newspaper. See you next week!
Today's reports
St. Petersburg Times, Orlando Sentinel
(Photo credit: Getty Images)
Lou Pearlman got his public defender, but he didn't get the release from jail that he asked for in today's hearing in Guam. The judge allowed Pearlman to present his financial information in secret, after which she declared him eligible for a public defender for the limited basis of his hearing in Guam. He asked for his release based on health problems and said he hasn't been able to sleep in jail. The request was denied. A report by KUAM, Guam's news network, says Pearlman was traveling under the alias "A. Incognito Johnson," that he had about $24,500 with him and that in the past year he had been to Germany, Ireland and Panama in addition to Indonesia. The US Marshals Service is arranging for his return to Orlando to face the bank fraud charge on which he was arrested as well as other potential charges.
Orlando Sentinel story, Report from Guam, Associated Press story
Also, here's a report about Pearlman borrowing money to leave the country. It might be an indication that there is no secret overseas stash.
(Photo credit: Associated Press)
The arrest of Lou Pearlman means federal prosecutors in Orlando will be presenting evidence in his case to a grand jury over the next few weeks. Here's some speculation on my part about how it will play out. They must indict him on the Integra Bank fraud charge within 30 days of his arrest, but that seems unlikely to be a problem based on the details of the criminal complaint (see link in June 15 blog entry). Once the Integra Bank indictment is established, prosecutors will try to get a charge of fraud for every bank willing to swear that it relied on the phony financial statements in making its loan. Then they'll explain the investment fraud scheme to the grand jury. While it's unlikely there will be a count of fraud for every investor, prosecutors certainly will be aiming for multiple counts. There also could be counts related to tax fraud. The criminal complaint notes the participation of an IRS investigator and states that the tax returns presented to the bank were never filed with the IRS. It does not say what was filed with the IRS.
In my column today, I discuss some of the reasons that white-collar crime investigations take so long. Relative to many cases, the Pearlman investigation has proceeded with lightning speed. Federal investigators probably were not involved in the case before January and maybe not until February, but the complaint was dated March 2. It relies heavily on the Integra Bank, Joseph Chow and Cheney-Pringle lawsuits as well as the investigative work done by the state Office of Financial Regulation. The charge also indicates Mandy Newland has given information to investigators. I think there's a good chance that the initial indictment will be against Pearlman only. That's because the cases against others probably will take longer to put together. Obviously everyone else will blame Pearlman and claim they knew nothing. It will be interesting to see if Pearlman testifies against them or tries to cut a deal by turning over assets. There may not be much maneuvering room on that considering the large number of likely charges.
Link to video tour of part of Pearlman's house (Orlando Sentinel).
eBay auction items here and here and here. The second one is a real treasure trove. It includes a letter about Michael Jackson's unpaid phone bills, an example of Trans Continental's haphazard accounting (bookkeeping "adjustments" of $100,000 to nearly $500,000) and a pair of documents from First Seminole Bank in Orlando, one threatening to close Pearlman's account because of repeated bad checks and the other --dated less than two weeks later--giving him a $25,000 loan.
You may not realize it, but you played a role in the arrest of Lou Pearlman Thursday in Indonesia. Thorsten Iborg, the German tourist who recognized Pearlman as a fellow guest at the Westin Resort in Bali, found this blog in his Internet research on Pearlman. With it, he found my contact information and sent me the tip, which I passed along to the FBI with his permission. This blog shows up prominently in Internet searches on Pearlman because I have posted so many items about him, the fraud scheme and the investigation. The reason I posted so much is because you, the readers, kept coming here for information about the case. In the blogging world, visitors and page views are all important. If nobody is reading, it is difficult to be motivated to keep posting. I also think that your phone calls and letters were motivating for investigators. Reality is that they, like the rest of us, have many worthy things they could be doing with their time. A high level of public interest in a case is a factor in setting priorities. So pat yourselves on the back.
St. Petersburg Times: Last taste of freedom
Link to video report on Bay News 9 (for those who wonder what I look and sound like)
Orlando Sentinel: Taxpayers could foot legal bills in Pearlman case.
(Photo credit: Thorsten Iborg)
Lou Pearlman invoked the 5th Amendment and did not cooperate with court officials at his hearing this morning, according to a report out of Guam. It says another proceeding will be held Monday to determine whether a public defender should be appointed to represent him. Here's another story, with his booking photo. Here's a video of him getting out of a van in Guam (he appears to be handcuffed.) The photo here is his booking mug shot.
Here is a copy of the criminal complaint, which is based on fraud against Integra Bank.
Here also is another interesting report about someone accused of fraud who found refuge in Bali. Perhaps this case helped Pearlman feel comfortable in Bali. This case involved only civil charges, not criminal.
One of the biggest bidders at Tuesday's auction is trying to sell some of her stash on eBay.
(Photo credit: Associated Press)
A German tourist vacationing in Nusa Dua, Bali, thought another guest at the Westin Resort looked like Lou Pearlman and he turned out to be right. At left, is a photo Thorsten Iborg took of Pearlman eating breakfast at the Westin Thursday morning before being taken into custody. Iborg said that every time he saw Pearlman, he was alone. Iborg is a 32-year-old computer programmer who is in Bali with his wife.
He first emailed me Sunday, saying he was vacationing in Southeast Asia and that another guest at his hotel looked like Pearlman. "I've checked several websites to a photograph of him," he wrote me. " I think it is Mr. Pearlman." I asked him for details and we emailed back and forth. Finally, he spilled the beans:
"We are at the Westin Resort at Nusa Dua, Bali," he wrote me. "Perhaps you like to share this information with the proper FBI office." I did and the FBI took it from there.
Iborg told me by phone tonight that he first spotted Pearlman drinking coffee in a restaurant and thought he recognized him from having previously seen a television feature about US 5 and the other boy bands. Naturally, his wife did not believe him. They went to the hotel's business center (free internet) to look for information on Pearlman and found Pearlman himself there, looking at music videos on You Tube. He said they wouldn't have gotten the breakfast photo except for the fact that they had to get up early to go scuba diving Thursday. I say congratulations on some great detective work!
Note: a larger, lightened version of this photo is currently posted on the Money page. (Can't guarantee how long it will stay there in today's Web world!)
Story in today's Times.
(Photo credit: Thorsten Iborg, Special to the Times)
The FBI took music producer Lou Pearlman into custody this morning in Bali and he is believed to be on his way to Guam for a detention hearing. He is being held on a charge of one count of bank fraud. Federal prosecutors will have 30 days to obtain grand jury indictments, which are likely to be far broader. The state has accused Pearlman of running one of the largest investment frauds in Florida history. He owes $317-million to investors and another $160-million to banks, who also say they are fraud victims. Pearlman was captured at the Westin Resort at Nusa Dua, Bali.
Here are more details from the St. Pete Times. Here's the FBI press release.
Trustee Soneet Kapila says it looks like the auction brought in about $225,000, from which expenses will be subtracted (Harry Stampler previously estimated $21,250 in expenses.) That doesn't include the 10% buyer's premium, which goes directly to Stampler Auctions. And, of course, it's a preliminary figure until everyone has paid up. The auction went on until about 9:30 last night at both locations. Apparently there were more delays today as people waited to cash out and pick up their goods. Kapila said the Boeing 727 parts were pulled from the auction because some legal claims had been asserted to them.
One of the items up for bid was an US 5 gold record for "Maria" with a plaque 
saying it was presented to Charlie Crist. Since it was still at Trans Continental offices, Crist obviously did not have it. My guess is that Lou Pearlman was waiting for the chance to present it to Crist, but never got to. It sold for $175.
After he bid $11,000 for Pearlman's boat, I talked with Clay Townsend, the Morgan & Morgan lawyer who filed the class action lawsuit against Pearlman and various Trans Continental entities only to withdraw it. Because it was dismissed without prejudice, it could be filed again. The problem, of course, is that nearly all the defendants in the lawsuit are in bankruptcy. Townsend said he has a few cases pending against sales agents, but he's concerned about being able to collect any judgment that he might win.
Those remote control drapes were a steal at $250 for all four sets, complete with motors. I've heard that Pearlman liked to impress visitors to his office by pressing the button and having the drapes open up to reveal the view. Of course I wouldn't have wanted dark, heavy drapes like that in my house.
That's a picture of auctioneer Harry Stampler at work yesterday.
Stories about the auction: St. Petersburg Times, Orlando Sentinel story (includes links to video of the auction,WESH-TV, WFTV video, Associated Press story, some auction photos.
(Photo credit: St. Petersburg Times)
$1,400! That's what it sold for at today's auction. Smiley Thurston bid $1,400 for it. "It goes with the other things I'm getting," he told me. He said he has a room full of music memorabilia at his Deltona home. While I was there the gold records for the boy bands were selling from $60 to $2,200. Personally, I had my eye on Lou's "Who's Who" certificate, but it went for $100, which was too rich for me, so I did not buy anything. The biggest prices while I was there were $11,000 for the jet boat and $18,000 for the five-piece Chihuly glass set. The two jet skis (Sea Doo waverunners) were stolen from the dock behind Pearlman's house so couldn't be auctioned off. There was a good crowd-about 400 bidders. None of the people I talked to were investors. If any of you went, tell us what you bought and/or what you thought of the auction.
It looks as though creditors will get more time to file their claims inthe Lou Pearlman and Trans Continental Airlines bankruptcy cases. Trustee Soneet Kapila filed a motion today to either leave claims filing open ended or extend the filing deadline for at least a year. He says he hasn't been able to identify all the creditors so they haven't been properly notified. It seems likely to me that the judge will grant the order. If not, the deadline would stand at July 30.
No wonder companies buy those Google ads. Apparently they're pretty effective at diverting Web surfers from their original destinations.
There is no charge for claiming unclaimed property if you deal directly with the state holding that property. I recommend sticking to state Web sites (such as Florida's) and those sponsored by the states (such as Missing Money and the National Association of Unclaimed Property Administrators). However, when I recently wrote about this topic, I heard from quite a few readers who got waylaid by clicking on the sites of companies that charge a fee for filing a claim on your behalf. While there's nothing illegal about charging for such services, it certainly is unnecessary for you to pay for them. The moral of the story: Be careful where you click.
Boy Band fans have an unusual opportunity this Tuesday (June 12) to obtain gold records, platinum records and other awards recognizing sales accomplishments of some of the biggest-sellng bands. These wall plaques and some posters are part of the bankruptcy estate of Lou Pearlman and Trans Continental Airlines and are being auctioned by ordered of the bankruptcy court. The auction includes memorabilia from these artists: *NSYNC, Backstreet Boys, US 5, Aaron Carter, O-Town, Natural, Encore, LFO (Lyte Funkie Ones), Take 5, Sean Van Der Wilt, C-Note and Brooke Hogan. Some of the awards are from other countries (Canada, Germany, Thailand).
See post below for details on participating in the auction. Note that online bidders must register by noon Monday (June 11).
06/11/07 update:
Here's the Orlando Sentinel story on the auction.
If you're going to Orlando next week for the bankruptcy court's auction of thousands of items belonging to Lou Pearlman and Trans Continental, here's some stuff you need to know. You can see the auction items up close Monday between noon and 5 pm. or Tuesday between 9 a.m. and 11 a.m. Expect crowded conditions Tuesday. The auction will start at 11 a.m., going from room to room at Church Street Station. There will be runners outside the room to take bids from people who are out in the hallways or adjoining rooms. The auction generally will be in order of bid number, with many of the interesting items from Lou's office at the beginning. To participate in the bidding, you will have to show your driver's license, register and put down a deposit of at least $100. As the auction goes along, you will be expected to increase your deposit so that you've always got down 25 percent or more of the items you are buying. Credit cards are not accepted. Neither are personal or business checks unless you have a bank letter guaranteeing payment. Cash and cashier's checks are welcome. If you want to participate online at Bidspotter.com, you must register and put down your deposit by noon Monday. Online deposits (and increases during the auction) may be made by PayPal. Checkout probably will start around 2 p.m. for buyers of smaller items who want to take their purchases home the same day. Most payments must be made on Wednesday. Some shipping assistance will be provided, but you'll have to pay shipping and handling costs. If you are planning to buy furniture or a bunch of computers, you probably will need to arrange to move them. The buyer's premium is 10% above the winning bid price in person or 15% online. In most cases, the bidding is PER ITEM, so if the quantity says "2," your winning bid will be multiplied by two.
After the auction is finished at the Church Street site (expected to take four to six hours), it will move to a warehouse at 7075 Kingspointe Parkway, Units 7 and 8, where Boeing 727 parts, "Making the Hit" kits and microphones and 1-million CDs are for sale.
Lou's house, the warehouse and eight Orlando Magic season tickets (great seats!) also are for sale through Soneet Kapila's Web site.
(Photo credit: St. Petersburg Times)
I wrote a piece today about an interesting lawsuit filed in Miami against the tobacco companies. (Here's a copy of the complaint.) This case focuses on tobacco marketing to African Americans. However, it is just one of what is likely to be many claims filed over the next few months by smokers of all races and ethnicities and the survivors of deceased smokers. To qualify, you must have developed one of a number of smoking-related diseases by Nov. 21, 1996. You can find a list of the diseases here, as well as some more information about the situation.
(Photo credit: Getty Images)
The Lou Pearlman-Trans Continental Airlines auction is now online at bidspotter.com. Be sure to read the terms and conditions carefully, noting advance registration, deposit, auction premium (an additional charge above the winning bid price), shipping rules, etc. Pay close attention to the quantity listing. If it's 3,000 CDs and the quantity listed is 3,000, if you bid $1, you will owe $3,000 plus the premium.
While white-collar crime investigations often take years to produce an indictment, that isn't always the case. Here's an interesting story about a South Carolina scam involving 650 investors who are out at least $56-million. Al Parish, shown here, was a well-known economics professor at Charleston Southern University who convinced people to give him money to invest, including a doctor who handed over $30-million, and the university, which trusted him with part of its endowment. He spent the money supporting a lavish lifestyle and acquiring art and collectibles. The U.S. Securities and Exchange Commission filed civil fraud charges against him in April and he was arrested shortly after that on a charge of lying to the SEC. He was indicted by a federal grand jury on fraud charges the next month. Parish claims to be suffering from amnesia. Here's a listing of stories in the Charleston paper for those who want to read more.
(Photo credit: Associated Press)
Here's my story from today's paper. It's my attempt to describe who Lou Pearlman is and how he operated. The most difficult part about writing it was deciding what to leave out as I was limited in how much space the story could take up in the paper.
(Photo credit: St. Petersburg Times)
Karen Kiehl sentenced in Hillsborough County for defrauding 120 people. The judge called her "the ultimate con artist." I wonder what would have happened if she'd stolen $157-million instead of $157,000? Check out the Times business section Sunday (tomorrow) for a piece I did on Lou Pearlman.
By the way, a notice listing some of the auction items for June 12 has been posted, so they should be showing up on bidspotter.com in the near future. The list includes 3,000 kits for making your own CD and another 80,000 small microphones like those used in the kits, 1-million CDs, Boeing 727 parts, office furniture, computers, restaurant equipment, a boat and two jet skis.
 St. Petersburg Times personal finance editor Helen Huntley writes about money topics and answers questions about financial planning, investments and personal income taxes.
Helen has been following the Lou Pearlman/Trans Continental investment scam since December 2006. Read more about it in this special report and on this blog. Looking for help with your income taxes? Check out this special report
E-mail questions to Helen Huntley: |
Recent Comments