Pop Music Manager Goes From Living Large to Living at Large

By all accounts, Lou Pearlman, the millionaire pop music mogul who virtually invented boy bands, has led a charmed life.

It was his charm, investigators say, which helped him to bilk more than 1,400 people out of hundreds of millions of dollars in a classic pyramid investing scheme.

Pearlman is now at large, and his whereabouts remain unknown. His alleged victims -- some of them now destitute -- are left to wonder how they were taken by the man who created and once managed the Backstreet Boys and 'N Sync.

"I lost everything," said John Spears, an 80-year-old, wheelchair-bound veteran who invested his life savings, some $200,000, in what he was led to believe was an insured interest-bearing savings fund.

According to Florida state officials, Pearlman swindled people out of $317 million and, more surprisingly, bilked banks out of an additional $150 million.

That money allowed him to lead a lavish lifestyle. Pearlman owned a Rolls Royce Phantom, a Gulfstream private jet and a 15,000-square-foot Florida mansion.

State and federal investigators, as well as lawyers for the alleged victims, say Pearlman and his associates sold investors, many of them senior citizens, phony securities which he called an "employee investment savings account" through his company Trans Continental Airlines Inc.

In numerous documents obtained by ABCNEWS.com, Trans Continental assured investors that their money was insured both through the Federal Deposit Insurance Corp. and the well-known insurance brokers AIG and Lloyd's of London.

By offering reasonable interest rates, investors did not initially believe they were being scammed, lawyers for the victims say. Some initial investors were paid quarterly with money invested by new investors. Others, like Spears, "never saw a dime."

"It was clever how he did stuff," said Robert Persante, a Florida lawyer who represents eight people -- including Spears -- who accuse Pearlman of fraud. "He would advertise to senior citizens and say he was FDIC insured but he wasn't and couldn't be."

"He'd charm people with his showbiz connections ... He even gave some people paraphernalia from the boy bands," Persante said.

"Mom and pop see FDIC in an ad and they are conditioned to trust that. People were disinclined to ask an attorney because they thought, 'Do I really need to, if this is FDIC insured?'"

"Only, the FDIC doesn't cover con artists. It only covers the failure of federal lending institutions," Persante said.

The Florida Office of Financial Regulation, which initiated the investigation, has been unable to contact Pearlman since he left the United States in January 2007.

On Feb. 1, 2007, Pearlman sat in a theater in Berlin and watched as his latest boy band, the German sensation US5, received a Goldene Kamera Pop International Band award.

Within days of his band receiving that award, perhaps the last triumph in Pearlman's career, a Florida judge had appointed a receiver over Trans Continental's few remaining assets. Within weeks, FBI and IRS agents stormed the company's Orlando offices.

"It was a Ponzi [fraudulent] scheme," said Robert Rosenau, chief of financial investigations for the Florida Office of Financial Regulation.

"Money invested with [Trans Continental] was diverted elsewhere to shore up his other companies," he said.

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