Boy band mogul Pearlman sentenced to 25 years

By Barbara Liston

ORLANDO, Florida (Reuters) - Boy band mogul Lou Pearlman, who launched Backstreet Boys and 'N Sync, was sentenced to 25 years in prison on Wednesday for swindling investors and major U.S. banks out of more than $300 million.

But U.S. District Judge G. Kendall Sharp gave Pearlman the chance to cut his prison time by offering a one-month reprieve for every $1 million in cash he helps a bankruptcy trustee recover for his victims.

Theoretically, Pearlman could cancel his entire 300-month sentence by repaying the $300 million debt.

His lawyer, Fletcher Peacock, said in a written plea that 25 years amounted to a "sentence to death in prison" for the 53-year-old impresario who lived a jet-set life of mansions and luxury cars before the fraud scheme collapsed.

In an audacious two-decade scam, Pearlman admitted in his plea agreement to enticing individuals and banks to invest millions of dollars in two companies which existed only on paper -- Transcontinental Airlines Travel Services Inc and Transcontinental Airlines Inc.

He won investors' confidence with fake financial statements created by a fictitious accounting firm.

During sentencing, Sharp held up a book with letters from Pearlman's victims, saying they included "his family, his close friends and people in their 70s and 80s who have lost their life savings."

"So the sympathy factor doesn't run high with the court," the judge said.

Pearlman pleaded guilty in March to four counts: two of conspiracy involving bank and investor fraud, one of money laundering and one of making false claims in a bankruptcy.

Sharp noted Pearlman's cooperation with the trustee to date had resulted only in the seizure of his mansion, cars including a Rolls Royce and other assets. Those recovered assets will not count toward the incentive plan to cut his sentence.

'NEGLIGENT' BANKS

Sharp scheduled a hearing for the third week in July to determine the exact amount of restitution owed to victims, which is still being calculated.

He called the banks "negligent" for lending millions of dollars to fake companies without asking the obvious question: "Why there weren't any Transcontinental planes flying around?"

The judge said he was concerned about small investors like Juanita Reynolds of St. Petersburg Beach, Florida, who cried while telling of her nearly 90-year-old husband's reaction to the swindle.

"Tears ran down his face and he said he'd lost all his self-confidence and he died seven months later," she said.