Lou Pearlman: Pop Music Con Man | Behind the Hit Charade | 4

Summary

American Scandal: Lou Pearlman - Pop Music Con Man | Behind the Hit Charade | Episode 4

Hosted by Lindsay Graham

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Introduction

In the fourth episode of American Scandal, titled "Lou Pearlman: Pop Music Con Man | Behind the Hit Charade," host Lindsay Graham delves deep into the meteoric rise and dramatic fall of Lou Pearlman, a figure whose legacy intertwines the glittering world of 1990s boy bands with one of the largest Ponzi schemes in U.S. history. Through an engaging conversation with Tyler Gray, author of Hit Charade: Lou Pearlman, Boy Bands, and the Biggest Ponzi Scheme in U.S. History, the episode unravels the complexities of Pearlman's character, his business ventures, and the impact of his deceit on countless lives.

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Early Encounters and Pearlman's Empire

Timestamp: 04:07

Tyler Gray recounts his initial encounters with Lou Pearlman while working as a reporter for the Orlando Sentinel in the 1990s. Pearlman, the head of Transcontinental Records, was instrumental in launching iconic boy bands like the Backstreet Boys and NSYNC. Gray explains how Pearlman's influence permeated Orlando’s business landscape, earning him accolades such as keys to the city and significant taxpayer incentives.

Notable Quote:

Tyler Gray: "He was a darling of Orlando for a while, so you couldn't ignore his impact, his outsized impact in Orlando." (05:14)

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Orlando: The Nexus of Ambition and Opportunity

Timestamp: 06:43

Gray delves into why Orlando became the epicenter of Pearlman's operations. Beyond its booming entertainment industry, Orlando's Homestead Act played a pivotal role, offering celebrities protection against asset seizures in case of financial downfall. This legal safeguard made Orlando an attractive location for Pearlman to build his empire.

Notable Quote:

Tyler Gray: "Orlando attracts people through the pathway to fame that was Disney. So he found himself in a target-rich environment." (06:53)

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The Genesis of Deceit: Modeling Scams and Early Red Flags

Timestamp: 09:09

Gray discusses Pearlman's foray into the modeling industry through the acquisition of Options Talent. What appeared to be a legitimate business opportunity for aspiring models was, in reality, a facade for Pearlman's expanding Ponzi scheme. Models were charged exorbitant fees for services that rarely translated into actual opportunities, raising suspicions about the integrity of Pearlman's ventures.

Notable Quote:

Tyler Gray: "Lou's was running a scammy model business where the checks were bouncing for payroll." (09:28)

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Pearlman's Origin Story: Fact vs. Fiction

Timestamp: 14:35

Exploring Pearlman's early life in Queens, Gray uncovers discrepancies between Pearlman's self-published biography and accounts from those who knew him. Pearlman portrayed himself as a savvy entrepreneur from a modest background, but testimonies from former peers reveal a different picture—one of a shy, overweight kid who fabricated stories of business acumen and success.

Notable Quote:

Tyler Gray: "He created this story about being a newspaper delivery guy... But when you talk to those other former newsboys, they say, no, that didn't happen like that." (16:33)

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From Aviation to Boy Bands: The Transition into Music Production

Timestamp: 17:42

Initially establishing a legitimate helicopter transport business, Pearlman's ambitions quickly spiraled into fraudulent activities. Utilizing deceitful insurance claims from blimp crashes, he amassed significant capital, which he then channeled into the music industry. This transition marked the beginning of Pearlman's dual life as a successful music mogul and a cunning con artist.

Notable Quote:

Tyler Gray: "He used the money from that blimp crash, but it was actually a fraudulently gained insurance claim on a sort of dud blimp that was never going to fly." (18:55)

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Mechanics of the Ponzi Scheme: Funding the Illusion

Timestamp: 21:56

Pearlman's Ponzi scheme relied heavily on funds from family, friends, and unsuspecting investors. By presenting a portfolio of seemingly legitimate companies, he secured loans and investments without legitimate collateral. His charisma and the allure of the burgeoning boy band phenomenon convinced many to entrust him with their savings, pensions, and personal funds.

Notable Quote:

Tyler Gray: "His name was out there as a successful guy... a lot of regular people invested in Lou like they took their pensions or retirement savings." (23:20)

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The Tipping Point: Unraveling the Web of Fraud

Timestamp: 26:26

The scheme began to collapse around 2004 when forensic accountant Paul Glover was brought in to audit Pearlman's tangled web of 84 corporations and limited partnerships. Glover's investigation revealed inconsistencies and fraudulent documentation, leading to the realization that Pearlman's empire was built on deceit.

Notable Quote:

Tyler Gray: "He was auditing his own fraudulent documents." (28:46)

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Pearlman's Flight and Capture: The End of the Line

Timestamp: 30:28

Fleeing the United States to evade prosecution, Pearlman's journey took him across various countries, culminating in his arrest in Bali, Indonesia. His capture was facilitated by vigilant journalists and international authorities who pieced together his trail of deception.

Notable Quote:

Tyler Gray: "Lou was staying at the Westin Resort in Bali, Indonesia, and he had checked in under an alias, Incognito Johnson." (30:28)

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Attempted Recovery and Exposed Assets

Timestamp: 32:39

Post-arrest, authorities struggled to recover the vast sums Pearlman had embezzled. Bankruptcy auctions yielded a fraction of the stolen funds, revealing the extent of Pearlman's extravagant and often frivolous expenditures, including luxury items and peculiar collectibles.

Notable Quote:

Tyler Gray: "He had a Cadillac Escalade golf cart, so a mini, shrunken down Cadillac Escalade... a life-size statue of Anakin Skywalker." (32:39)

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Inside the Prison Walls: An Unrepentant Deceiver

Timestamp: 33:54

Gray shares his exclusive interview with Pearlman while he was incarcerated. Despite facing the consequences of his actions, Pearlman exhibited no genuine remorse. Instead, he clung to his delusions of grandeur, referring to himself as a "king in exile" and continuing to manage non-viable ventures from behind bars.

Notable Quote:

Tyler Gray: "He was trying to manage an act that called itself Bite Boy... like the first season of reality TV." (35:54)

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Legacy: A Dual-Edged Sword

Timestamp: 37:52

The episode concludes by reflecting on Pearlman's complex legacy. While he undeniably played a pivotal role in shaping the boy band phenomenon that defined a generation, his fraudulent activities cast a long shadow over his contributions. Members of the boy bands he managed express mixed feelings, acknowledging that without Pearlman, their careers might not have flourished, yet grappling with the betrayal and financial ruin he inflicted on so many.

Notable Quote:

Tyler Gray: "In that regard, when Lou said that first time... we brought a lot of joy to a lot of people. But on balance, the heartache was bigger." (38:04)

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Conclusion

Lindsay Graham's in-depth exploration of Lou Pearlman's life paints a portrait of a man who deftly navigated the lines between charisma and deceit. Through Tyler Gray's insightful narration, listeners gain a comprehensive understanding of how Pearlman's ambition and manipulation facilitated both the creation of beloved pop icons and the devastation of countless lives through his elaborate Ponzi scheme. This episode serves as a cautionary tale of unchecked ambition and the profound impact of financial fraud.

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Final Thoughts

American Scandal effectively unpacks the intricate layers of Lou Pearlman's rise and fall, offering listeners not only a chronicle of events but also introspection into the human psyche that allows such scandals to unfold. By blending historical facts with personal narratives, the episode underscores the enduring fascination with stories of grandeur and treachery.

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Produced by Paulie Stryker with contributions from the production team at Wondery.

Transcript

[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, 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 from Wonder E. I'm Lindsay Graham, and this is American Scandal. The Backstreet Boys and NSYNC epitomized the boy band sound of the 1990s. These two bands were the brainchild of Lou Perlman, head of Transcontinental Enterprises, and for a while it seemed like everything Perlman touched made money. But behind the fancy offices, the Rolls Royce, and the Gulfstream jet lay a dark Lou Perelman was running a massive Ponzi scheme. He financed the boy band's rise to fame using other people's money and helped himself to their profits. When the Backstreet Boys and NSYNC sued and parted company with Perlman, he continued his scheme of selling phony retirement accounts to family, friends and elderly people, even his barber. But it all caught up with him in 2008 when a judge sentenced Lou Perlman to 25 years in prison for bilking more than 1400 victims, including people and banks, out of around $500 million. Today, I'm speaking with Tyler Gray, the author of the hit charade Lou Boy Bands and the Biggest Ponzi scheme in U.S. history. Lou Perlman held that infamous record until Bernie Madoff broke it. Our conversation is next.

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[Lindsey Graham]

Tyler Gray, thanks for speaking with me today on American Scandal.

[Tyler Gray]

Thanks for having me. I really appreciate it.

[Lindsey Graham]

So you were living and working in Orlando back in the 90s when Lou Perlman was just launching Transcontinental Records and the Backstreet Boys and all the rest. How did Lou Pearlman come onto your radar?

[Tyler Gray]

I became sort of Backstreet aware, Lou aware when I was working as a waiter in Orlando, Florida. It sounds like the title of the song, but I was waiting tables with this person named Kim, who was my colleague, and she was great. And she was dating this guy that she was doting on, and his name was Alan Siegel. And he was this New York businessman who turned out to be a VP of Transcontinental Records, which would become part of Lou's enterprise. And Kim would always talk about how Alan's got these huge bands that he's working with in Germany and they're massive overseas and they're going to be really big here. And they're. They're called the Backstreet Boys, and there's this boy band and they're super cool. And we'd snicker under our breath like, that sounds horrible. We were all like rock and roll kids. And we were like, this sounds like the cheesiest thing in the world. And it turns out Kim was right.

[Lindsey Graham]

So then you started working at the Orlando Sentinel as a reporter. So I guess this gave you a few early brushes with Lou's businesses. What were your early impressions of Transcontinental and Lou Perlman as he was building up his empire?

[Tyler Gray]

One of my first beats that I picked up and covered was a small business beat. The job was to find really interesting companies to cover that were sort of startups. And in that beat, I came across one of My first loopholman adjacent companies and it was a company called Shape CD. There was literally like cut compact discs like CDs that were into the shape of people's faces. Like a boy band face or a logo of a company. And like they'd have a song or two on them, but there wasn't a lot of space cause they looked weird. And that was owned by Alan Siegel, that person that, that was dating. Someone I used to wait tables with. I also covered at least one nightclub that was being started by people in Lou's world and it was called the Vanguard Room. And as a nightlife reporter covering everything after dark and clubs and music, it was a new venue and it was pretty swanky and it looked really nice. It was almost done and it never really got done and it never really took off and it never really opened. But it was another place that I'd covered. And there were studios that Lou had. And you couldn't be in Orlando without coming across something that he had touched. He impressed local leaders to, I think a lot in Orlando saw him as a force for development and a force for bringing tourist dollars and attention to Orlando, which is very much an attention economy there. Those leaders would eventually bestow him with things like keys to the city or a million and a quarter in taxpayer funded incentives to help him with his businesses. He was a darling of Orlando for a while, so you couldn't ignore his impact, his outsize impact in Orlando.

[Lindsey Graham]

You mentioned that Orlando has an attention economy and that might be one of the reasons why Lou Perlman ended up there. He's not a n But why Orlando? What was the reason for this Nexus?

[Tyler Gray]

You know, it was sort of a place that he used to go as a kid with some of his friends. They would do trips and they would all kind of come down and they'd stop at fun places along the way. He knew that Disney World was here. And by the time he decided to relocate his business to Orlando, it just was a hotbed of young talent. It drew others from around the nation who wanted to come and strike a famous through the pathway to fame that was Disney. So he found himself in a, in a target rich environment. You know why Lou would come to Orlando? I think there's another important reason that's built deep into the code of what Orlando is and why it attracts the people that it attracts. It has something called the Homestead Act. And the Homestead act means that no matter what happens to you, if you go broke and if you're accused of financial crimes, the government can't Take your house. So you see a lot of celebrities setting up these giant McMansions on lakefronts in Orlando. And if things go south and they go broke, or maybe they get accused or convicted of doing something wrong, the government usually can't take their house. They'll always have that big estate. So maybe it was prescient on his part.

[Lindsey Graham]

Why don't you remind us about his empire? Because we know the music empire. But that's not how he got started.

[Tyler Gray]

Lou actually did have an idea for a legitimate business. He was, when he was getting out of business school, a final project had to do with a helicopter business that he wanted to start that would go from lower Manhattan to the airports. And it would be this transport business with these helicopters. And he needed not one, but two helicopters. He needed a backup to be a legitimate business. And so he went to the family where he knew there was money. And that was to Jack Garfunkel, who was Art Garfunkel's father, and Art was Lou's cousin. So he had that connection. And Jack was like, hey, it's a good business idea. It's really good. I'll buy your second helicopter. And it was sort of like a wink, wink, saying to Lou, like, if you can scrape together funding to get this thing off the ground, I'll be a second round investor. And so Lou took Jack's statement of I'll buy you a second helicopter and ran with it and ended up saying to other investors, I've got one helicopter. I just need a second. And that was how he ended up getting some banks on the hook to buy the helicopter that he ended up getting leased back to and started a legitimate helicopter business in New York. But he ended up having, like 84 corporations and limited partnerships that were all strung together somehow by the end of things, Blue really did have an empire.

[Lindsey Graham]

But even with this empire that he brought to Orlando, it was clear very early on that something wasn't right. And I heard that you actually were approached as a potential victim of one of these schemes. People had been paying money to one of Lou, Lou's model, scouting businesses, but then never getting anything in return. Tell us the story.

[Tyler Gray]

The modeling business was a really interesting one because it was kind of like a breaking point for Lou. It was kind of when things really started to go south. What happened was, is he bought this company called Options Talent and took it over. It was struggling. It was sort of failing. And for some reason, he thought he could turn it around. More importantly, he saw it as a vessel because it was A public company that he could turn it into. Him getting onto Wall street like this was his pathway of pouring in his various companies through this shell of Options Talent, which he renamed Transcontinental Talent and renamed it a whole bunch of different things over time. I came in contact with it because I had this friend, this guy named Wheat Wurzburger. Wheat, like fields of Wheat Wurtzburger. A photographer I knew in Orlando. I'd moved to New York. Wheat was still in Orlando, but he took this job with this model scout agency because he was a photographer. And they would send him on these road trips to places like New York City. There would be people on the street who would bump into somebody and go, hey, have you ever considered modeling? And someone would be flattered. And they go, oh my gosh, no. And they go, you want to come do some headshots? Like, we could schedule you. And then Wheat would go take their headshots. The people would get charged one or two thousand dollars for all these headshots. And there was no guarantee that any of that stuff would ever result in any sort of modeling gigs for any of those people. And in fact, did not. So when Wheat came and told me about this story and that he was doing this thing, he also told me that he wasn't getting paid like he was supposed to, but the checks were bouncing. And it was a check bouncing from this guy, Lou Perlman, who supposed to be this huge mogul with these millions and millions of dollars. Why was he running a scammy model business where the checks were bouncing for payroll? So that's when I started to wonder what the heck was going on and could this actually be as sort of scammy as it seemed to be on the surface? Here's how you know it's a scam. I got approached on the street by one of these people. Early days in New York, walking through Times Square, and I'm tall, but I'm not a model. And somebody was like, hey, have you ever considered modeling? And I'm like, of course I haven't. Have you seen me? But nevertheless, it feels flattering. And it was almost like, wow, if they're reaching all the way out to me, like they're really casting a wide net here. And this is weird.

[Lindsey Graham]

And you weren't the only one who thought something was fishy here. The Florida state attorney's office began an investigation of the so called talent scouting agency. What came of that?

[Tyler Gray]

Not a damn thing. It was weird because the thing about the investigation into lieu by the state attorney general in Florida is that number one, it went nowhere. It was transferred into oblivion. The prosecutor was moved off the case and then it disappeared. A lot of people think that's because Lou gave $10,000 to the govern as a donation. Other people think it's because of emails they couldn't use, weren't admissible. The case would have hinged upon them regardless of why it disappeared. This is a classic example of many, many things that somebody could have spotted that would have alerted them to lose House of Cards. It could have been the card that sent the whole thing tumbling down and nobody caught it. They didn't dig deeper into his bigger businesses at the time. And later, when he was claiming to run this business and having all these investors in these airplanes, no one bothered to look up in the sky to see if there were any airplanes with transcontinental logos on them. Same thing. There were just multiple opportunities where people could have pulled the thread of lose businesses and the whole thing would have come unraveled.

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[Lindsey Graham]

So let's rewind a little bit and talk about Lou Perlman's origin story. In our series, we portrayed him as someone who definitely liked to live large, but he came from a middle class background in Queens, New York. In writing your book Hit Charade, you talked to people who knew Lou in his early informative years. What did you find out about his character?

[Tyler Gray]

The thing that I found out about Lou as a young kid is that there's the story that he himself tells in his own biography, especially about his youth, and then there's the story that the other kids around him, now grown up, would tell about him. And oftentimes those things were at complete odds. So there's no doubt Lou was a shy kid. He was a bit overweight, he was picked on for his appearance. He did have some friends, but it was kind of like the nerd squad. Like, they were into math, they were into blimps, like Goodyear blimp type blimps who flew nearby where he lived. They called themselves helium heads. So you're kind of getting the nerd vibe. He did have like a, you know, a loving family. His dad ran a dry cleaning business. His mom sort of was always doting on him and cooking snacks and kind of doing everything for him at home. But you know, what you really started to find is that he created this story about things like being a newspaper delivery guy. Like he had this elaborate story in his book about how he so smartly like, went around the neighborhood and picked up routes that some of the other kids who'd had the same routes for a long time didn't want anymore or couldn't do anymore. And they sell it to him and oftentimes for like $500, they'd sell their paper routes to Lou, which was a crazy amount of money back in the early 80s, and yet supposedly was able to come up with some deals to take on the debt and then pay it off over time. He tells us all in his book like he's an elaborate businessman. The problem with the stories like this are is that when you talk to those other former newsboys, they say, no, that didn't happen like that. Lou didn't buy anything from us. He might have helped out with some paper delivery. But he certainly didn't have $500 to pay anyone anything and take over routes and make them a better business.

[Lindsey Graham]

And it wasn't just pure fictionalization of his story. He also borrowed some other people's stories as well.

[Tyler Gray]

He did borrow other people's stories. There's this guy, Alan Gross, who was like his childhood best friend, lived across the hall with him in Queens in the building where they lived. And Lou would go to the window of his apartment building and look out across the field and see in Flushing, Queens, where the Goodyear blimp was taking off and landing. And eventually he would talk about wandering across the street and going over there and bugging the people at Goodyear and eventually talk them into getting a job. And ended up hanging around with him a lot and saying he worked for Goodyear as he finished college. And the problem was, when you talk to Alan, his best friend, Alan's like, no, that was my apartment. Lou's didn't even face the landing place for the blimps. Alan's place was the place that faced the blimps. He was the one who was obsessed with blimps and did all this research and study. It was Alan who actually approached the person from Goodyear and got the job working. Lou was just kind of hanging around in the background, and people sort of say like, he was there, but he was just sort of weird it in the background.

[Lindsey Graham]

So that was Lou's early life in Queens. And you mentioned he made his start in aviation with this helicopter company.

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But.

[Lindsey Graham]

But how did his business dealings begin to veer away from legitimacy?

[Tyler Gray]

Lou claims to have made his first 1 million by the time he was age 21, and his first like 400 million in his early 30s. And he did set up a money making business that was a helicopter company. He got his pilot's license and he shuffled business travelers between New York and Jersey. So there was a real business there that was legitimate for a. But pretty quickly he took what was legit and he started to parlay it into blimps again. The dude was into blimps. Kind of the weirdest aircraft you could possibly be into. But something about it was right for Lou. And he sold ads on the side of these blimps to places like Jordache Jeans, which was like a hip jeans company in the 80s at the time that blimp would end up crashing. He would get a big insurance payout for that for like two and a half million. And that's really when things super shifted for Lou and He kind of crossed the Rubicon. He used the money from that blimp crash, but it was actually a fraudulently gained insurance claim on a sort of dud blimp that was never going to fly. He used that money and took it and bought an actual legit blimp, and that started, really, transcontinental airlines and the business that he grew from there.

[Lindsey Graham]

Well, so far, if we disregard the insurance fraud and the malfeasance behind it, it still seems like a reasonable career trajectory. From helicopters to planes to blimps, we're all up in the air. How did Lou Perlman then leap from aviation to producing boy bands?

[Tyler Gray]

Yeah. So he's got this blimp company, right? You're right. It's pretty legit. His little twist of facts, that landed him a lump of cash from insurance, and he started Airship International, which was his blimp company, and that actually went public, but it was underwritten by this penny stock operation. Penny stocks? Like just tiny little amounts of money for stocks. He kept issuing stock. They were doing things like pump and dump, which was essentially pumping up these stocks to be worth money and then selling them off really quickly for profit. He did get some attention from regulators there, but he managed to stay on the edge of what was going on. But it all really clicked for Lou, and the shift really happened this one time when he had chartered a plane for a band, and this band was called New Kids on the Block. His story goes that they paid in cash. They brought a suitcase full of cash to pay for the flight. Lou was like, whoa, what's going on? How do these guys have, like, a ton of cash? And he'd been around our Garfunkel, but seeing this young group of guys he'd never even heard of flash around a suitcase full of cash to pay for a chartered plane, he was like, what the heck is happening here? He asked the manager who was with him, who are these guys? How come they have this much money? He's like, oh, man. The guy was like, it's a great business. These guys are cashing in. This boy band thing is really big. That person was Maurice Starr, who went on to produce New Kids on the Block. Problem with that story, like so many stories in Lou's past, I talked to Maurice Starr, and he's like, I don't recall that happening at all.

[Lindsey Graham]

And it wasn't just the money of the music industry that was alluring to Lou. He had a musical background, too.

[Tyler Gray]

Yeah. Lou was actually in a local band called Flyer that was in Queens. This is some local guys who put together a good rock band. And Lou originally started out playing in the band, playing guitar, but. And this is cruel and it shouldn't be the way. But he didn't fit the part. Visually. He's a heavy guy. Everybody else in the band was kind of traditionally good looking or whatever you want to call it. But right or wrong, Lou didn't fit the mold. He was sort of weird on stage and they were like, you know, it's not really working out with you on guitar. And so Lou's like, I'll manage the band. So he became the manager and sort of the off stage member of the band. And he started to promise them the world. And he said he'd set up a world tour for them and negotiated a record deal with Columbia Records. And he told the guys he was really winning for them. And none of it actually came true because it was it.

[Lindsey Graham]

This is when, about the time that Lou moves his operation to Florida and Transcontinental Records becomes a division of Transcontinental Airlines, however weird that might be. And this is when he starts scouting and training up his boy bands. This took a lot of time and a lot of money. This is probably the period in which his businesses begin to resemble a Ponzi scheme the most. Who was he taking money from?

[Tyler Gray]

Well, Lou was getting money from family and friends mostly, and banks. He wasn't just relying on friendships and family to give him money. He would actually convince banks with this long list of companies that he had that he had all this collateral to put up and nobody stopped to look whether there were actually any transcontinental airlines planes flying in the sky or not. They would just keep issuing him credit. His name was out there as a successful guy. It's like if an Elon Musk or somebody came to a bank today and asked for a loan, he'd be more likely to get it than not because of his name, name alone. And so while Lou was no Elon Musk, he was still making the rounds and getting people to invest in him based mostly on his name. But a lot of regular people invested in Lou like they took their pensions or retirement savings. There was a person whose son had a heart condition and they had these medical savings, but instead they put it into Lou's investment schemes so that they could make a little more on their money. There were retirees who had saved up their whole life. He even convinced his childhood barber back from Queens that, that he could retire early if he invested in him. And there was a cousin that invested in him. Not Garfunkel, but a different one. There's this one guy, Joseph Chow, who was maybe one of his biggest investors. Just invested over and over and over again. He ended up pouring $14 million into Lou's businesses over time. In the meantime, Lou was actually paying the boy bands that he was running at the time really poorly.

[Lindsey Graham]

I can almost understand getting money from banks in terms of loans based on paper collateral. That's sort of fraud. But the fleecing of everyday investors seems like something altogether different and requires a different skill set from Lou. What was his pitch to investors? What was the hook?

[Tyler Gray]

Lou's pitch to investors? The mom and pop people, first of all, they were starstruck. Here was a guy who had been on mtv. He made it known to the world that he was behind Backstreet Boys and NSync and shared the edge of the spotlight with them whenever it was possible. So they were starstruck and they're like, oh, my God, this guy's. He's got the Midas touch. Everything he touches is gold. But it wasn't like he was promising to them that he was going to make them rich, rich overnight. He pitched an investment scheme that he said was part of his larger set of companies. That was the Employee Savings Plan. You had to work for him in order to be a part of it, but he likes you. He'll extend it to you. This was not get rich quick. It performed a couple percentage points better than the average 401. People would invest over time. And the promise would be that over the course of time you would normally spend investing in a retirement fund, you would make 3, 4, 5% more in his fund. It was called the Employee Investment Savings Account, or eisa. It was styled to sound like a legitimate thing, which is the Employee Retirement Investment Savings Account, or risa, which is a common thing at companies.

[Lindsey Graham]

I'm just wondering about the character of a man who sits at the table at night and comes up with ESA knowing fully well that it's 100% fraudulent and yet he's successful at it. People believe him. People are drawn to him. Did Lou have any redeemable qualities? How did he pull this off?

[Tyler Gray]

Well, it's important to understand that it wasn't just his word when it came to these financial investments in this fraudulent savings scheme. He produced documents from aig, from Lloyds of London to say that these things were secure, that they were insured, and in fact, those were things that he made on his printer, like on Photoshop or in Microsoft Paint or whatever he was Using at the time, like, he literally just comped together a document and sent it to people. Because who the hell would have the audacity to do something that brazen? And no one really thinks at the time. Time, you know, we live in different times now, but in the time, like, no one would think that somebody would just be that brazen to do that. And then on top of it all, like, he did have the Midas touch when it came to some of these band members. He could recognize talent, and he was an engaging guy. He had this thing where he could talk to you and pretty quickly understand what your biggest dream was and then make you believe it was true. But actually, he was just sort of absorbing your dream and making it his own. He did deliver to some early investors. That's the mark of a great Ponzi scheme, right? Or horrible Ponzi scheme, depending on how you look at it. It. Early investors will sometimes get paid back. So there's always somebody out there who can say, I got some money back investing with this guy. He really did me, right? And now I have a million dollars on my $500,000 investment. Meanwhile, he's getting new investors to pay that extra 500,000 he paid back to somebody on their $500,000 investment. So new investors pay for old debts. That's the definition of a Ponzi scheme. And it's why they're often so successful.

[Lindsey Graham]

So around 2004, things start to fall apart for Lou Perlman. Banks are calling angry. Investors are demanding repayment. One of the characters that I found fascinating was Paul Glover in this story, who suddenly finds himself at the center of a massive fraud ring. What was his story?

[Tyler Gray]

So there's this guy, Paul Glover, who I love. He's like my favorite character in the story. And the reason I love him is because, all right, he's a forensic accountant, right? And Lou actually brought him in, or somebody in Lou's transcontinental companies brought him in. Now, mind you, this is when there's 84 companies going. People are starting knock on the door of his massive complex in the middle of downtown Orlando, which was, by the way, this former Rag Time themed complex. It was like when downtown Orlando tried to do tourism there, but Disney did it better, built fake cities of their own, and people left. He took that over. Here he is inside this giant compound. His companies are bleeding cash. He has very little liquid assets available. He brings in this guy who has a really good reputation as a forensic accountant to come pour over the mess and tangle of his companies to see if there is any bit of cash that he can squeeze out of anything that he's got. And so this guy's like, yeah, sure, I'll do it. He comes in, he gets the keys to Lou's office. He gets the access to all the files, and he starts going through them. And one by one, he starts seeing really sloppy investment work and accounting work. And he sees this accountancy that's gone through and certified all these different documents. He starts seeing the employee investment savings account, and he starts seeing different loans and things. And this firm that sort of had audited everything is called Cohen and C. And so he's like, I'm just going to give these guys a ring. It seems like there's some shoddy work going on here. I want to see what was going on at the time. So he picks up his mobile phone that he's got on him, right? And he dials this number for Cohen and Siegel, which is in South Florida. And he's sitting in Lou's office, and nobody else is there. It's just him. And he dials this number in. And as he's dialing, somebody's calling Lou's phone on his desk, right? The number on Lou's desk starts ringing, and nobody answers the Cohen and Siegel. So he hangs up the phone, and he goes, I'm going to call him again. And he dials his phone again. And when he dials it, the number on Lou's desk rings again. And so the phone number Cohen and Siegel was attached to the one on Lou's desk, because there was no Cohen and Siegel. It was Lou. He was auditing his own fraudulent documents.

[Lindsey Graham]

And what was Paul Glover's decision at that moment? He's discovered fraud. What does he do?

[Tyler Gray]

So there's Paul Glover sitting here. He sees the phone ring on Lou's desk, and he realizes this whole thing is built on, like, a scam. And suddenly, it all makes sense. Every document he's looking at is not a way to find more money for Lou. It's evidence of fraud. And so his mission shifted in that moment. And as he sat alone in Lou's office and had a bunch of boxes, he started to try to assemble the best set of evidence that he could find to take out of that office that day and bring it down the street to the authorities.

[Lindsey Graham]

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[Lindsey Graham]

So Paul Glover has tripped over evidence of a massive Ponzi scheme, and he goes to the author. Once the authorities get involved, Lou Pearlman leaves the country. What do you know about his life on the run?

[Tyler Gray]

This is about the time that I started following the story really closely. Lou had mailed a letter to the Orlando Sentinel where I used to work, saying that he was going to pay back all his investors. He bragged about attending this award ceremony in Germany for a boy band that he was currently promoting at the time called US five. Then he went from Germany to Spain and then to Panama and then to Singapore and then ultimately Bali, Indonesia. And by the way, a lot of this stuff was being documented by a St. Petersburg Times reporter named Helen Huntley, who was all over this. And she's the one that got the call when this German tourist named Thorsten Eyebord saw Lou Perlman in Bali, Indonesia at the buffet wearing his classic cornflour blue triple quadruple large T shirt. And the tourist took a photo. Being from Germany, he knew very well the boy band scene that Lou had started there. And he's like, hey, that's that guy with the boy bands. Isn't he wanted? So he took a photo and he emailed it to Helen Huntley at the Times, who tipped off the FBI. And so Lou was staying at the Westin Resort in Bali, Indonesia, and he had checked in under an alias, a Incognito Johnson. And so the Indonesian authorities came and arrested him, sent him to Guam, a US Territory, where he was indicted on bank and wire fraud charges on June 14th in 2007. And that's really where I sort of got him involved. I'm like a small town Florida kid who moved to New York City and was working for this magazine that I really revered. And I was always looking for angles for stories. And I started to realize that this place I came from, Florida, was like a treasure trove of weirdness. All this stuff that I'd seen as a reporter or a person living in Orlando, it was really weirder than I even realized when I was in the middle of it. And that's when I decided to come down to Orlando and try to get an interview with Lou for first a magazine article and later what we a book.

[Lindsey Graham]

So I imagine one of the first things that happens once Lou is discovered to be overseas on the run is an immediate action to try and secure what assets might remain to recoup money for people harmed. How did the authorities go about doing this?

[Tyler Gray]

Well, once Lou's arrested, different set of forensic accountants, this time being paid by the government, swooped in and tried to take a look at what all he had as soon as they could so that they could reclaim some of the money for investors. Investors in their accounting, he had stolen at least $340 million, maybe as much as $500 million from investors. His business, Transcontinental. The whole swath of businesses were put into bankruptcy. They could come in and start to claim his personal finances and try to sell off things to get investors their money back. There was no giant pot of money sitting in a secret bank account somewhere. This was what they had to do in 2007, in June, a super weird website popped up, a bankruptcy auction for his businesses and headquarters in Orlando. And it would only end up raising about $200,000. But you got to look inside the crazy life that this guy was living, the silly, almost childish things that he was buying with the money. He had a Cadillac Escalade golf cart, so a mini, shrunken down Cadillac Escalade. He had an Uzi submachine gun. He had a life size statue of Anakin Skywalker from Star Wars. Just super weird stuff. There was never any big bank account hiding somewhere somewhere or money buried somewhere.

[Lindsey Graham]

So with hundreds of millions of dollars missing, it's no surprise that Lou Perlman ended up in a jail cell. But you interviewed him while he was in Orlando's Orange County Jail. How did you get in to see him? What was it like to talk to Lou Perlman, the man himself taken down?

[Tyler Gray]

So far, the line is, you know, he traded his $250,000 Rolex for a set of metal cuffs. That was sort of the running joke at the time, even though, you know, it was not funny to a lot of people.

[Rocket Money Sponsor]

But.

[Tyler Gray]

But I did interview him when he was in the Orange County Jail. And look, I'd been a reporter covering crime in courts in Orlando for quite a while. I knew how the system worked. I also knew that in Orlando, in Florida, there was government and sunshine laws, which really allowed you a lot of access to anything paid for by tax money. And I also knew that there was no reason why a member of the press should be treated any differently than a member of the public. And the member of the public had the perfect right to go into the jail, sign up to visit anyone they wanted, and that person would be brought in front of a closed circuit camera without even knowing who they were meeting. So that's what I did. Instead of trying to go through a media channel, I just signed up to go see him. And so I went into the jail, and I had about 30 seconds when he dropped in front of the closed circuit camera and said, hello, you know, kind of questioning. And I made my case. I said, look, I'm a journalist working on a story, and there's been a lot written about your situation, but, you know, nobody's heard your side yet. And he said, you know, there's a lot I really want to talk about here, but my lawyer says that I shouldn't. I'm like, well, then let's just talk about your legacy. And that really opened him up. And from that moment on, he really started talking. We spent 45 minutes talking in jail, and he expressed how he really thought of himself as a king in exile, and he expected this chapter to be ending relatively soon. And from then on, he would talk to the person he called his girlfriend, who would talk to me, and that was how I kind of communicated with him. In jail for a better part of.

[Lindsey Graham]

A year, it sounds like Lou not only told tales to his investors, he was telling tales to himself. Even while in prison, everything was looking up. He was still a king, but in exile. What did Lou Perlman do in prison?

[Tyler Gray]

In prison, I think that he thought it was just a little less of a comfortable working office for him. He was telling everybody he was still working with US5, which is a group that he had kind of cloned from the best quality of his biggest boy bands, Backstreet Boys on NSync. And, yeah, when Lou was in, he was trying to manage an act that called himself Bite Boy. And it was like a rock kid in Orlando who was just sort of this kind of strange, irreverent rock and roll, you know, the kid played a couple shows. I went to him. He wasn't that good. Like, it was just sort of weird. And Lou had this idea for a reality show called Second Chances that would feature, like, losers from American Idol, America's Next Top Model, which I think is kind of a concept that's happening in reality TV now, though. So he tried to manage bands, he tried to start new businesses.

[Lindsey Graham]

Do you think Lou Perlman had any remorse for scamming so many people?

[Tyler Gray]

I Don't think Lou had any remorse at all. In his mind and in the mind of a lot of Ponzi schemers, they're just one step away from being able to make everything awesome for everybody, and they'll be beloved for the risk that they took in the process. And that was Lou till the end. I mean, you know, the person he for a long time called, his girlfriend Tammy, was telling me that he was saying, he's got all these plans, he's doing his thing. You know, he's got some ideas. Like, there wasn't any sort of real admission of the hurt and the pain that he had caused.

[Lindsey Graham]

How have members of the boy bands spoken about him?

[Tyler Gray]

It's super conflicting for members of the boy bands who worked with Lou. Like, to them, he wasn't all monster. I think he had had a bit of a fatherly vibe about him for some of them. Like, they called him Big Papa. Like, that was the nickname for him or Papa Lou occasionally. And he did, like, try to create this air of, like, everybody's a big family. And frankly, like, if there was no Lou, there'd be no future Sex Love Sounds by Justin Timberlake. There'd be no NSYNC or Backstreet Boys. Like, you wouldn't see the talent that came out of that happening if it weren't for Loose. So even the ones who are, like, super pissed off at him, they say it and then they go. And it's weird because at the same time, I wouldn't be here in this position in life if it wasn't for Lou.

[Lindsey Graham]

You mentioned that when you saw Lou Perlman in jail, you were able to get him to open up. When you talked about his legacy, that was something he was interested in, I guess. I'd like to know what you think his legacy is.

[Tyler Gray]

Well, the fact is, he died alone in a Miami prison with very few people around him and not even really enough money to finish his burial service. So there's that, but then there's also this sort of idea that the modern era of pop music as we know it has been heavily influenced by the boy band era that Lou Perlman had the vision to make happen. And so did he have the means to make it happen? Not legally, but could he recognize talent? Absolutely. So in that regard, when Lou said that first time, when I sat down with him, you know, we brought a lot of joy to a lot of people. That is true. But on balance, the heartache was bigger.

[Lindsey Graham]

Well, Tyler Gray, thank you so much for talking with me today on American Scandal.

[Tyler Gray]

Thank you so much.

[Lindsey Graham]

That was my conversation with Tyler Gray, author of the hit Charade, Lou Pearlman Boy Bands and the biggest Ponzi scheme in U.S. history. Lou Pearlman held that infamous record until Bernie Madoff broke it from Wondery this is episode four of Louis the Con man of Pop from American Scandal. In our next series, we delve into the Challenger space shuttle disaster of the 1980s. Under pressure to meet launch deadlines, NASA and its contractors ignored a serious design flaw that led to the death of seven astronauts, including the first teacher in space, Christa McAuliffe. If you're enjoying American Scandal, you can unlock exclusive seasons on Wondery Binge new season first and listen completely ad free when you join Wondry in the one Wondery app, Apple Podcasts or Spotify. And before you go, tell us about yourself by filling out a [e-mail] survey American Scandal is hosted, edited and executive.

[Audible Sponsor]

Produced by me, Lindsey Graham for Airship.

[Lindsey Graham]

This episode was produced by Paulie Stryker. Our senior interview producer is Peter Arcuni. Sound design by Gabriel Gould music by Lindsey Graham produced by John Reed managing producer, Elizabeth senior producer Andy Herman development by Stephanie Jens. Executive producers are Jenny Lauer, Beckman, Marshall Louis and Erno Flaherty for Wondering Dracula, the ancient vampire who terrorizes Victorian London. Blood and garlic, bats and crucifixes. Even if you haven't read the book, you think you know the story.

[Tyler Gray]

One of the incredible things about Dracula is that not only is it this wonderful snapshot of the 19th century, but it also has so much resonance today. The vampire doesn't cast a reflection in a mirror, so when we look in.

[Lindsey Graham]

The mirror, the only thing we see.

[Tyler Gray]

Is our own monstrous abilities.

[Lindsey Graham]

From the host and producer of American History Tellers and History Daily comes the new podcast, the Real History of Dracula. We'll reveal how author Bram Stoker rated ancient folklore, exploited Victorian fears around sex, science and religion, and how even today we remain enthralled to his strange creatures of the night. You can binge all episodes of the Real History of Dracula exclusively with Wondery. Join Wondery and the Wondery app, Apple Podcasts or Spotify.