ORLANDO, Florida (Reuters) - Lou Pearlman, the music mogul who launched the Backstreet Boys and ‘N Sync, has agreed to plead guilty and make restitution to victims swindled out of an estimated $300 million in phony bank and investment schemes, U.S. prosecutors said on Tuesday.
Pearlman admitted in a plea agreement that for 20 years he enticed people and banks to invest millions of dollars in two companies that existed only on paper: Transcontinental Airlines Travel Services Inc. and Transcontinental Airlines Inc.
Pearlman is scheduled to enter his plea on Thursday in a U.S. court in Orlando. The charges carry a maximum of 25 years in prison and a $1 million fine.
As part of the deal, Pearlman agreed to help the government identify assets to make restitution, forfeit a 2004 Cadillac, a 2005 Chrysler, a 2004 Rolls Royce Phantom, a 2006 Cadillac limousine and two bank checks totaling $97,000.
Pearlman will plead guilty to two counts of conspiracy, one of money laundering and one of making a false claim in a bankruptcy, according to the deal. Prosecutors said the case involved three different conspiracies and fraud schemes.
One was a “Ponzi” scheme in which money raised from investors was used to pay earlier investors. The second was a bank fraud in which Pearlman got loans based on fake financial statements and income tax returns prepared by a fictitious accounting firm and the third was a bankruptcy fraud scheme.
Prosecutors counted at least 250 individual victims who lost $200 million, plus 10 financial institutions that lost $100 million, according to the plea deal.
The schemes were sustained by a fictitious international accounting firm, Cohen & Siegel, created by Pearlman in 1995, with nothing more than a dedicated telephone line at a Coral Gables, Florida, answering service, the plea deal said.
Pearlman, who guided the career of teen idols ‘N Sync and the Backstreet Boys in the 1990s, also created a fictitious “German Savings Banks” and company officers, according to the agreement.
Among the banks identified as loaning money or providing a line of credit to Pearlman or his companies are Integra Bank N.A.; Bank of America; American Bank of St. Paul; First International Bank & Trust; MB Financial Bank N.A.; Northside Community Bank; Mercantile; Washington Mutual; First National Bank & Trust; and HSBC Bank.
Editing by Jim Loney and Bill Trott
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