Pop Music Manager Goes From Living Large to Living at Large

April 16, 2007 — -- 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."