American Scandal: Lou Pearlman – The Con Man of Pop | Tearin’ Up My Heart | Episode 2

Host: Lindsay Graham
Release Date: November 26, 2024

Introduction

In the second episode of "American Scandal," hosted by Lindsay Graham, listeners delve deeper into the complex and deceitful world of Lou Pearlman—a charismatic entrepreneur whose ambition and manipulation led to the downfall of two of America's most beloved boy bands, the Backstreet Boys and NSYNC. This episode, titled "Tearin’ Up My Heart," explores Pearlman's rise, his intricate business schemes, and the eventual unraveling of his empire.

Lou Pearlman's Early Ventures

The Birth of Lou Pearlman

The story begins in the mid-1990s in Chicago, Illinois, introducing Dr. Joseph Chow, an engineering professor at the University of Illinois, Chicago, and his wife. Chow is portrayed as a savvy investor looking for lucrative opportunities beyond traditional investments like Fortune 500 stocks or mutual funds. His encounters with Lou Pearlman set the stage for the unfolding drama.

[00:35] Lou Pearlman: "Lou, huh? You're on a first name basis with him? Well, we talked on the phone for a while."

Chow’s initial meetings with Pearlman, who pitches various ventures including blimp advertising and the charter plane company, Transcontinental Airlines, seem promising. Pearlman's ability to present himself as a savvy and ambitious businessman convinces Chow to invest in these ventures.

Formation of the Backstreet Boys and NSYNC

Creating the Backstreet Boys

Lou Pearlman's most significant venture began with the formation of the Backstreet Boys. Relocating to Orlando, Florida, Pearlman invested over $3 million into developing the group. By late 1995, their success in Europe signaled the beginning of a pop empire.

[07:00] Narrator: "Perlman's music empire is also accelerating. The Backstreet Boys are getting bigger and bigger..."

Introducing NSYNC

With the Backstreet Boys gaining traction, Pearlman sought to replicate his success by creating a rival group. This led to the formation of NSYNC, recruiting members like Chris Kirkpatrick, Justin Timberlake, Joey Fatone, JC Chasez, and Lance Bass. Pearlman's strategy involved rigorous rehearsals and substantial financial backing to ensure NSYNC's success parallel to the Backstreet Boys.

[10:15] Pearlman: "If they can get four other guys to join the group, I'll back them financially."

Transcontinental Airlines and Financial Schemes

Investment Opportunities

Transcontinental Airlines offered Employee Investment Savings Accounts (ESAs), enticing investors like Dr. Joseph Chow with promises of high returns and direct involvement with Pearlman's ventures.

[03:02] Chow: "Lou's making these investments as safe as possible."

However, discrepancies and regulatory concerns surfaced, hinting at the dubious nature of Pearlman's financial dealings.

Legal Scrutiny and Investor Concerns

FDIC Investigation

In the fall of 1995, the FDIC's Senior Attorney, J. Michael Payne, scrutinized Transcontinental's ESA program after receiving queries about its legitimacy. Despite suspicions, the FDIC opted not to pursue the matter further, allowing Pearlman to continue his schemes unabated for two more years.

[18:22] Lindsay Graham: "The FDIC's brief inquiry into Perelman's ESA program ultimately fizzles out."

Dr. Joseph Chow's Tragic End and Aftermath

By 2004, Dr. Joseph Chow's untimely death from pancreatic cancer left his family grappling with heavy estate taxes and inaccessible investments. When Chow's family attempted to withdraw funds from the ESA, Pearlman's evasive tactics and misleading assurances revealed the depth of his deceit.

[23:33] Narrator: "They assume it would be a straightforward process. But when Perlman shows up at Chow's funeral..."

Discovery of Fraud

Attorney Edwin Brooks, representing the Chow family, uncovered forgery in the ESA withdrawal agreements. It became evident that Pearlman had falsified documents, marking a grave escalation from business fraud to criminal behavior.

[26:32] Narrator: "Because Chow's signature is not on this document. He didn't sign it. Perlman did."

The Backstreet Boys and NSYNC Break Free

Financial Exploitation

Despite their phenomenal success, both bands discovered they were inadequately compensated. Members realized Pearlman had been siphoning funds through exorbitant commissions and unfair contracts.

[21:41] Bass: "They're bringing in millions and millions of dollars and I want to know where all that money is going."

Legal Battles

The Backstreet Boys and NSYNC took legal action against Pearlman to sever ties from his exploitative contracts. NSYNC, with the help of lawyer Adam Ritholtz, meticulously dismantled Pearlman's hold by exploiting contractual loopholes, ultimately winning their freedom in court.

[35:58] Narrator: "With this injunction denied, they can release their new album and finally earn the money they deserve."

Pearlman's Continued Downfall

Perpetuating the Scheme

Despite legal setbacks, Pearlman continued to manipulate new groups and investors, maintaining a facade of success while living lavishly off dubious investments. His relentless pursuit of creating successful acts led him to launch reality TV shows and invest in various unrelated businesses.

[33:47] Narrator: "Young musicians are still lining up to work with him, believing that Perlman knows how to create stars..."

Chao Family's Struggle and Final Exposure

The Chao family's attempts to reclaim their investments culminated in legal counter-suits initiated by Pearlman. However, Edwin Brooks's discovery of forged documents provided undeniable evidence of Pearlman's fraudulent activities, solidifying his role as a con artist rather than a legitimate businessman.

[35:58] Narrator: "Perlman's not just a business deal gone bad. This is criminal behavior."

Conclusion and Lessons Learned

The episode concludes by highlighting the extensive control and manipulation wielded by Lou Pearlman, showcasing how his ambition and deceit not only ruined two iconic boy bands but also defrauded countless investors. The legal triumphs of the Backstreet Boys and NSYNC serve as cautionary tales about the dangers of blind trust in charismatic entrepreneurs.

[46:30] Lindsey Graham: "If you're enjoying American Scandal, you can unlock exclusive seasons on Wondery plus..."

Notable Quotes

• Dr. Joseph Chow on Pearlman’s Assurance

  "[03:02] Chow: 'Lou's making these investments as safe as possible.'"

• Lance Bass Confronting Pearlman

  "[21:41] Bass: 'They're bringing in millions and millions of dollars and I want to know where all that money is going.'"

• Adam Ritholtz on Contractual Exploitation

  "[26:31] Ritholtz: 'This is a terrible contract. It might be one of the worst in music history.'"

• Judge Ann Conway's Revelation

  "[30:12] Judge Conway: 'You're not the person that people pay to see.'"

Key Takeaways

1. Charismatic Leadership Can Mask Deceit: Lou Pearlman's charm and ambition obscured his fraudulent activities, misleading both investors and artists.

2. Importance of Legal Vigilance: The Backstreet Boys and NSYNC's eventual legal victories underscore the necessity of understanding and scrutinizing contracts.

3. Impact of Fraud on Innocent Lives: Beyond financial loss, Pearlman's schemes caused emotional and familial distress, as seen with the Chao family's tragic experience.

4. Cautionary Tale for Investors and Artists: The episode serves as a warning to thoroughly vet business opportunities and to remain wary of overly charismatic figures promising extraordinary returns or fame.

Next Episode Preview

In the upcoming episode, listeners will witness the intensifying scrutiny Pearlman faces as more victims come forward, unraveling the full extent of his manipulations and the repercussions that follow.

Recommended Resources

For those interested in exploring more about Lou Pearlman's deceptive practices, recommended readings include:

• The Hit Charade by Tyler Gray
• The Song Machine by John Seabrook
• Out of Sync by Lance Bass
• Mad about the Boys by Brian Burroughs (Vanity Fair)

Credits

• Host: Lindsay Graham
• Produced by: John Reed
• Editing: Christian Parocca
• Sound Design: Gabriel Gould
• Music: Lindsay Graham
• Written by: Austin Rackless
• Edited by: Emma Cortlandt
• Fact-Checking: Alyssa Jung Perry
• Managing Producer: Olivia Fonte
• Senior Producer: Andy Herman
• Development: Stephanie Chenz
• Executive Producers: Jenny Lauer, Beckman, Marshall, Louie, and Arono Flaherty
• For Wondering Network

Disclaimer

This episode contains reenactments and dramatized details based on historical research. While efforts are made to ensure accuracy, some dramatizations may not reflect exact historical conversations or events.

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