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Lindsey Graham
Hi, this is Lindsey Graham, host of American Scandal. Our back catalog has moved behind a paywall. Recent episodes remain free, but older ones will require a Wondery plus subscription. With Wondery plus, you get access to the full American Scandal archive ad free, plus early access to new seasons and more. Join Wondery plus in the Wondery app or on Apple Podcasts. It's June 2007 at the Weston Resort in Bali, Indonesia. 24 year old Michael Johnson pushes through the doors of the hotel business center looking for his mentor, Lou Pearlman. Perlman is 30 years older than Johnson and a world famous music mogul best known for creating two of the most successful boy bands in history, the Backstreet Boys and In Sync. For the last several months, Johnson has been traveling around the world with Perlman, scouting bands and meeting with potential investors for a music and media business they're planning on starting together. And at first, Johnson felt immensely lucky to have this opportunity to work with someone as savvy as Perelman. When they first met, Johnson was just a teenager with dreams of becoming a famous musician himself. Perlman managed Johnson's band for three years, but when the band fell apart, Perlman took Johnson under his wing and offered him to teach him the business side of music. And even though Perelman is old enough to be his father, Johnson has come to think of him as one of his best friends. But lately, things have felt different. Johnson spots Perelman hunched over a table and makes his way over to say hello. He pulls up a chair, but Perlman barely acknowledges his presence. It's yet another sign that Perlman isn't telling him something. With every passing week, Perlman has seemed more and more distracted. Plus, he keeps delaying their trip back home to Florida, and he's started asking Johnson to charge all of their expenses to Johnson's credit card. Even though Perlman's a multimillionaire. Something must be going on, and Johnson needs to know what it is. So when he plunks himself down at the other end of Perlman's table and logs onto one of the business center's computers, the first thing he Googles is the name Lou Perlman. And immediately an article pops up from a newspaper in Florida. Johnson clicks the link, and as he begins to read, his mouth goes dry. The article says that Perlman is accused of defrauding hundreds, if not thousands of people and that he's currently evading law enforcement. Johnson's instinct is not to believe the article, but as he scrolls through the comment section, he sees the names of several people he knows, claiming that they were ripped off by Perlman. Johnson turns to look at Perlman. The older man is drawing something on a piece of paper and he looks deeply focused on what he's doing. Johnson tries to get his attention. LOU yeah? I'm reading an article here in the St. Petersburg Times. Oh, that useless rag. Well, they're saying you're on the run, that no one knows where you are. Reporters will say anything to sell papers. But Lou, there are hundreds of comments from people saying you owe them money. I know some of these people. They've been around the office. They used to come to my shows. Perlman ignores Johnson and keeps drawing. LOU why do all these people say you owe them money? Perlman holds up his drawing. Hey, does this look real to you? What? It's a seal for a German bank. You think it looks real? What do you mean? Does it look like a real bank seal to you? Would you buy that this was a seal from a bank? I guess. Why? Don't worry about it. Johnson looks over at a stack of papers next to Perlman. It's a loan application from bank of America. No, for real, Lou. Why'd you draw that seal? I told you, don't worry about it. Perlman gets up, grabs the application and walks over to a fax machine. Are you sending a forged document to bank of America? Perlman ignores him again. Lou, seriously, tell me what's going on. Look, don't overreact. This is just how you do business on a global scale. You'll see for yourself one day. Johnson stares at Perelman in disbelief. He may not be a hotshot businessman, but he knows forgery and fraud are not standard practice. This is criminal behavior. As the fax finishes going through, Perlman turns back to Johnson. Come on, let's go to the beach. Sure. I just need to grab something from my room. I'll meet you out there. All right, but don't be long. Johnson dashes out of the business center and up to his room. But he has no intention of meeting Perlman on the beach. He's booking himself on the first flight back to the United States. But as he starts packing his bags, Johnson struggles to understand how he got things so wrong. How he could have missed the signs that must have been there telling him who Lou Pearlman really was. American Scandal is sponsored by Audible. I bet you heard that it takes 10,000 hours of practice to become an expert, right? Who came up with that? Malcolm Gladwell. In his book Tipping Point. It's an idea that becomes something of an axiom and brought criticism to Gladwell for oversimplifying complex social concepts. So what does he do? He writes a snarky follow up, Revenge of the Tipping Overstories, Super Spreaders, and the Rise of Social Engineering. Too bad the Audible title itself isn't 10,000 hours long, because there's more to imagine. When you listen as an Audible member, you choose one title a month to keep from their entire catalog. New members can try audible free for 30 days. Visit audible.com as or text as to 500 500American Scandal is sponsored by T Mobile 5G Home Internet. With new home Internet plus from T Mobile, you can get Internet right where you want it so you can boost your connection to places it hasn't reached before and transform your home Turn your backyard into a movie theater, turn your basement into a home office for a limited time, get a free upgrade to T Mobile Home Internet plus while supplies last. Home Internet plus starts at just 50 bucks a month with autopay and any voice line. Check availability@t mobile.com home Internet and get Internet right where you want it. During congestion, customers on this plan may notice speeds lower than other customers and further reduction if using greater than 1.2 terabytes per month due to data prioritization. After $20 bill credit plus $5 per month without autopay, debit or bank account required regulatory fees included. For qualifying accounts, $35 connection charge applies. From Wonder I'm Lindsey Graham and this is American SC in the mid-1990s, a middle aged entrepreneur named Lou Pearlman became one of the most important figures in the music industry. He didn't sing or play music especially well, but he had an uncanny ability to develop and launch musical acts. Perlman was the brains behind both the Backstreet Boys and NSync, two of the most successful and lucrative groups in popular music. He also managed other acts like LFO and O Town and helped launch the hit TV show Making the Band. Between album sales, concert tickets, and merchandise, Perelman's groups generated hundreds of millions of dollars. And thanks to his golden touch, Perelman had musicians lined up to audition for him and investors begging for a piece of his multifaceted business empire, in which managing bands was just one piece. Perelman's portfolio also included an aviation business, fast food franchises, a steakhouse, and even the mail stripping act Chippendales. But then, in 2007, 10 years after Backstreet Boys first topped the charts in the United States, news broke that Perelman was arrested for an array of financial crimes. And finally it was revealed that his vast Empire was built on lies. This is episode one. I want it that way. It's 1967 in Queens, New York. David Liebenstein stands in a gravel lot with his leather baseball glove positioned at the ready. At 17 years old, Liebenstein loves playing baseball with his friends, and he keeps up a steady prattle of hey, batter, battery. Trying to throw off the hitter at the plate. But something's distracting him. Somewhere over his shoulder, someone is calling Liebenstein's name. He tries to ignore it and squints and watches the batter swing and miss. Liebenstein pounds his fist into his glove. Two strikes, one more to go. And as the pitcher winds up, Liebenstein leans in, ready to pounce on any ball hit near him. But again, someone calls his name, and this time more urgently. The hitter knocks the pitch foul. And Liebenstein turns to see who's trying so desperately to get his attention. When he sees it's his neighbor, Lou Perlman. Liebenstein is even more annoyed. Perelman is a couple of years younger than Liebenstein. They live in the same complex, and sometimes Liebenstein asks Perlman to sub in on his paper route. But for the most part, Liebenstein tries to keep his distance from Perlman. There's something awkward and off putting about the boy. He's pudgy, with thick glasses, wears a pocket protector, and as far as Liebenstein can tell, only has a few friends. He's also obsessed with airplanes and blimps, which Liebenstein finds weird. But perhaps the biggest reason Liebenstein doesn't like talking to Perlin is because he lies all the time, usually about stupid stuff, like how he gets giant tips on the paper route when Liebenstein knows it's not true. So Liebenstein turns back to the game, showing just how disinterested he is and what Perlman has to say. But clearly, Perlman won't be dissuaded. Hey, David, I have something for you. Shut up, Lou. Now, let's see. I'm in the middle of a game. Trust me, you're going to want to see this. Sure. It's fascinating. Pitcher winds up, releases, and puts the pitch in the dirt. It's ball one. It's an invitation to my bar mitzvah. I'm not going to be able to make it. You don't even know when it is. Whenever it is, I'm busy. Yeah, well, it's not just a bar mitzvah. It's also a private concert. What are you talking about? Art Garfunkel. Is going to perform. Art Garfunkel is one half of the duo Simon and Garfunkel, who are one of the biggest music acts in the country. Liebenstein turns to face Perlman. Art Garfunkel is going to perform at your bar mitzvah. He is. He's my cousin. Liebenstein snaps his attention back to the game and raises his glove as the hitter knocks a pop fly over the infield. It drifts foul, so he turns back to Perlman and sneers, Art Garfunkel is your cousin. Is he your cousin in the same way you got a hundred dollar tip last week on a paper route? I did get a hundred dollars and already is my cousin. Whatever you say, Lou. I'm serious. You're going to be sorry to miss it. I'll take my chances at the plate. The batter swings and misses for the third strike of the third out. Liebenstein trots toward home plate, his team now up to bat. But Perlman continues waving the envelope, yelling that Liebenstein forgot his invitation. But Liebenstein doesn't turn around. He has no interest in going to Perelman's bar mitzvah. And if there's one thing he knows for certain is that there's no chance in hell that Art Garfunkel is related to geeky Lou Pearlman. At Lou Perlman's bar mitzvah, the surprise guest of honor is Art Garfunkel, who is Lou Perlman's cousin. And though he does not provide a private concert, when kids in the neighborhood hear that Garfunkel was really there, they're impressed. And Perelman's association with a famous musician earns him a tiny bit of cachet. And Perlman likes the way this feels. Alone in his room, Perlman begins to imagine himself as a popular rock star himself, adored and respected like his cousin Art Garfunkel. It's the kind of life he wants for himself. So while still in high school, Perelman decides to pursue music. He joins a band as a rhythm guitarist and even plays some local shows. But Perlman's only a moderately talented musician, and he doesn't really look the part. So he transitions to managing the band, and at one point, he even claims that he's close to securing them a record deal. But his dreams of rock and roll success never materialize. So in the early 70s, at the age of 18, Perlman enrolls at Queens College. He majors in accounting with the goal of pursuing his other great love, aviation. Growing up, Perelman's apartment building faced The Flushing Airport, where he would watch Goodyear blimps take off and land. Perlman became obsessed with flying, even through his high school music phase. So when one of his college professors gives the class the assignment to pitch a business, Perlman seizes the opportunity to develop an idea for a helicopter commuter company. And he does such a thorough job planning it that Perlman's professor encourages him to try to make his idea a reality. To raise the startup funds he'll need, Perlman goes to his uncle Jack Garfunkel, Art's father and business manager. Uncle Jack tells Perelman that he likes the sound of the business and he'd be happy to give him some money, but he doesn't want to be Perlman's first investor. He says he'll buy Perlman's second helicopter, but he wants Perelman to find the money to purchase the first chopper on his own. So Perlman begins pitching the idea around, and after a string of rejections, he finally convinces a group of investors to purchase two helicopters and lease them to Perelman's new company, Commuter Helicopter Service, Inc. It's his first big break as a businessman, and Perelman is eager to make the most of the opportunity. He hires an old friend from the neighborhood called Ray Seiden to help him run things, and together they start building up a customer base. But soon Perlman discovers that the cost of maintaining helicopters is significantly more than he anticipated. Before long, the company finds itself with cash flow issues. And about two years after launching, Perlman merges his struggling business with a tourism company called Island Helicopters. The merger is a lifeline for the now only 23 year old Perlman, and it allows him to pursue yet another business idea. In the days before electronic money transfers, banks needed to physically send paper checks to clearing houses to be processed, often via airplanes. So Perelman begins leasing planes to transport checks around the country. The business gets off to a strong start, and by 1979, he's ready to expand. Perelman and Seiden start another new company called Transcontinental Airlines Travel Services. The idea is to lease planes, including major jets like Boeing 747s, to discount travel companies. To market the company, Perelman turns to his old friend and neighbor, Alan Gross. They grew up together in the same Queen's apartment building where they both still live and bonded through their mutual love for aviation. Gross now works for Goodyear Blims. But more importantly to Perelman, he still has the model playing collection he built as a kid. So one day, Gross opens his apartment door to find Perelman standing there with a camera hanging around his neck. He holds up his car keys and tells Gross to grab his model Boeing 747 because they're going on a field trip. Gross nods and goes to collect the model. He doesn't bother protesting or even asking where they're going because he knows there's no point. Perlman is relentless when he wants something. About a half hour later, the two men arrive at JFK airport. Perelman leads Gross through the terminal until they reach a large window with a clear view of a Runway. Perelman peers at the view through his camera lens and says, this is perfect. Then he pulls out a small sticker that says Transcontinental Airlines and tells Gross to put it on the model plane. Now Gross starts to get curious and asks Perlman what exactly they're doing. Perlman explains he needs marketing material for his new company, specifically photos of a 747 taking off so he can use them in brochures and ads. Gross wonders out loud if this isn't misleading advertising. Perelman doesn't actually own any planes, but Perlman is quick to correct him. He doesn't own any planes yet, and he needs a way to pitch the company in the meantime. Gross isn't sure this is entirely ethical, but Perlman tells him it's fine. Companies do this kind of thing all the time. There's a reason why. Fake it till you make it is such a well known phrase. So Gross agrees to play along. Perelman is the more experienced businessman between them, and if he says this is how it's done, then it must be true. So he takes the sticker and carefully applies it to the model plane, making sure it's straight. Then he shows it to Perlman, who loves it. Perlman then hands the camera to Gross as he positions the plane in front of the window, holding it by the tail and angling it up about 45 degrees. Then he asks Gross to make sure it looks like the plane is taking off. Gross looks through the viewfinder and tells Perelman to move the plane a little to the right and angle it down slightly. And after a few adjustments, they get it right. Gross snaps some photos until Perelman feels sure they've gotten one that'll work. Then they head back home. A few days later, the photos are developed and they've come out great. They really make it look like a transcontinental plane is taking off from jfk. And Perelman uses the photos to place ads in newspapers and make brochures for his new company. Soon he's offering flights from New York to Paris on the planes he leases. And by the next year, Perelman is ready to start yet another business. In 1980, he partners again with his old friend Ray Seiden to form a blimp company called Airship Enterprises. He lures Alan Groves from Goodyear to run the company's pr. But unlike Perelman's other aviation businesses, Airship is not a travel or delivery company. It will lease blimps out exclusively for marketing purposes as giant flying billboards. Gross puts together a video featuring the highest quality German made blimps. And soon Airship lands a major customer, the blue jean company Jordache. The plan is to fly a blimp emblazoned with a Jordache logo over a party the company will host in Manhattan's Battery Park. The only problem is that Airship doesn't own a blimp and doesn't have the money to buy one. But Perlman figures out a workaround. He finds an old industrial logging balloon once used to lift lumber out of forests at a fraction of the cost of an actual blimp. He then hires metal fabricators to create a frame so it resembles the oblong shape of a traditional blimp. And then he covers the entire thing in gold leaf to give it extra pizazz. On October 8, 1980, Alan Gross arrives at the airport in Lakehurst, New Jersey, excited for the Jordache party and the debut of Airship Enterprise's first blimp. But when he sees the dirigible in person, Grose feels his stomach sink. It doesn't look anything like the sleek German made blimps in the video he made. It's small and misshapen, and the gold leaf has turned brown in the sun. Gross asks Perlman if he's worried that Jordash will be upset when they see that their expensive promotional blimp looks like, in Gross words, a duty in the sky. But Perlman waves him off and says Jordache execs came out to inspect the blimp yesterday and said it looked fine. Gross isn't sure he believes that, but Perlman seems unconcerned. So the flight will go ahead as planned. And while Gross has watched hundreds of blimps launched since he was a child and always gets a thrill from it, today he feels dread. The pilot fires up the engines, and the blimp floats into the air. He rises higher and higher, and for a second, Gross thinks maybe he underestimated Perlman and his makeshift blimp. But then suddenly, the blimp starts spinning slowly to the right. Like a deflating balloon, it spins and spins until it hits a pine tree and crashes to the ground. Everyone on the airfield stands there, stunned. Fortunately, no one is hurt, but Gross feels ill. He believed his old friend Lou Perlman when he said they could build something amazing together. Gross trusted Perelman's business savvy and resourcefulness. He even gave up a job at Goodyear to come work with Perelman. But now it seems that Airship Enterprises, just like its first blimp, may be destined to come crashing back to earth. American Scandal is sponsored by Uncommon Goods Spark something uncommon this holiday with just the right gift from Uncommon Goods. Incredible hand picked gifts for everyone on your list. Gifts that spark joy, wonder, delight. And that it's exactly what I wanted feeling all in one spot. Like what my wife found recently. She loves puzzles and she adores Advent calendars. So Uncommon Goods Jigsaw puzzle Advent calendars. Well, that's two great tastes that taste great together. And when we shop at Uncommon Goods, we're supporting artists and small independent businesses. 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Terms and conditions applied after witnessing the crash of Airship Enterprises first blimp in October 1980, Alan Gross is crushed. He'd banked his career on his friend Lou Perlman's company, and now their dream seems to be over before it got off the ground. But moments after the crash, Perlman does not seem all that upset. He tells Gross to head back to Queens and start tape recording all the news footage of the crash. Perlman plans to placate the executives at Jordache Jeans by pointing out that the accident is generating media attention and Jordache's name is all over the coverage. Perlman is a strong believer that there's no such thing as bad publicity. Gross nods because it's actually not a bad idea. And it's not the only way that Perelman is planning to capitalize on this apparent setback. Not long after the crash, Perlman files a claim with his insurance company. He had insured the blimp for several million dollars with the kind of policy you'd expect for a traditional high quality blimp. But when the insurance company sees the specs of the blimp that Perelman actually bought, they balk at the idea of paying out. But Perelman is determined to use the insurance to fund his next venture, so he takes the company to court. And as Gross watches Perlman's maneuvering, part of him wonders if this wasn't the goal all along. As a child, Gross could look past Perilman's endless series of lies and exaggerations, but Grose does not like the idea that his old friend and now business partner may be deliberately committing insurance fraud. So when he gets an inkling that Perlman is trying to push him out of airship, Gross decides to leave before he can get fired. He quits with a bad taste in his mouth. So with Gross gone and the insurance dispute working its way through the court system, Perelman plows forward. He continues to pitch his blimp business, and his other company, Transcontinental Airlines, continues to offer discount travel packages. And improbably, his businesses appear to be successful. In 1982, Perelman moves out of his parents apartment and into the penthouse of a luxury apartment building in Queens, New York. Then he trades in his Dodge for a Lincoln Continental stretch limousine and a Rolls Royce. All around Perelman's old neighborhood, people take notice. Some hear that his net worth is $400 million. Others hear 72 million. However much it is, Lou Perlman has clearly hit it big, and he's only in his late 20s. His friends and neighbors are proud that a local kid has done good. But to Ray Seiden, Perelman's business partner in both transcontinental airlines and airship enterprises, the success doesn't add up. Seiden has worked with Perelman for over eight years, and the whole time he's had to work a second job as a shoe salesman just to make ends meet. So Sidon doesn't understand how Perlman is able to afford this lavish new lifestyle. And then one night, as Seiden sprawls out in the back of his friend's Lincoln Continental limo, buzzed on expensive wine, his curiosity gets the best of him. They're on their way back to Queens after another multi course meal at Peter Luke Luger, a high end steakhouse on Long Island. Like always, Perelman charged the meal to his business. Sidenote leans over and pats Perlman on the shoulder, thanking him again for dinner and acknowledging that he knows this was not a cheap meal. A single steak of Peter Luger cost $40 in 1982, so Seiden would never be able to afford it himself, never mind wash it down with a pricey bottle of Bordeaux. But Perlman just grins and tells Seiden not to worry about it. Seiden smiles back and then asks as nonchalantly as possible how Perlman is able to live like this. Perilman shrugs and explains that you have to spend money to make money. Poseidon looks at him, confused. He says, of course he knows the phrase, but he doesn't see how moving into a penthouse and being driven everywhere in a limousine is helping Perelman make money. Perelman sighs and explains that after the Jordache blimp crash, his reputation was ruined. He needs investors to keep Airship, Enterprise and Transcontinental going, but no one wants to invest in a loser, so he needs to be seen as a success. Sidon nods because he can understand that, but it still doesn't explain how Perlman is paying for this lifestyle. His businesses are definitely not bringing in enough. Perlman is quiet for a moment and then leans forward to make Sidon swear not to tell anyone what he's about to say. Seiden nods, promising. So Perlman whispers that he has $50,000 worth of charges on his credit card. Seiden's eyes go wide. $50,000 is almost enough to buy a house, and Perlman spent that on fancy cars and steak dinners. He can't believe that his friend is willing to go into that much debt to attract investors. And he wonders if Perlman's plan will actually work. But slowly, Lou Perelman is able to get some friends and family members to invest in transcontinental airlines. And in his new luxury apartment building, Perlman meets a neighbor who helps him hatch a plan for reviving his other business, the struggling Airship Enterprises. Perlman's neighbor is a broker who specializes in so called penny stocks, shares of small companies that typically trade for under $5, making them attractive to less wealthy investors. The broker tells Perelman that a blimp business is perfect for the penny stock market. And the fact that all Perlman has is an idea and one failed blimp isn't important. The market is red hot, and penny stocks are big business. So Perelman ditches Airship Enterprises and launches a new company, airship International. In 1985, the company goes public, and with the help of his stockbroker Neighbor, Perelman raises $3 million in the initial public offering, using the money to buy a real blimp. Perlman then secures a deal with McDonald's to use this blimp for advertising. McDonald's keeps the blimp up in the air for most of the year, bringing in a steady income that allows Perillman to rent an office on Fifth Avenue. And in 1987, Perillman gets another windfall when a jury awards him $2.5 million in his dispute with the insurance company over the crash of the Jordache blimp. Ultimately, Perelman purchases two more blimps and leases them out to major companies, companies like MetLife, Anheuser Busch and Gulf Oil. Perelman gains a reputation as an innovator in the world of blimp marketing. Meanwhile, Perelman keeps building his other business, Transcontinental airlines. He leverages connections through his cousin Art Garfunkel to charter private jets for musical acts like Paul McCartney and Michael Jackson. He also continues to encourage his friends and family to invest in transcontinental, telling them he plans to take the company public and offering them the chance to get in on the ground floor. Perlman tells his investors they'll earn 20% interest with an investment of just $5,000 and promises them they can withdraw their money at any time. People seem to be eager to get in on the action. And the man, once seen by his friends and neighbors as an awkward outsider, is now viewed as a business genius. By the late 1980s, Perelman is flying in a private Learjet and owns a 6,000 square foot vacation home in Orlando, Florida. But he's also getting restless and looking for his next business opportunity. He finds it in 1989 when a Boston based pop group called New Kids on the Block charters one of his planes to fly to several of their concerts. Perelman has never heard of New Kids on the Block, and he's surprised that this boy band, most of them still in their teens, can afford a transcontinental private jet. So when the group's manager pays for the plane, Perlman asks about their finances. He's shocked when the manager tells him that between sold out arena shows and merchandise sales, New Kids on the Block are raking in upwards of $100 million a year. When he hears this, Perelman's old musical aspirations come flooding back. So he goes to a New Kid's concert to see for himself what the fuss is about. Later, when he gets invited to a party at Art Garfunkel's apartment in Manhattan, he decides to do some further reconnaissance. Perlman meanders around the crowd, and when he sees Garfunkel step out onto the balcony, Perlman seizes the opportunity to talk to him alone. Perlman follows his famous cousin onto the balcony, holding a plate loaded up with hors d'oeuvres. Hey, Art, you want any of this? Yeah, thanks. You bet. Help yourself. How's the aviation business, Louis? Oh, it's good. Lots of big name clients, you know. Including this band, New Kids on the Block, you know? Sure I do. We're on the same label. No kidding. I checked out one of their shows and you wouldn't believe how loud the screaming got. And not just from teen girls, but also their moms. Yeah, I bet they have a following. And they were put together in a really smart way. I noticed. Each guy is, I don't know, a different personality type. You got the bad boy, the jock, the boy, next store. So they each appeal to different sorts of girls. Yeah, that tracks with what I've heard about them. Well, what. What have you heard? Well, it makes sense that they were put in the band based more on their looks than their vocal abilities. Word around town is not all the guys can sing. Oh, that's interesting. Yeah, the rumor is their producer sings on a lot of their records, and they don't sing live during their performances. I mean, it's just a rumor, but, you know, it's what I've heard. Wow. I mean, that's true. And this is how people react to a boy band that can't really sing. Think how well a boy band who could sing would do well. That would be something. I'm gonna go check on my other guests, but it's been nice catching up. Lou. Glad to hear the plane business is going so well. Yeah, yeah. Thanks, Art. And great talking to you, too. Always interesting to hear about the music biz from a real insider. As Garfunkel steps back inside, Perlman gobbles down some hors d'oeuvres, his mind racing. He can't think of any reason why he couldn't put together a group like the New Kids on the Block. He knows music. He has a home base in Orlando, which is a city filled with young, aspiring entertainers. And he has the money to invest. So Perlman decides what his next business venture is going to be. And this time it won't be in aviation. He's going to start a boy band, and he's going to make it the biggest pop group in the world. Ryan Reynolds here from Mint Mobile. With the price of just about everything going up during inflation, we thought we'd bring our prices down. So to help us, we brought in a reverse auctioneer, which is apparently a thing Mint Mobile unlimited premium wireless. 3030 bid to get 30. 2020. Better to get 2020. Better to get 15. 15. 15 15. Just 15 bucks a month.
- [33:55]
Lou Pearlman
Sold.
- [33:55]
Lindsey Graham
Give it a try@mintmobile.com $45 upfront payment equivalent to $15 per month. New customers on first three month plan only. Taxes and fees, extra Speed slower above 40 gigabytes. Y detail.
- [34:06]
Lou Pearlman
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- [34:56]
Lindsey Graham
By the early 1990s, Lou Perlman is All in on his boy band idea. In 1991, he officially moves his base of operations to Orlando, Florida and brings several of his employees with him from Queens. He tells them that they're all in the music business now. In 1992, he officially launches Transcontinental Records as a division of Transcontinental Airlines. Then he places an ad in the Orlando Sentinel looking for teenage boys who can sing and dance to form a new Kids on the Block style group. In April 1992, 14 year old AJ MacLaine becomes the first member of Perlman's still unnamed boy band. AJ has been working as an entertainer in Orlando for several years, so Perlman convinces AJ's mother Denise to use her contacts to recruit more boys to audition. The next two members are cast in quick succession, 19 year old Howie Durrow and 13 year old Nick Carter. Filling the final two spots though, proves more difficult. But Perlman is adamant that five part harmonies are key to a boy band's success. He also thinks having five different personality types in the group will broaden their appeal, similar to the New Kids formula. And then finally, by the spring of 1993, the group has found its fourth and fifth members, a pair of cousins named Kevin Richardson and Brian Littrell. They also have settled on a name, Backstreet Boys, after the Backstreet flea market in Orlando. Perlman puts his group through a boy band boot camp, and every day they spend hours rehearsing. Perlman hires choreographers, singing coaches and tutors for the members who are still in high school. The training is full time, so Perlman rents a house where the older boys can live and the band can rehearse. Through it all, Perlman tells them they're like a family. He asks the boys to call him Big Papa. And he takes them out for meals at steakhouses around Orlando, buying them clothes and jewelry and throwing them birthday parties. But with Perelman's attention on the Backstreet Boys, Airship International begins to suffer. By early 1994, the company posts a $4 million loss, which causes the stock price to tank. Fortunately, Transcontinental Airlines is still bringing in millions of dollars. And Perelman still has the trust of his investors, who are excited that Transcontinental is now getting into the music business. And by the mid-1990s, Perelman pitches a new opportunity to investors, including even his barber, Mark Morelli in Queens. Morelli has been cutting Perelman's hair for years, and it means a lot to Morelli that even though Perlman is a big shot, he still comes to Morelli's shop and flushing for all his haircuts. That loyalty is part of why Morelli started investing with Perelman in the late 1980s. He put his entire retirement savings into Transcontinental shares because he believes in Perelman. Transcontinental is Morelli's ticket to an early retirement. So in the mid-1990s, when Perelman comes by for his usual haircut, Morelli is delighted, spins his chair toward Pearlman and pats the back. Hey, Lou. Good to see you. Take a seat. Perlman hangs up his suit jacket and sits down. How's life, Mark? I can't complain. What about you? How's the band? Oh, they're terrific. Touring the country right now, seeing at different high schools. And you should see the way the girls go crazy. It's like a Beatle mania. I can't wait to see him when they come to New York. I'll bring them by. You can cut their hair. You'll be able to say you knew them before they got huge. Well, that'd be. That'd be incredible. And there's something else I want to let you in on. Another ground floor opportunity. Oh yeah? What's that? So this is only available for current Transcontinental employees and investors, but we're offering a something new. It's called Employee Investment Savings account. An ESA 8% returns. And that's better than what you'll get at the bank. Sounds interesting. Check my inside jacket pocket. There's a brochure in there. Morelli stops snipping and reaches into Perlman's suit jacket. He pulls out a trifold brochure, the front featuring a photo of a 747 taking off from JFK airport. Now, most of that's about Transcontinental and our planes, which you. You already know all about. But flip to the back. It's an insurance certificate. Yep. Lloyds of London. They're one of the most prestigious insurance companies in the world. They ensure Bruce Spring scene voice, you know. And of course, we're also covered by the fdic, so this is a safe investment. Pirelli puts down the brochure and resumes cutting Perlman's hair. Well, it does sound pretty great, Lou. But you have a doubt. I can hear it in your voice. I've already invested all my savings into Transcontinental. I mean, I guess I could cash in some of those shares, buy into the. What, the. What's it called? Esa yeah, look. Well, Mark, between you and me, Transcontinental is going to go P public soon. So you're going to want to hang on to those shares. But the ESA is a great opportunity, and if there's any way to find some funds to invest, I promise you won't regret it. Well, I mean, maybe my brother would want to go in. I talked to him. I want to help out as many people from the old neighborhood as possible. Well, you know, we appreciate it. In a few years, half of Flushing will be living the good life. An early retirement, all thanks to you. Well, from your lips to God's ears. All right, I. I think I'm done. Tell me what you think. Morelli holds up a mirror so Perlman can check the back of his head. Perlman nods approvingly. So Morelli brushes him off and unclips the barber's cloth. But Morelli's mind is elsewhere, thinking about this new investment. He's never heard of an ESA before. But if Perlman says it's a good opportunity and it's fully insured, Morelli is going to find mark. Morelli and his brother end up investing in the employee investment savings account, as do many of Perelman's other transcontinental investors and staff. Perelman assures them that a strong rate of return is virtually guaranteed because the plan is insured by Lloyds of London and protected by the US Government. But behind the scenes, Perlman is burning through cash because it's taking much longer for the Backstreet Boys to take off than he expected. The group's tour of high schools is proof that they have what it takes to attract a fan base. But even so, a record deal remains elusive. But Perlman doesn't give up. He reportedly spends $3 million developing the band. And finally, in 1994, two years after AJ MacLaine first got cast in the group, Jive Records indicates they're interested in signing the Backstreet Boys. Jive has had big success with artists like R. Kelly and A Tribe Called Quest. And when the Backstreet Boys show up in Jive's offices in Manhattan, they're awed by the gold and platinum records on the wall. So is Denise McClain, AJ's mother. Because AJ is still a minor, she's accompanying him to this meeting with the Jive executives. The past two years have been exhausting, and there were times when Denise wondered if it would ever pay off. But now they're here, and if all goes well, there's a record contract in the future. An assistant leads the group into a conference room, where Denise finds Lou Perlman waiting with a man she's never seen before. Perlman introduces the man as Kendall Mitner, the band's lawyer, and Denise is surprised. She had no idea the band had a lawyer. Perelman says that Mitner has reviewed the contract from Jive, and in his expert opinion, this is the best deal the group is going to get. Mitner passes out the contracts to the band, and Denise takes one, her mind spinning. She isn't prepared to read and evaluate a contract right now. She thought they were just going to meet with the Jive executives and hear a pitch. She looks over at Nick Carter's parents, who also seem caught off guard. But Perelman plows forward, leading the group through the contract, highlighting a few paragraphs he thinks are important. Some clauses seem odd to Denise, like how perfect Perlman is listed as the quote unquote, sixth member of the group. But she doesn't know what's standard in a music contract, so she doesn't feel comfortable calling it out. And when they've gone through the agreement, Perilman looks up at everyone with a smile, and Denise realizes he's expecting everyone to sign right now. But Denise doesn't feel comfortable with that, and neither do the other parents. Nick Carter's father, Bob, says he'd like to have his own lawyer look over the contract. Contract. And a flood of relief comes over Denise. She quickly says she does too. Perlman calmly explains that he hired Kendall Mitner to get the best deal for all of the boys. And he looks Bob and Denise in the eye and asks if they trust him. He thought they were all one family. Denise can't deny that Perlman has been exceedingly generous over the past two years. He's paid every expense to get the boys to this moment. And the truth is, she doesn't even know a lawyer to ask. But Bob Carter reiterates that he won't sign anything until his own lawyer has reviewed it. Perilman's calm demeanor suddenly disappearing. He barks angrily that this is the only deal they have. It's either take it or leave it. Denise sees her son's shoulders tense up. AJ turns back and looks at her, asking her, please just sign the contract, reminding her that this is exactly what they've always wanted. A recording deal with a major label. Denise looks at AJ's pleading face, the same one he had when he was six years old, begging her to let him audition for a community theater production. He's been working so hard for so long, and she can't be the reason he doesn't achieve his dreams. So she nods and agrees to sign next to her. Bob Carter gives in and agrees to sign as well. The boys break out into cheers. They have a record contract. But as Denise signs her name to the paper, she still feels uneasy. In the past, she's always felt like she could trust Lou Perlman. He's discussed with them every move and business decision, lived up to every promise. But today, it doesn't feel like they're on the same team. Feels like they're being railroaded. Denise McLean wonders if maybe Big Papa isn't as trustworthy as she'd originally thought. From wondering this is Episode one of Lou the Con man of Pop for American Skin. In our next episode, Perlman's investment in the Backstreet Boys pays off, and he decides to launch a second boy band. But when the group grows suspicious of their manager's lavish spending, Perlman's empire starts to crumble. If you're enjoying American Scandal, you can unlock exclusive seasons on Wondery plus, binge new season first and listen completely ad free when you join Wondery plus in the Wondery app, Apple Podcasts, or Spotify. And before you go, tell us about yourself by filling out a survey@wondry.com survey if you'd like to learn more about Lou Perlman, we recommend the book the Hit Charade by Tyler Gray and Mad about the Boys by Brian Burroughs. Published by Vanity Fair. This episode contains reenactments and dramatized details. And while in most cases we can't know exactly what was said, all our dramatizations are based on historical research. American Scandal is hosted, edited and executive produced by me, Lindsey Graham for Airship Audio editing by Christian Paraga Sound design by Gabriel Gould music by Lindsey Graham this episode is written by Austin Rackless edited by Emma Cortlandt Fact checking by Alyssa Jung Perry Produced by John Reed Managing Producer Olivia Fonte senior producer Andy Herman development by Stephanie Jens Executive producers are Jenny Lauer, Beckman Marshall Louie and Erin O'Flaherty. For wondering.
- [46:32]
Luke Jones
In the Pacific Ocean, halfway between Peru and New Zealand, lies a tiny volcanic island. It's a little known British territory called Pitcairn, and it harbored a deep, dark scandal.
- [46:47]
Lindsey Graham
There wouldn't be a girl on Pitcairn once they reached the age of 10, that would still a virgin.
- [46:52]
Luke Jones
It just happens to I'm journalist Luke Jones, and for almost two years I've been investigating a shocking story that has left deep scars on generations of women and girls from Pitcairn.
- [47:04]
Lindsey Graham
When there's nobody watching, nobody going to report it, people will get away with what they can get away with.
- [47:10]
Luke Jones
In the Pitcairn Trials, I'll be uncovering a story of abuse and the fight for justice that has brought a unique, lonely Pacific island to the brink of extinction. Listen to the Pitcairn Trials exclusively on Wandering. Join Wondery plus in the Wondery app, Apple Podcasts, or Spotify.