Lou Pearlman and his 20+ year Ponzi explored (pt 2.)

In Part 2 of Lou Pearlman and his 20+ year Ponzi explored, we explore who Lou Pearlman conned and more of the methods used. 

Who was conned?

During the period, even the established financial institutions were  conned. Banks conned into loaning money or providing a lines of credit to the Lou Pearlman or one of his entities included,

  • Bank of America
  • Washington Mutual 
  • Mercantile Bank
  • Integra Bank N.A.,
  • American Bank of St. Paul
  • First International Bank & Trust,
  • MB Financial Bank NA, 
  • Northside Community Bank
  • First National Bank & Trust 
  • and HSBC Bank

Master of Fake

In order to facilitate the SCAM Lou Pearlman became the master of fake. Here is a list of some of the fictitious organisations and documents

  • Fictious Airline Company
  • Fake Branch of German Bank
  • Fake South Florida Accounting Firm called Cohen & Siege
  • Fake accounting firm called “S. Kaplan & Co.”
  • False audited financial statments prepared by  the above companies
  • Fake Tax Returns
  • Fake Business Documents
  • Tried to create a Fake German Bank Seal
  • Using the signature of a deceased former associate to stall repayment bids
Interestingly the Herald Tribune reports the following describing the accounting firm:
Those included hiring an answering service to pose as a South Florida accounting firm, Cohen & Siegel, which endorsed Transcontinental’s finances.
In the long run he defrauded over US $300 million from 
  • Investors 
  • Major Banks 

The investors where carefully selected and were primarily from these groups

  • family
  • friends and 
  • The elderly.
From one Scam to another

When Transcontinental Airlines Travel Services went bust,  Lou Pearlman then started another company call Employee Investment Savings Account, that promised higher returns than traditional investments. This scam lasted between 2003-2006. During that period it collected

  • US $118 million collected, 
  • US$43 million returned 
  • US $38 million to himself & pearlman enterprises
Investors, reassured that their investment was not only FDIC insured ( Federal Deposit Insurance Corporation) but backed up further with supplemental coverage from AIG and Lloyds of London, consolidated their entire portfolios into the one security, many handing over millions of dollars. Even those that deposited far less, often gave up their entire life savings based on outright lies and document-backed deceptions. ****

Lou Pearlman was sentenced by Senior U.S. District Judge G. Kendall Sharp to 25 years’ imprisonment on charges of conspiracy to commit an offense against the United States, money laundering, and presenting or using a false claim in a bankruptcy proceeding.

How Lou Pearlman managed to fool so many is the reason why we must all be careful, think and check before you invest. At times we guilty of laughing at the stupidity of others but we should not. We should show them the folly of their ways, even in the face of ridicule and seek to educate them.  With the lessons learnt from each mistake we as a society will become more aware of the evil that is around and be careful not be ‘scammed’ ourselves.

Sources:
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