The next auction will be on eBay

Bankruptcy trustee Soneet Kapila is planning another auction of Lou Pearlman's possessions, only this time it will be on eBay. Instead of having people buy the stuff at bankruptcy auctions and resell it on eBay, Kapila's staff will put the stuff up on eBay themselves. It's mostly US5 and Backstreet Boys memorabilia and fancy jewelry. There's a Rolex watch and a couple of imitations as well as three diamond-studded rings (two gold, one platinum) with "LJP 75" on one side and "Trans Continental 19" on the other. Perhaps the numbers signifiy a date--1975--marking Lou's entry into the aviation biz. The platinum model has 170 full-cut diamonds.

Kapila described the items as "turnovers we took from some people who had dealings" with Pearlman and said a decision was made to keep them out of the general auction. He said no dates have been set for the eBay sales.

Story in today's Times with various updates on the case. (Blog readers got all this news first.)

German criminal prosecution stalls

German prosecutors have decided not to pursue a criminal case against Lou Pearlman and Mitchell Louis van Balen of German Invest & Finanzberatung GmbH. Bankruptcy trustee Soneet Kapila filed a "criminal suspicion of fraud" last summer with the hope of getting subpoena power to aid in the search for assets. "The way I understand it is the prosecutor said in simple terms we need to have more evidence in our complaint for him to continue investigating," Kapila said. "That doesn't mean we've given up on it and it doesn't mean we can't go back in if we are able to gather more evidenciary support."

The German publication Der Spiegel recently published this story about the Pearlman case. If any of you can read German, let us know if it has anything interesting to say.

New York case gets stranger by the minute

The New York lawsuit, in which a group of Trans Continental investors is suing the state of Florida, Gov. Charlie Crist and a host of other parties, appears to be in serious jeopardy. The New York lawyer, Ed Fagan has filed this rather bizarre motion  asking the court to stop everything until "certain issues" can be resolved by a magistrate judge and to make some documents in the case secret. Fagan made his dispute with Tampa lawyers Jim Lowy and Fred Lowe public two weeks ago. When I wrote about it then, Lowy said he expected them to work out their differences. However, in the latest filing, Fagan claims "Mr. Lowy and his actions have prevented me from being able to do my job" and that he has "tried in vain to resolve these issues with Mr. Lowy." He says he is trying to make his own arrangements with "certain plaintiffs," but that some issues can only be resolved by the court. The judge granted his request to assign the matter to a magistrate judge.

Chamberlain will have to submit some documents to judge for review

Judge Arthur Briskman says former Pearlman lawyer Rene Chamberlain will have to hand over some of the documents she claimed were protected by attorney-client privilege. Notes from today's hearing show that he ruled that the documents listed as A and B in this motion will have to be given to him for review in secret. Presumably if he decides they are not protected, they then would be given to Soneet Kapila. However, the judge ruled that Chamberlain does not have to reveal account information that she redacted from some documents.

Here's more of what's going on in the bankruptcy court

A California condo developer is bankruptcy trustee Soneet Kapila's latest target in his attempt to round up Lou Pearlman's assets. Kapila filed this motion attempting to rescind Pearlman's agreements to buy three condos at Marina Pointe in Marina Del Rey, Calif. and reclaim $880,000 in deposits.

Kapila is asking the court to approve a settlement with Me, Myself & Eye related to an agreement with Trans Continental Television Productions to produce a 13-episode reality TV show, Big in America II. The show is supposed to be about the activities of US5. What I gather is that TCTP was supposed to put up 267,000 euros to help finance the production. Since it didn't have the money, it signed over the rights to proceeds from US5 merchandise due from a third party, Universal Music. These rights were valued at about 50,000 euros. Under the agreement, TCTP and Me, Myself & Eye are going to share the money from Universal and Me, Myself & Eye's bankruptcy claim will be reduced by any money it gets from Universal.

Financial results are available for the Pearlman and Trans Continental Airlines bankruptcies, as well as the other TC entities. They show $712,898 in receipts to date for LJP's personal bankruptcy and $222,830 for the TCA bankruptcy.

Lou's mansion is quite a mess

The latest bankruptcy court filing includes these photos of damage to Lou Pearlman's Windermere home. Soneet Kapila says in this filing that the damage was done by contractors and subcontractors under the direction of the would-be purchaser, Dr. John Choi. The $7.1-million sale of the property did not close because Choi did not obtain financing. Now Kapila wants the court to hold Choi's $175,000 deposit until he can determine how much it will cost to repair the damage.

Expense tally to date: $187,198

Bankruptcy trustee Soneet Kapila filed a request this week for reimbursement of expenses for his firm and the various other law and accounting firms that are working on the Lou Pearlman- Trans Continental Airlines bankruptcy case. The grand total to date is $187,198. Travel expenses appear to be the largest category (lots of $190 hotel rooms in Orlando). The numbers do not include any professional fees. So far none of the professionals have asked to be paid for their work, although I am sure they will be asking at some point. Here are the documents for those who care to read them: Motion for reimbursement, attachments, more attachments.

The Rene Chamberlain saga continues

Here's a big surprise: Rene Chamberlain did not turn over all the documents that bankruptcy trustee Soneet Kapila says she should have. He objects to her removing account information from documents and claiming attorney client privilege for items such as letters from other attorneys to Lou Pearlman. Another hearing on the matter is set for Monday.

Here are the documents: Letter from Chamberlain's attorney, Kapila's latest motion.

Also, here's another story about former 'NSync member Lance Bass.

Money question of the week: Do you have a budget?

Has budgeting gone out of style? Do you have a budget and if so, do you follow it? Please share your experiences and tips. You are welcome to post here or, if you prefer, send me an email. If you include your first and last names and city, your comments will be considered for publication in the Times. One good source for money-saving tips is Mary Hunt's Debt-Proof Living site. If you've got a budgeting favorite site, share it.

Backstreet Boys: Just call them Unbreakable

The boy band that made Lou Pearlman famous is aiming for a big comeback with the release Oct. 30 of a new album, Unbreakable,the group's first album in two years. The first single from the album, "Inconsolable," was released last month. Last I checked it was #26 on Billboard's "hot adult contemporary" chart. While Kevin Richardson has dropped out of the group, this album features remaining Backstreet Boys Nick Carter, Howie Dorough, Brian Litrell and AJ McLean. The boys' publicists say they've sold more than 75-million albums worldwide. Here's some interesting background on the group and Kevin's departure.

[Newscom.com photo]

Should I take a buyout offer from my siblings?

Question: I recently retired at 58. My only debt is a $65,000 mortgage. My mother just passed away and left her home worth $200,000 (no mortgage) to her five children in a trust. It is currently rented for $1,000 per month. I have a chance to be bought out by my brothers and sisters. I would use this money to pay down my mortgage. Would being closer to being debt-free be a good decision versus remaining one-fifth owner of a rental house?

Answer: Being one-fifth owner of a rental house is fraught with peril. If a new roof is needed, you may be called upon to put up a fifth of the money. If the house is vacant for a while, you may experience outgo rather than income. And you and your siblings could have disagreements over the best way to handle these and other issues that may arise. Keep in mind also that rent is not all profit. You will be paying for insurance and taxes as well as repairs. In addition, whichever sibling does the work involved in managing the property should be entitled to compensation. As long as it's a reasonable price, I'd say take the buyout offer.

Whether to pay down a mortgage is a separate issue. What's best depends on the return you would earn on your investment alternatives. How would you invest this money if you did not pay down your mortgage? There also are psychological considerations. Paying off your house is a conservative approach, one that many people find gives them peace of mind.

Lou Pearlman dreams of TV shows and freedom

Sitting in jail for the last four months hasn't been a complete waste of time for Lou Pearlman. He came up with an idea for a new reality TV show while dreaming of getting out of jail. My story in today's Times offers some insight into Lou's life behind bars based on conversations Lou has had in recent weeks with his childhood friend, Alan Gross. Lou's TV show concept: "Second Chance," which would be hosted by a celebrity who's been to jail (like Paris Hilton) and feature losing contestants on other shows such as "American Idol." Lou is convinced, by the way, that he's going to get out on bond.

I recently visited Alan, who still lives in Mitchell Gardens apartments, where he and Lou grew up together in Flushing, N.Y. It was fascinating to see the treasure trove of documentation he has of that era and the time he and Lou spent together in the blimp business--he has reams of papers, photos and video recordings. Here's my story on Lou's earlier years and a slide show I narrated featuring many of Alan's photos. Alan and Lou parted ways in the late 80s and had numerous business disagreements. However, they stayed on friendly terms and Alan went to Lou's 50th birthday bash.

Also, here's a New York Times story about former 'NSync member Lance Bass.

To see all the blog posts on Lou Pearlman, click on "Trans Continental News" under "categories" on the left-hand side of the blog.

My ex won't share our deductions!

Question: My ex-husband states that he is going to claim all the tithes and donations that we gave to our church and that he is not going to tell me the figure for the time we were together. Can he do this? I think I would be entitled to claim at least half of this number. Some of the checks that were given were checks that I received from my employer and I just signed my name and gave them to the church.

Answer: First contact the church and ask for a record of your contributions for the time in question. You can’t take a charitable deduction unless you have a written acknowledgment of your donation.
You each are entitled to deduct money given from your separate funds. Ask your employer if it’s possible to get a copy of the endorsed check to help you document your case.

Donations from joint funds are divided 50-50 in community property states, but Florida is not one of them. The IRS says that in other states, it’s up to the divorcing spouses to decide how to allocate their itemized deductions, but in no case can you both deduct the same expense. This might be discovered if you were audited.

What's going on with the NY lawsuit?

The lawyers representing Trans Continental investors in the lawsuit filed in federal court in New York have had a falling out. New York lawyer Ed Fagan sent a lengthy email Wednesday to investor plaintiffs, complaining about Florida attorneys Jim Lowy and Fred Lowe. (One of the recipients shared it with me.) An excerpt: "One of the things that troubled me most was the repeated attempts by Jim Lowy and Fred Lowe to justify 'losing' this case or trying to tell me that nobody should ever expect to recover any monies form the case and that no one can ever win the case. If they truly believed that the case was a loser - then why solicit people, why promise them you are going to fight for them..."

Jim Lowy's response when I asked him about the email: "I wouldn't spend the last 4 to 6 months of my life living, breathing, working on this case if I thought it didn't have any value or prospects." He called Fagan's email "unprofessional" and "not true" and said he'll be sending an email of his own to clients. Lowy said he thinks Fagan has done an excellent job so far in the New York case and that he expects them to work out their differences. They're still waiting on a ruling from the judge on the state of Florida's motion to dismiss the case. If the judge decides the case doesn't belong in New York, they'll refile in Florida, Lowy said.

Stay tuned.

 

What a surprise: My stock has been sold

Question: I had hundreds of shares of TXU stock in my TD Ameritrade IRA account and had done very well with it. Then I checked online and saw that my shares had been sold and the proceeds placed in a money-market account. TXU is no longer listed. When I searched for information, I found out that they had been bought out. I knew about the negotiations, but assumed any buyout would mean conversion of TXU shares for shares in the new company, not merely a cash transaction. Clearly I was wrong.

I'm a cautious 79-year-old seeking income. If this was not in an IRA, I'd yank the money out and put it in a CD, but now I'm stuck in a money market account unless I am willing to take some risk. Do you have any comment on my experience?

Answer: My first comment is that investors should not buy individual stocks unless they are prepared to follow them more closely than you did this one. I think you are fortunate that this episode turned out as well for you as it did. When you know a deal is pending, it is best to do some research rather than assuming that it will take a particular form. Here's the story of how the buyout worked.

If you want a CD, there is nothing stopping you from getting one. You can buy CDs and other fixed-income investments at TD Ameritrade. Or, if you haven't already done a rollover involving this account in the last year, you can withdraw the money from your IRA brokerage account and roll it over to an IRA at a bank. Just be sure you get the rollover accomplished in 60 days so it's not a taxable transaction.

Here's the order on Rene Chamberlain

Here is Bankruptcy Judge Arthur Briskman's order compelling Rene Chamberlain to turn over her laptop computer, disks and documents related to Lou Pearlman and his companies. It details trustee Soneet Kapila's attempts to get the information from her, going back to April. It also outlines how the computer information is to be copied and kept confidential by a company called Litigex. Kapila will have to foot the bill, although the order notes that he has the right to seek reimbursement from Chamberlain. A judge would have to rule on that should she contest his request. 

National Enquirer has more to say about Lou

The latest issue (Oct. 22) of the National Enquirer says Jane Carter was so worried that Lou Pearlman had molested her son that she took Nick to a therapist. However, ex-husband Bob claims the therapist decided that Lou had never touched Nick. The Enquirer did uncover photographic evidence that Lou had once given Backstreet Boy A.J. McLean a piggyback ride (both fully clothed.)

Judge orders Chamberlain to produce documents

Bankruptcy Judge Arthur Briskman ordered Lou Pearlman's former lawyer Rene Chamberlain (that's her in the picture) to turn over documents and computer discs related to Trans Continental Airines by Oct. 22, according to this report on today's hearing. If a hearing is needed to resolve disputes, it will be Oct. 29. There's no written order yet, but when there is one, I'll post it. No sanctions for Ms. Chamberlain at this time, but the judge is threatening them if she doesn't comply with his order.

Orlando Sentinel report.

WFTV Report

[Photo taken from Trans Continental video]

Do you remember black Monday?

Do you remember Oct. 19, 1987, the day the Dow Jones Industrial Average lost 23% of its value? I am interested in hearing from some people in the Tampa Bay area about their memories of that day. What were you doing? How did you feel when you heard the news? What happened to your own investments? What did you do in reaction? Did it affect your investing for years to come? Could it happen again?

Update:

Here's the story I wrote about Remembering Black Monday.

Here are the least expensive cars to own over five years

If you want to save money on your next new car, you might consider a Chevy Aveo (shown here). That's the cheapest to both own and operate, costing $29,362 total for five years, according to editors of Edmunds.com, whose findings are reported in Bankrate.com.

Other top picks: Honda Fit, Honda Civic, Toyota Yaris, Hyundai Accent, Nissan Versa, Kia Rio, Toyota Corolla, Mazda 3 and Jeep Patriot. Three Mercedes-Benz models top the list of most expensive cars to own and operate.

[Times photo]

Money question of the week: Do you have tax tips to share?

This week's column is about year-end planning opportunities. The state sales tax deduction is expiring, so if you were thinking of buying a car or boat, do it before year end and you can deduct the sales tax on next yea'rs income-tax return. The kiddie tax-the tax on your children's unearned income-is extending its reach next year and will include children up to age 24 who are full-time college students. If your kids that age own appreciated securities, you might want to sell them before they're subject to higher tax rates. Here are more tips from CCH.

Now it's your turn: Do you have a tax planning tip? Share your secrets for saving on income tax. If you include your first and last names and city, we can consider your tip for publication in the Times.

Tyler Gray's working on "The Hit Charade"

That's the working title of Tyler Gray's planned book on Lou Pearlman, according to this item in the New York Post. He has a book deal with HarperCollins.

How should I pay for my new roof?

Q. I have recently discovered that I need a new roof on my small home. Estimates are coming in around $6,000 and I don’t have a liquid $6,000.  I have an IRA and a 403B rollover, each with approximately $6,000, but I don’t think I can take any money out of these accounts without a penalty. Is there a better option between a home equity loan, a home equity line of credit, or simply spreading the $6,000 across my two credit cards?  I’m not fully clear on the definition of home equity, but I think that I have a sufficient amount of equity as my home is valued at $160,000 and I only owe about $40,000 on it.  Any advice?

A. Don't cash in your retirement accounts. You would owe income taxes on the money plus a 10% penalty if you are younger than 59 1/2.

Home equity is simply the value of your home minus the amount of your mortgage. You have equity available and a home repair or improvement is the most legitimate use of home equity. The general rule is that a home equity loan is best when you have a single expense you'll be paying for in a lump sum--your roof repair is a perfect example. A home equity credit line is best when you'll be borrowing at various times. A credit line is often more convenient but it has a couple of drawbacks. One is that the interest rate is adjustable and could go up. The other is that it makes it very tempting to spend more than you originally intended until you have maxed out your credit line.

A credit card is the best option only if you've been offered a low rate that's locked in for a while. A "teaser" rate good for just a few months is worthless unless you think you can pay off the loan very quickly.

Lou Pearlman denies Vanity Fair allegations

Lou Pearlman says there was nothing inappropriate about his relationship with the boys in his bands, according to Radar Online. Tyler Gray says he reached out to Pearlman through a close friend. "We are all good friends and had a normal friendship with no inappropriate activity," Pearlman reportedly said. He also denied that he is gay: "I don't think there is anything wrong [with having one's] own sexual preference, but no, I've never dated nor have I been interested in men sexually." He also says the story about jumping into the bed with a towel around him couldn't be true because no towel is big enough.

By the way, Tyler Gray says he is writing a book about Pearlman for HarperCollins. He promises it will be an "investigative/true crime book," not an "authorized biography," as Page Six reported.

Can you identify Trans Continental employees

I'm looking for people who can help me identify photographs of Trans Continental employees. If you might be willing to help me match names with faces, please send me an email. Thanks.

Raymond James discrimination lawsuit heating up

It didn't take long for things to heat up in the discrimination case pending against Raymond James Financial Inc. Three former employees sued Raymond James Sept. 25 in the U.S. District Court for the Norther District of Illlinois, accusing the company of discrimination based on gender, age and national origin. They want their suit to be granted status as a class action including many current Raymond James employees. The company responded with this memo posted on the company intranet. That prompted lawyers for the three women to file this motion asking for a "corrective notice" and for a requirement that Raymond James get court approval before broadcasting notices to employees who might be part of the class.

The women initially filed their claims with the Equal Employment Opportunity Commission and Raymond James responded. The women then asked for the authority to sue Raymond James, which the EEOC granted, dropping its own investigation. The EEOC did not rule on the complaints.

Lawyers for the women say Raymond James misrepresented the situation by claiming that it refuted the allegations and demonstrated that all employment decisions were proper and appropriate. The Raymond James memo also states that the company "believes these complaints to be wholly unjustified, intends to defend itself vigorously and expects that the charges will ultimately be dismissed by the court."

The memo also directed employees with questions or concerns about the lawsuit to contact the company's legal department and reminded them that they aren't allowed to talk to the media about the lawsuit. Lawyers for the women plaintiffs say Raymond James' instructions are intimidating.

Any women who have worked at Raymond James in the past who would like to comment on the lawsuit and share their experience are invited to email me (hhuntley@sptimes.com). Please don't contact me, however, unless you are willing to have your name published. Thanks.

Update: Raymond James agreed to remove the memo from the company intranet.

Another Update: Raymond James filed this motion to dismiss with this supporting legal memo.

Huffington Post puts spotlight on Lou's political contributions

The Huffington Post, a well-known political blog, tied the sexual predator report in Vanity Fair to Lou Pearlman's Republican campaign contributions.  Only federal campaign contributions are mentioned--those to the campaign of congressman Ric Kelly and to national Republican campaign committees. Read more about the Huffington Post here.

Here's an earlier Orlando Sentinel blog post on this topic.

Money question of the week: How have student loans affected your financial life?

How have student loans affected your financial life? If you had to do it over again would you still borrow the money?

In this week's column, I wrote about a new law that will help people with big student loan debts in relation to the size of their incomes. The income-based repayment program caps the size of the monthly payment and subsidizes interest payments in some instances. This calculator will allow you to figure out how you might benefit from the program. In addition, many loans can be forgiven after 25 years of payments. Those working in certain jobs (including teaching, government, social work) can have their loans forgiven after 10 years.

If you would like your comments to be considered for pubilcation in The Times, please include your first and last names and city.

Some updates on the legal scene

Singer Aaron Carter has been released from his contracts with rights to his works still to be decided.

Bankruptcy trustee Soneet Kapila wants to abandon any interest in Lou Pearlman's condo at Mosaic at Millenium. He says there's no equity in the property.

Assistant U.S. Attorney Daniel Eckhart has been appointed to assist in prosecution of the criminal case against Pearlman.

Pearlman mansion back on the market

  A deal is not a real deal until it's done. The sale of Lou Pearlman's Windermere mansion (reported here) for $7.1-million has fallen through. Orlando plastic surgeon John Choi had agreed to buy the property but failed to close. He could end up forfeiting his $175,000 deposit. The house is back on the market, still listed with Sotheby's International.

Naturally the collapse of the transaction is not great news at a time when the real estate market is suffering. The lenders at Bank of America have to be particularly disappointed since they were due to collect $5.3-million-plus to satisfy the first mortgage on the property.

Also off, this deal engineered by Soneet Kapila to split the proceeds from the sale of two condos at sale of the Signature at MGM Grand. Kapila said the deal was cancelled because the sale fell through.

In other news, the hearing related to sanctions against Rene Chamberlain, which was to have been Oct. 4, has been postponed to Oct. 15 because she has hired an attorney. Also, the federal court in New York heard arguments today regarding the state of Florida's motion to dismiss the lawsuit Jim Lowy filed on behalf of investors. Jim said the judge did not rule on the motion yet.

Orlando Sentinel story.

{Times photo by Phelan Ebenhack]

Mad about the Boys

In addition to writing about Lou Pearlman's sex life, Bryan Burrough has done an impressive job telling the story of Pearlman's business life. The 11-page piece in the November issue of Vanity Fair tells about the rise and fall of Airship International, Pearlman's association with Theodor Wullenkemper, the seduction of Dr. Joseph Chow (who lent Pearlman more than $14-million) and Dr. Steven Sarin (whose family invested $12-million), the EISA scam, the boy bands, the phony accounting firm and more.

One interesting passage tells how Julian Benscher discovered Pearlman was a fraud when he flew to Germany to meet with Wullenkemper, the supposed 82 percent owner of Trans Continental Airlines. Wullenkemper told him he had nothing to do with the company. Upon further investigation, Benscher found that Pearlman only owned three planes, all of which belonged to Planet Airways. Trans Continental Airlines existed only on paper.

Burrough writes: "The mind-boggling thing is that not one of Pearlman's new banks discovered that the emperor had no clothes. Not one realized that his largest asset by far, Trans Con Air, didn't exist. Not one realized that his financial statements and tax returns were a tissue of lies."

The November issue of Vanity Fair is available on newsstands in New York and Los Angeles Wednesday and nationally Oct. 9.

Former associates claim Lou Pearlman was a sexual predator

Today's New York Post says Lou Pearlman preyed on teenage boys who sang in his boy bands or aspired to make it in the music world. The information is attributed to writer Bryan Burrough, who has been researching Pearlman's world for an article in Vanity Fair. He quotes young artists Steve Mooney, Phoenix Stone (Backstreet Boys), Rich Cronin (LFO), Tim Christofore (Take 5) as well as Jane Carter, mother of Nick Carter.

Note: The new Vanity Fair containing Bryan Burrough's story is out today. As soon as I can obtain a copy, I'll be posting about it.

Update: Pearlman segments are scheduled TONIGHT on Inside Edition (featuring Steve Mooney) and E (featuring Bryan Burrough.)

When it comes to investment fraud, crime keeps paying

When regulators crack down on fraudsters, what do they do? Ignore them, in many cases, according to this interesting recent article in Investment News. One of the cases mentioned is that of Steve Rodd, who was barred from the securities industry by the SEC for selling a pay phone scam and ended up selling Lou Pearlman's Trans Continental Investment scam through Churchill Financial Inc. But he has plenty of company. One of the problems cited by Investment News and my own stories has been the lack of communication among various regulators. Rodd might have been banned from the securities industry, but he remained licensed to sell insurance. The more attention this problem gets, the better.

Here's a new source of help if you're worried about losing your home

The National Foundation for Credit Counseling has launched a new Homeowner Crisis Resource Center offering a helping hand for homeowners who are having difficulty making their mortgage payments. There's a "mortgage reality check" quiz to help you determine how serious your problems are and numerous resources, including referral information for housing counselors and alternatives to foreclosure.

My advice is to be proactive. Don't wait until you get a foreclosure notice before doing something about your situation. If you know you can't afford your mortgage - or won't be able to when your adjustable rate loan resets - talk to a housing counselor now about your options.

[St. Petersburg Times art by Steve Madden]