Prosecutors charge Pearlman with conspiracy in investment fraud

Federal prosecutors filed new fraud charges Monday against former boy band producer Lou Pearlman, who faces a sentence of up to 25 years in prison under a plea deal. Pearlman, 53, will plead guilty under the agreement with prosecutors expected to be presented at a hearing Thursday morning in U.S. District Court in Orlando.

In a four-count court filing late Monday, prosecutors expanded the bank fraud charges against Pearlman to include conspiracy to defraud investors through a Ponzi scheme he ran out of his Orlando office, as well as mail and wire fraud, money laundering and bankruptcy fraud.

Pearlman raised more than $200-million from at least 1,300 investors, prosecutors said. The charges cover both a savings plan labeled an “Employee Investment Savings Account” and a stock purchase plan run through Pearlman companies Trans Continental Airlines and Transcontinental Airlines Travel Service.

Pearlman spun a web of lies, disarming both investors and bankers with his genial nature and reams of falsified documents. He told savings program investors their accounts were FDIC-insured then reinsured for up to $1-million through Lloyd’s of London. He told stock investors the corporation was about to go public.

He convinced both investors and banks that his companies were financially sound, showing them false financial statements prepared by a fictitious accounting firm. He gave them documents “signed” by a dead man and told them he had millions of dollars at his disposal in a German trust.

Prosecutors’ newest charge is that Pearlman presented a false claim for $5-million in the bankruptcy case of FF Station, the entity that owned the Church Street Station complex where Pearlman’s companies had their headquarters. While abroad eluding federal agents and creditors, Pearlman caused a claim to be filed purporting to represent a loan German Savings Bank had made to FF Station in 2005, the prosecutors said.

The court filing says Pearlman used money he got from investors and banks to repay earlier investors and make payments on earlier bank loans. In addition, they say he and his unnamed co-conspirators converted some of the money to their personal use.

The charges filed Monday call for Pearlman to forfeit his interest in any property that was involved in criminal activity or that was derived from proceeds from the criminal activity.

A plea agreement in federal court does not specify the term of the sentence, which is left to the discretion of the judge. In agreeing to a plea deal, defendants typically hope to reduce their sentences by cooperating with prosecutors. In Pearlman’s case, he might cooperate in locating assets or in bringing charges against his associates.

The charges Monday took the form of an information rather than a superseding indictment. Pearlman waived his right to be prosecuted by indictment.

Tuesday Update: Here is the Orlando Sentinel's version of the story. Also, here's my story as published in the Times. (Basically the same as what was posted here Monday.)

Comments

> Tolner appears to be a wealthy man.

He's a successful businessman.

Perhaps Lou will see William J McCorkle the Orlando infomercial king. He is in a federal pokey in Georgia.

Not sure who sentenced him...

Tolner appears to be a wealthy man.

now we know why Mark Tolner has been living out of the country for over a year now

Thanks Helen, that certainly makes it sound like there is a real shot at LP getting all 25 years.

[Helen Huntley]

Regarding Judge Sharp--He was admitted to the bar in 1963, so he is 65+. He was appointed to the federal bench by President Reagan in 1983. A Google search turns up some references to his role in the case of serial killer Ted Bundy. According to one reference I found, Sharp once said it was a "waste of time" for Bundy to appeal his death sentence.

The time has come to review the history of convicted NY drug lord Frank Lucas.

He received a 70 jail sentenced but served only 5 years

why?

because he turned over all his money - about $60 million cash and hundreds of millions of dollars in heroin

plus

he ratted on about 100 NY police officers that were crooked and were evntually convicted

well, at least someone has gotten it correct on this blog

"He is changing his plea to get this behind Governor Charlie Crist. You can take it to the bank that Hanberg pressured him to take the deal for that reason, highest among many."

[Helen Huntley]

To 12:33 a.m. regarding the double Ponzi--The bank Ponzi was part of the original complaint. See story http://pub.sptimes.com/2007/07/24/Business/Now__banks_accuse_Pea.shtml

News Flash...Pearlman to name his co conspirators which is to include the former AG and other Government officials...NOT

News Flash...Pearl,an to name his co conspirators which is to include the former AG and other Government officials...NOT

Hey 8:42.

You brought up an interesting point. He might have already given up info about where the money "Went".

Remember everyone. Just because Lou is going to work with these people in some fashion does not mean there is a dime stashed anywhere

He will tell them where the money went and at what point the ponzi scheme fell.And if you are all lucky there will be a few to several million stashed somewhere.

I still wonder about this judge. He seems to be no nonsense with the way he told them no more delays. Is there any indication of his attitude toward this kind of crime? How old is he? Does he still have parents around, does he have children? What is the judge's story?

Hopefully he is a hardass who won't take any BS, will see how wrong LJP did the investors and therefore give him the maximum he is allowed by law, regardless of cooperation. Hopefully he is older and has no patience for people who rip off the elderly.

BREAKING NEWS

Good News for Investors

[Pearlman's attorney Fletcher] Peacock said Pearlman, who has been held without bail at the Orange County Jail since July 10, decided to enter guilty pleas because it was the "right thing to do."

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He said Pearlman, 53, has agreed to assist the government and the court-appointed trustee in his pending bankruptcy cases in "recovering assets and making reparations."

****************************

http://www.orlandosentinel.com/news/local/crime/orl-pearlman0408mar04,0,3986407.story

Like we said, it was his only bargaining chip.

This is the best news for investors in many months! No guarantees, but it looks as if Pearlman, despite all the pessimistic posts in this blog, will finally reveal where the money went to stay out of prison (for some years, at least).

We can't assume the feds are being duped. Pearlman must have already given them key info on where the money went, and they have verified it; otherwise they wouldn't agree to a plea bargain.

He won't get 25 years. The prosecutor put that number out as the maximum. That's what's hanging over his head. He might get 15 years if he reveals where most of the money went, and most investors get their money back.

> What I don't get is why he would plead guilty. What does he get out of it?

His goose is cooked. He can't win the case and he knows it. The evidence is too great, and he only has a Public Defender. Why sit through months of daily humiliation in a public courtroom simply to postpone the inevitable?

We'll just have to wait a few days to see if there's any method in his madness. But his biggest supporter, the ebayer, has given up on him, so it doesn't look as if we can expect anything significant.

The timing is interesting. Perhaps Helen can find out what happened.

Did the prosecutor hear Pearlman was about to change his plea, and then quickly put together the Ponzi Scheme indictment, which was long overdue, so it wouldn't look as if he'd neglected the investors?

Or did they have the plea agreed upon, so they were ready to file the indictment and let him change his plea right afterwards?

25 years is the top end of white-collar crime sentences. It rarely goes higher. Many criminals convicted of white-collar crime get less than 5 years. The Enron fraud level scammers get 25.

Two of Pearlman's business associates a few years back got 38 months and about 48 respectively. They operated national scams with many victims.

[Pardon??]

Are you all saying that the prez will give a pardon to this fat man. Is that why he is pleading to the charges, so that it is ripe for a pardon. I will believe that when i see it, and this prez is out of office in less than a year.

What I don't get is why he would plead guilty. What does he get out of it? What does the government get out of it? As far as I can tell, he still faces at least 25 years. He would have faced that with trial.

What logical reason does he have to admit guilt? Is he protecting someone? Lord knows he doesn't have any kids to leave the money to, he's not married, he's just a gay pedophile (allegedly).

For the life of me, I just don't understand why someone would voluntarily sit in jail for the rest of their life. At least go to trial and take the risk that you might get off on some BS technicality.

[Probably or Probably Not]

If you read the latest headlines, the Judge in the case would not grant extensions requested by both the Federal Prosecutor and the Defense attorney--and therefore the Judge was keeping the fire to their feet, so to speak. Under those conditions, the Federal Prosecutor probably fealt compeled to do this, but probably wanted more time and more charges. Just a guess.

Tough Judge, that one is.

> Pearlman did not do this alone.

Wrong. Virtually everything he did. The whole scam hinged on only a few frauds. Huge lies, but only a few of them. Go back and read the indictment.

Helen said he's working on a deal for 25 years. That's not exactly a sign he's got some big fish to throw under the bus is it!?

> So who do we think the alleged co-conspirators will be.

He's not giving anyone up. That's a pipe dream.

The criminal genius is something you don't understand. He didn't need anyone to run this scam. No big executives. That's how it stayed a secret. He didn't have to tell anyone. He didn't have to trust anyone. That's why it didn't leak. That's why it lasted 25 years. It's just paperwork.

The legal reference to coconspirators is merely a formality. 99.9% of this scam was Louis J. Pearlman... drafting fake letters and mailing his bogus documents.

The alledged co-conspirators will be certain prevalent agents, and cronies within Transcon, and hopefully bank officials in a just world, but this is a coverup to protect the banks. IF the overnment does not name some significant co-conspirator, then we know they do not want to. Pearlman did not do this alone.

He is changing his plea to get this behind Governor Charlie Crist. You can take it to the bank that Hanberg pressured him to take the deal for that reason, highest among many.

So who do we think the alleged co-conspirators will be.

I believe he is changing his plea in hopes Georga W. Bush will pardon him when he leaves office--similar to how Bill Clinton pardoned Mark Rich.

And what about the prosecutor asking for Pearlmans possessions back to the government? WHAT??

What? No trial? That's got to put a damper on The Pearlman Movie. You can't have a crime story without courtroom drama.

Anyone disappointed there will be no trial?

It's a ripoff!

What this new indictment shows for the first time, and this was never reported by Helen (?), or anyone else, is it was a DOUBLE PONZI SCHEME.

First it was a Ponzi Scheme against the individual investors (we knew that), and second against the banks. He borrowed from banks to pay other banks.

The Pearlman Scam is really just a story of a crooked accountant. He was an accountant. He had an accounting degree. He tricked other accountants at banks.

Very few people were needed to pull off this massive fraud. It mostly all happened in fake documents.

Unlike that modeling business, which used thousands of scouts to scam, Pearlman didn't need anyone else, except a few salesmen, to steal $200,000,000, and the occasional document to be sent by his secretary.

Wickedly simple.

Those two words can also be used to describe the IRS.

Helen, how on earth did so much money pass through Pearlman's accounts and never once in 25 years did the IRS find out?

That is, quite frankly, the untold story in this scam, and where the fault lies. Everyone here rails against Crist, his subordinates, etc., but the biggest failure in the detection of this 25-year fraud was the Internal Revenue Service.

How does someone collect $350,000,000 and the IRS is clueless?

ONE year? What on earth are you talking about? Read the introduction.

One more time:

"Pearlman, who faces a sentence of up to 25 years in prison under a plea deal."

You did not read it right. It says for counts 1, 3 and 4 are punishable by imprisonment for more than one year

If I read the complaint correctly Helen, Pearlman is looking at one year in prison, please see last pages.

Trustee keeps looking until the recovered assets no longer pay the fees.

Hanberg appears to be excusing the banks as being victimized, and no mention of where the fraudulent transfered funds went. He is completely defending the banks for their shoddy practices. It will take a real lawyer to call these banks out.

So lets say in the end he says there is no money hidden anywhere, but here is who helped me with this. He gets a few years in jail. Is that the end of story? No reason for the trustee to continue looking?

If he serves a few years and then gets out to a hidden stash of cash, can they go after him again?

So hopefully Hanberg throws his cards out finally, and we can see where we are at. We hope he does not see his job as complete just to file the charges and convict, we hope he has in mind to help those damaged by calling to task all that facillated this fraud, no matter how compromised and awkward it may be. Otherwise the message it sends is, we protect certain entities, and the little people do not matter, thereby inviting the next abuse of the financial system for the next criminal.

So I wonder just who the fellow conspirator was who faxed and delivered all of the bogus documentation to the banks.

Other than that there isn't much in the complaint that wasn't known six months ago. At least now we can't say they never charged him for the investor fraud.