At one point, boy band impresario Lou Pearlman was, arguably, the most powerful and influential music industry mogul since Berry Gordy.
In addition to launching several popular boybands and teenybopper acts, including The Backstreet Boys and NSYNC, Pearlman established a template that pop acts continue to follow to this day.
Manufacturing boy and girl bands for maximum commercial effect? Pearlman didn’t originate it (see: Menudo, The Monkees, early K-Pop or even Take That), but he definitely popularized it and turned his label into a factory, mass-producing teeny-bopper acts and watching the money roll in. In the last couple of decades, we’ve seen a ton of manufactured bands from the likes of Simon Fuller (S Club 7, Spice Girls, Now United), Simon Cowell (One Direction, Fifth Harmony, Little Mix), and so many K-Pop bands, including the biggest of them all.
Employing outside songwriters (such as a then-unknown Max Martin) to churn out hit singles? It’s practically the industry standard now. At one point in the 2010s, the Billboard singles charts were dominated by songs written by four songwriters/teams: Martin, Stargate, Ester Dean and Dr. Luke.
Using the power of television to put bands together? His Making the Band show on MTV spawned legions of imitators and demonstrated the potential of reality shows as a vehicle for musicians regardless of whether they were unknowns, established stars, or somewhere in between.
So why is his name mentioned today about as often as Voldemort’s or Chris Benoit’s? Probably because he was exposed as a con man, convicted of running a massive Ponzi scheme and embezzling over $300 million, and sentenced to 25 years in prison. That and some disturbing allegations about sexually abusing and harassing members of his boybands, and you can see why he’s been unpersoned.
Like many con men, it’s hard to keep track of all of Lou Pearlman’s many scams. For instance, he had once leased a blimp to a major company without actually owning one, and then created Transcontinental Airlines, a company that didn’t actually own any airplanes or operate any flights. (As one former company employee recounted in The Boy Band Con, a 2019 documentary co-produced by Lance Bass, they were always booking flights with Delta or United or American but never with Trans Con Air — that probably should have raised some suspicion.)
Instead, Pearlman would rent a plane and pass it off as his own. It was one of these “chartered” flights where he encountered New Kids on the Block, then at the height of their fame. Always interested in music (his cousin was Art Garfunkel), Pearlman saw how popular the New Kids were and decided to try his luck at the boyband game.
He was right that boybands could be a big time moneymaker. His first group, the Backstreet Boys, released their first two albums overseas and did very well in several foreign markets (like David Hasselhoff, they were big in Germany— their first seven singles hit the Top 5 there and from 1995 to 2000, they had 12 Top Ten singles). For their entry into the American market, those first two albums were condensed into 1997’s Backstreet Boys, a compilation that went 14x platinum in the U.S. and produced three Top 5 singles: “Quit Playing Games With My Heart,” “All I Have to Give” and “Everybody (Backstreet’s Back).”
Meanwhile, his second band, NSYNC, also got big as their 1997 debut album went 10x platinum in the U.S. and produced two major hit singles: “I Want You Back” (#13) and “God Must Have Spent a Little More Time on You” (#8). The hits kept coming with LFO’s 1999 self-titled debut album going platinum off the strength of two Top Ten singles: “Summer Girls” and “Girl on TV.” Throw in successful albums from Aaron Carter, Jordan Knight and O-Town, as well as concert ticket sales, merchandising and endorsements, Transcontinental Records was practically printing their own money.
But like always, greed and the love of a good con reared their ugly heads. For instance, Pearlman often dealt with desperate-for-fame kids and their families, who were often dazzled by a few thousand dollars and some fancy toys and gifts and didn’t understand contract law or legalities. Most of the time, they didn’t even read their contracts before signing.
As such, they often got a rude awakening when things unfolded the way they did. When it came to The Backstreet Boys and NSYNC, Pearlman was contractually considered a sixth member of the band, entitling him to an equal portion of their profits on top of what he was already making as their manager and producer.
That arrangement was unusual, to say the least. Jason Galasso, Lance Bass’s predecessor in NSYNC, recalled how he got a contract from Pearlman and one from another label for a different group that he was part of at the time. Unlike the others, he went to a lawyer and was told the contract from the other group was an industry standard while the Pearlman one raised all sorts of red flags — including the “Sixth Ranger” clause. “It was thick as a phone book,” Galasso told The Digital Get Down podcast in 2019 about the Trans Con contract. “I think the other guys were kind of like ‘whatever’ about it, not really flippant about it, but ‘we’ll sign it and no big deal.’”
Turns out, it was a big deal. When the Backstreet Boys sued Pearlman in 1997, it started a flood of lawsuits and investigations that would eventually bring Pearlman down.
It all started after the Boys only received $300,000 for all of their work over the preceding four years while Pearlman allegedly took in $10 million. Soon, it was NSYNC’s turn to say “Bye Bye Bye” to Lou, with Bass recounting that when he and his bandmates finally got paid after three years of near nonstop touring, recording and rehearsing, he was crushed when his check was only $10,000.
“There were a few moments where I realized something wasn’t right,” Bass told The Daily Beast. “One being when we finally got our first paycheck after working three years, with No. 1 albums and tours and millions and millions of merchandise being sold, and we got a check for $10,000 and we were still in debt $1 million. That’s when I realized, OK, there’s something wrong here. And then that just kind of snowballed into what it did.”
It was another contract provision — this one relating to royalties — that snagged Rich Cronin. The leader of LFO recounted how, despite writing “Summer Girls” with his bandmates before joining Trans Continental, his royalties went to Pearlman, who then sold them to another party.
“I should’ve made, like, at least 2 or 3 million dollars — easy,” Cronin recounted to Howard Stern in 2009, only to be told his publishing royalties had been sold. “Lou sold it for $1.2 million to Jive/Zomba. When I first signed the contract with him, I signed it away.”
Obviously, Pearlman was hardly the first record executive to get sued by his artists. And he certainly wasn’t the first mogul accused of taking advantage of naive, unsophisticated musicians. But his image as “Papa Lou,” a benevolent, fun-loving guy who was friends with his protégés, took a hit as details of his onerous contracts and return on investment compared to the ones actually on stage or record became public.
“He totally deceived me,” Kevin Richardson told Rolling Stone in 2000. “It’s ‘We’re a family, we’re a family,’ then you find out ‘It’s about the money, it’s about the money, it’s about the money.’”
In time, almost every one of his other bands or artists would follow the Backstreet Boys and NSYNC and sue Pearlman, forcing him to spend less time overseeing his music empire and more time and money with his lawyers.
And the increased legal scrutiny brought his various financial practices into focus. Since the 80s, Pearlman had enticed outside investors into his various business ventures by selling stock and promising annual returns of about 10 percent. At first, it was his phony airline. But then, when the Backstreet Boys and NSYNC got big, he was able to use his now verifiable success in the pop world as an imprimatur of his financial acumen, enticing starstruck investors into parting with their money for a chance to get close to his stable of pop stars.
One such plan involved getting outside investors to buy into Trans Con’s employee stock-ownership plan. Called an Employee Investment Savings Account (EISA) the vehicle sounded suspiciously similar to ERISA (Employee Retirement Income Security Act), a federal law enacted in 1974 to protect employees’ pensions, which I imagine was the point. Pearlman boasted that the EISA paid an annual return of about 8 percent and was guaranteed by the Federal Deposit Insurance Corporation (F.D.I.C.), as well as American International Group (AIG) insurance company, and Lloyd’s of London.
Just one problem. The EISA was not guaranteed by any of those entities — in fact, Lloyd’s fired off a cease-and-desist letter in 1999, while Vanity Fair reported that Pearlman had a generic AIG policy that he displayed in his office. According to the plea agreement between Pearlman and the U.S., he admitted that he created a fictitious accounting firm called Cohen & Siegel and that said firm audited Trans Con Air and prepared financial statements greatly overstating the “airline’s” assets and income. He also admitted to creating a fake bank (called, unimaginatively, the “German Savings Bank”) to pay out the returns to investors.
By 2003, his magic was starting to run out, and Pearlman began scrambling to come up with money to keep his various schemes going. The following year, faced with having to repay a $14 million loan, he tried going on the offensive, suing the estate of the person seeking repayment.
The other party countersued and now Pearlman’s finances were subject to discovery. So now, the courts had pretty solid evidence of a massive fraud on Pearlman’s part. Worse, with boybands being yesterday’s news, he had very little money coming in, which meant he needed to borrow in order to repay his investors. He soon ran out of money and, with the feds closing in, he ran off. He was discovered in Bali by a German tourist who had happened to see a news story reporting on Pearlman’s disappearance.
Ultimately, in March 2008, Pearlman pled guilty to conspiracy, money laundering and making a false claim in bankruptcy and was sentenced to 25 years in prison. He died in prison eight years later. Many of his former charges were fairly diplomatic about his passing, expressing mixed feelings but also gratitude for what he had done for them and their careers. “You don’t know whether to cry, to laugh, to be relieved. to feel bad for him and happy for everybody else,” said Chris Kirkpatrick in The Boy Band Con. “There’s so much wrong with everything about him and what happened that you don’t even know how to take death.”
And somehow, all of that financial fraud actually represents the lesser of his alleged evils. Vanity Fair and The Boy Band Con go into detail about the various sexual abuse and harassment allegations against him, if you can stomach it. Hopefully his victims have been able to find some sort of peace. And if they got just a little bit of pleasure or joy at seeing Pearlman get a fraction of what he deserved, then that’s certainly understandable.
