Lou Pearlman and his 20+ year Ponzi explored

Posted on June 16, 2008 by investforlife

A few weeks ago we showcased the story about Lou Pearlman, the mastermind behind a long running PONZI.  How exactly did this PONZI work? The  court documents along with news reports reveal many interesting facts and twists. 

In 1981, Lou Pearlman conceived an idea and built it around two companies Transcontinental Airlines Travel Services sand Transcontinental Airlines, Inc. The company was to own and/or operated airplanes and offer travel agency services. To raise capital for the business Lou Pearlman decided to sell shares to investors who he sought out. 

For 20 years Lou Pearlman sold trancontinental shares convincing investors that company was worth millions, was doing well and was profitable. Here is a quote from press release of the Department of Justice, Middle District in Florida.

Pearlman represented to thousands of investors and several federally insured financial institutions that those two companies were successful companies in the airline business and that Pearlman’s ownership interest in those companies was worth millions of dollars. That was not true.

The reality was the company existed on paper only. Those companies had minimal employees, business operations, and revenue.  After 1999 it ceased to exist legally as Delaware officials voided its incorporation that year.

In turns out to the dismay of the Judge and observers, Transcontinental Airlines Travel Services did not own or lease one single plane. The shocked judge asked if nobody thought it prudent to check by visiting an airport.

Here is the answer to that question 

In fact, according to a childhood friend of Pearlman’s, the photos Pearlman used to market the airline featured models, not real planes: “You notice you can’t see the entire airplane. You can’t see the tail numbers. You know why? Because that’s where Lou was holding his fingers! It’s a model. It’s one I built for him.”**

See the photo here http://blogs.tampabay.com/money/2008/05/by-popular-requ.html

Pearlman lived large

The portly Pearlman loved the limelight, even recording a short video about his lifestyle, “Lou Pearlman Living Large,” which he often popped into the VCR in his opulent office when investors visited. It features a Lou-guided tour of his Mediterranean mansion outside Orlando in suburban Windemere, with boats and jet skis docked out back on Lake Butler. He shows off his fleet of luxury cars and diamond-studded Rolex watch with matching ring and cuff links that he claims are worth $425,000.***

In part 2 we will look at who was conned, more methods used and one scheme leads to another.

Sources:

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