A judge sentenced former boy-band mogul Lou Pearlman to 25 years in federal prison on Wednesday (May 21) for his part in running a two-decade-long financial scheme that cheated investors out of more than $300 million. And, in an unusual deal, Senior U.S. District Judge G. Kendall Sharp offered the onetime 'NSYNC manager the chance to reduce his sentence by shaving a month off his term for every $1 million he pays back to investors, according to the Orlando Sentinel.
Given that his sentence totals 300 months, Pearlman, 53, could avoid prison entirely if he's able to pay back all his debts. "I'm most concerned for the investors, even more so than the institutions," Sharp said of the individuals, many of them elderly, who were allegedly conned by Pearlman. According to a plea agreement Pearlman signed in March, the investors, individuals and banks were enticed into investing in two shell companies that existed only on paper and which were part of an elaborate, years-long pyramid scheme in which Pearlman fabricated financial statements from a phony accounting firm to keep the scam going.
The final chapter in the long fall from grace for Pearlman — who is credited with helping to launch the boy-band craze of the 1990s through his work with 'NSYNC, Backstreet Boys and O-Town — came two months after he pleaded guilty to two counts of conspiracy, one count of money laundering and one count of making a false claim in a bankruptcy.
What's left is a now-crumbled empire that once included his musical acts, an airplane-charter business and the showcase real-estate project Church Street Station in downtown Orlando. According to the Sentinel, Pearlman, the cousin of '60s folk icon Art Garfunkel, slouched in his chair during much of Wednesday's hearing, clad in an orange jail jumpsuit and leg shackles. The room was packed with angry investors, who bankruptcy proceedings claim Pearlman scammed out of close to a half-billion dollars. "I'm truly sorry, your honor, to all the people who have been hurt by my actions," Pearlman said in a brief statement, according to the paper — an apology that drew bitter laughter from investors and a loud gasp of disgust from one victim when Pearlman's lawyer argued for a more lenient sentence if Pearlman paid his investors back.
"I think truly, in Mr. Pearlman's mind, he always meant to make good on his obligations," attorney Fletcher Peacock said, adding that his client's legendarily lavish lifestyle was a requirement of his business. "Mr. Pearlman did live large, if you will, but judge, he was in the entertainment business," Peacock said.
The sentencing brought to a close 13 years of legal disputes and government inquiries into Pearlman's finances. Pearlman's house of cards began to crumble in December 2006, when he was forced to close an "employee investment saving program" opened through one of his airlines that is alleged to have been a front company to keep the Ponzi investment scheme going. Pearlman fled the U.S. shortly after, just before the majority of his assets were sold off at a bankruptcy auction. Authorities caught up with him in June in Bali, Indonesia, and arrested him after he was expelled from that country.
The judge expressed sympathy for the many investors, holding up a book filled with letters from those who were scammed describing how the fraud had hurt their lives, the Sentinel reported. "It turns out they're all his family, close friends and people in their 80s who have lost their life savings," Sharp said.
According to Reuters, Pearlman had unsuccessfully tried to delay his sentencing to give him time to launch his latest boy band, US 5, which he said could provide "significant profits" that might be used to pay back his victims. Pearlman had asked for permission to have supervised access to a phone and Internet connection while in custody to promote the band in the U.S. and Asia, but federal prosecutors balked, saying that Pearlman's fraud proved he could not be trusted to conduct business using those means.