Lou Pearlmans Billion Dollar disgrace and fall from grace part 1.

The perversion of Lou Pearlman “lover of boy-bands”.

The crowds began gathering outside Orlando’s Church Street Station complex early on a sweltering June morning, waiting in line to wander through the abandoned offices of the unlikely multi-millionaire who had transformed this central Florida city into a music-industry mecca.

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Lou Pearlman, the rotund impresario who created the Backstreet Boys and ‘NSync and guided the early recording careers of Justin Timberlake and scores of other young singers, had been an international celebrity, a popular, easygoing local businessman known as “Big Poppa.”

In his heyday, 5 to 10 years ago, he was profiled on 60 Minutes II and 20/20 and produced a hit ABC/MTV series, Making the Band.

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Pearlman was long gone now, vanished, one step ahead of the F.B.I. and investigators from the state of Florida, who had rocked Orlando months before by accusing him of being a con man. Gone too were Justin and JC and Kevin and all the other young singers he had made into stars.

What remained of Pearlman’s empire, mostly memorabilia and office furniture, was to be auctioned later that day.Up in his gaudy third-floor corner office, with its rust-colored shag carpet and walls lined with gold and platinum records, would-be bidders poked into his cabinets and rifled through his desk drawers; the only secret they uncovered, alas, was Pearlman’s passion for breath mints. At the back, a cavernous storeroom was stacked with framed posters of his bands.

Most of those milling about Pearlman’s offices had scant idea what he had done wrong, much less where he had fled to. Some said Israel, or Germany, or Ireland, or Belarus. He had left the country last January, just days before the state sued him, alleging that he had bilked nearly 2,000 investors, many of them elderly Florida retirees, out of more than $317 million in a Ponzi scheme lasting at least 15 years. A dozen banks also sued for more than $130 million in back loans.

Later the indictment would come. Big Poppa, it turned out, had been an accomplished swindler long before he formed his first band.His were scams of jaw-dropping audacity. Pearlman’s largest company, a colossus he boasted was bringing in $80 million a year, was … well, not. For years his investors, starry-eyed after rubbing elbows with ‘NSync and the Backstreet Boys, never questioned his promises of forthcoming riches. When they finally did, he fought back with lawsuits, forged documents, and fictitious financial statements. When the truth began to come out, he ran.

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That much any reader of the Florida newspapers might know. What no one knows, however, is that Pearlman’s sins appear to have been far more sordid than conning kindly grandmothers. What no one knows, because it is described here for the first time, is that while the King of the Boy Bands was smitten with the music industry and the millions he made there, while he adored his gold records and his television appearances, what Lou Pearlman loved at least as much were the attentions of attractive young male singers.

Some, especially the teenagers, shrugged and giggled when he showed them pornographic movies or jumped naked onto their beds in the morning to wrestle and play. Others, it appears, didn’t get off so easily. These were the young singers seen emerging from his bedroom late at night, buttoning their pants, sheepish looks on their faces. Some deny anything improper ever happened. But the parents of at least one, a member of the Backstreet Boys, complained. And for any number of young men who sought to join the world’s greatest boy bands, Big Poppa’s attentions were an open secret, the price some paid for fame.

“Some guys joked about it; I remember [one singer] asking me, ‘Have you let Lou blow you yet?'” says Steve Mooney, an aspiring singer who served as Pearlman’s assistant and lived in his home for two years. “I would absolutely say the guy was a sexual predator.

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All the talent knew what Lou’s game was. If they say no, they’re lying to you.”To a number of his former band members, Pearlman seemed so enamored of his male singers that it called into question his motivations for entering the music business in the first place. “Honestly, I don’t think Lou ever thought we would become stars,” says Rich Cronin, lead singer of the Pearlman boy band Lyte Funky Ones (LFO). “I just think he wanted cute guys around him; this was all an excuse. And then lightning crazily struck and an empire was created. It was all dumb luck. I think his motives for getting into music were very different.”

Pearlman was already the 37-year-old millionaire C.E.O. of a publicly held company when he entered the music business, in 1992. He wasn’t raised rich, though. Born in 1954, he grew up in the Mitchell Gardens Apartments, a collection of six-story brick buildings on a tidy street in Flushing, in the northernmost reaches of Queens, New York, below the Whitestone Bridge. His father, Hy, worked in dry cleaning; his mother was a homemaker. His cousin the singer Art Garfunkel was among those who encouraged Pearlman’s interest in music. In his 2002 book, Bands, Brands & Billions, Pearlman describes an idyllic childhood in which he grew up a kind of miniature Bill Gates, earning money with lemonade stands and paper routes.

His life, Pearlman wrote, changed forever in 1964, when, looking across the Whitestone Expressway from his bedroom window, he spied a Goodyear blimp landing at Flushing Airport for the World’s Fair. At the airport, he begged the blimp men to let him take a ride. When they said only special guests and journalists were allowed on board, the 10-year-old wangled an assignment from his school newspaper, presented his “credentials,” and was duly lifted into the skies above New York City. A dream was born. The blimps returned to Queens every summer for years, and Pearlman was always there to meet them, helping around the hangars and becoming an unofficial mascot.
“I was ecstatic,” Pearlman wrote in his book. “The airport became my summer playground and my after-school hangout.”

But there are other versions of Pearlman’s early years one hears at Mitchell Gardens. The most compelling is told by Alan Gross, who for 55 years has lived in Apartment 4C, a narrow space crammed with flotillas of blimp models, blimp posters, blimp photos, blimp key chains, and a cat. “This is the window Lou always talks about,” Gross tells me, pointing across the Whitestone Expressway toward the long-closed Flushing Airport. “Lou’s apartment is on the other side of the building. He couldn’t even see the blimps from there. He saw them here, because I showed him.”

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After a career in aviation, Gross is now a census worker in poor health, a worn man with a luxuriant gray pompadour, dark circles beneath his eyes, and blue-jean shorts cut off with scissors. Though he has never spoken publicly about his longtime friend, Gross lives in a kind of Pearlman museum, his apartment stacked with boxes bursting with Pearlman correspondence, Pearlman news clippings, Pearlman family photos, even tape recordings of 25-year-old arguments the two had over the telephone. Gross is a kind of ramshackle Inspector Javert to Pearlman’s Jean Valjean, a man who has spent years trying to warn investors and government agencies about the kid he first knew as “Fat Louie.”

“I remember him in a baby carriage,” Gross says, taking a seat on an old couch. “Louie was a very shy kid, didn’t have many friends. Wasn’t very friendly, a little overweight. He wasn’t comfortable with who he was, you know? I’m three years older, but we were the only only children in the building, so we became friends. We went on family outings, to the Statue of Liberty, to Coney Island. I went to their family circles, where I listened to his cousin Artie sing as a kid.”

As Gross tells it, it was he, not Pearlman, who first glimpsed the blimps that day in 1964. It was he, not Pearlman, who scurried there to befriend the blimp men; he, not Pearlman, who got the press pass necessary to get a ride; he, not Pearlman, who snagged the job of gofer around the blimp’s hangar. “The stories he tells?” Gross says. “They’re not about Lou. They’re about me. He’s taken episodes from my life to make his own. He always has.”

Pearlman did join Gross at the hangar, doing odd jobs, but, as Gross tells it, Pearlman did little but sit and stare, which, he says, “made the blimp guys uncomfortable. I had to tell him to stop staring, to come out and talk a little, or they wouldn’t let him hang around. That’s really when he started coming out of his shell, you know. Sometimes I feel like the Dr. Frankenstein who created a monster.”

The two lost touch when Gross left to attend Syracuse University and Pearlman enrolled in accounting classes at Queens College. It was for a class assignment that Pearlman, infatuated with aviation, worked up a business plan for a commuter helicopter service. When the two friends returned to Mitchell Gardens after college, Apartment 4C became the headquarters for Pearlman’s first aviation company. He persuaded a small group of Wall Streeters living on Long Island to buy a helicopter, which he leased and flew around New York. In his book, Pearlman claims he made his first million at 21. This is at best doubtful. (The company was later merged into a competitor.)

Helicopters were fine, but what Pearlman really wanted was a blimp. He had never shaken the bug he caught in 1964; he and Gross were proud members of the airship fraternity who call themselves “balloonatics” and “Helium Heads.” Some of the best blimps in the world were built by a German company, headed by an industrialist named Theodor Wüllenkemper.

In 1978, when the 24-year-old Pearlman heard that Wüllenkemper would be visiting the U.S. around the time of his 50th birthday, he mailed him a two-foot-high birthday card covered with glitter, along with an invitation to dinner in New York. To Pearlman’s amazement, Wüllenkemper accepted.

Pearlman picked him up at the airport in a helicopter and ferried him to dinner at, of all places, Apartment 3F, Mitchell Gardens, Flushing, Queens. Pearlman’s mother hosted. Wüllenkemper, charmed by Pearlman and his enthusiasm to start a blimp business, invited Pearlman and another Mitchell Gardens friend, Frankie Vazquez Jr., to train at Wüllenkemper’s facilities in Germany.

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Returning to the U.S. in 1980, Pearlman formed a company he called Airship Enterprises Ltd., and, after making the rounds of potential corporate sponsors, persuaded the owners of Jordache Jeans to lease a blimp for promotional purposes. Unfortunately, Pearlman had neither a blimp nor the money to buy one. According to Alan Gross, who joined Airship as its public-relations manager, Pearlman wangled a used balloon “envelope” from a California man and hired a New Jersey aluminum contractor to build a frame for it.

The blimp was assembled at a naval base in Lakehurst, New Jersey, the same one where the German zeppelin Hindenburg crashed in flames, in 1937. There were problems from the beginning, among them the fact that the gold paint Jordache demanded tended to turn brown after several days in the sun, making the blimp look, in Gross’s words, “like a giant turd.” On its inaugural flight, on October 8, 1980, the new Jordache blimp floated into the New Jersey sky on its way to New York Harbor, where it was to circle a promotional party Jordache was throwing. It made it less than a mile, however, before losing altitude and forcing the pilot to crash-land in a garbage dump.

The crash made national headlines. Pearlman blamed the weight of the gold paint. In the airship community, however, there were darker whispers. “Lou never intended to fly that blimp,” asserts Gross, who says the airship hadn’t flown anywhere near the number of practice runs required under federal law. “He could have been arrested if it had left that base.” Pearlman and his insurer ended up in court; seven years later a New York jury awarded Pearlman $2.5 million in damages.

It took years for him to rebound. After moving into a penthouse apartment in Bayside, Queens, however, Pearlman met a Wall Street broker well versed in the market for small, fly-by-night “penny stocks” who proposed a way he could return to the blimp business: Go public. Though he had little to sell but an idea, this was the go-go 1980s, and Pearlman’s new company, Airship International, managed to raise $3 million in a 1985 public offering, which he used to purchase a 13-year-old blimp from Wüllenkemper.

In short order Pearlman secured a promotional contract with McDonald’s, and with his new McDonald’s blimp in the air most of the year, he was able to rent office space on Fifth Avenue. In time Pearlman had enough money to begin flying in a rented Learjet. By 1989 he owned a 6,000-square-foot vacation home on a leafy street in Orlando.

A large, pale man with thinning red hair and glasses, Pearlman had a style that was enthusiastic, giving, and nonconfrontational. He picked up every check and seldom if ever said no. A big talker and a better listener, Pearlman drew people into his world by deducing their dreams and promising to deliver them. But his soft edges cloaked an unyielding will and the purring persuasions of a televangelist. “You could point your finger in his face and hold a Bible in one hand and tell him your name, and he could tell you you were wrong and make you believe it,” recalls Jay Marose, Pearlman’s publicist in later years. “He could make you believe anything. Anything at all.”

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In the late 1980s, Pearlman began to grow restless after he suffered two profound losses: the 1988 death of his mother and the 1989 destruction of his blimp in a San Antonio windstorm. Some suggest he went through an early midlife crisis; maybe, at the age of 35, he was just lonely. Whatever happened, within two years he had moved into new offices on Sand Lake Road in Orlando and begun talking about getting into the music business.

The seeds of Pearlman’s rise—and his fall—were laid soon after he relocated Airship International to Florida, in July 1991, when he began attracting a massive inflow of new money, investors, and business partners. One was a suave 22-year-old British heir named Julian Benscher, who met Pearlman when he acquired a replacement blimp from a British company Benscher was negotiating to buy.

After touring Airship’s U.S. facilities and poring over its financials, Benscher bought into the company, becoming its second-largest shareholder. It seemed a bargain. As Pearlman explained it, his little empire now had two strong legs, the publicly traded Airship and a rapidly growing private company called Trans Continental Airlines, an aircraft-leasing business Pearlman co-owned with Theodor Wüllenkemper. According to Dun & Bradstreet, Trans Con Air operated more than 49 aircraft, including 14 727s, and had annual revenues of $78 million.

Benscher pushed Pearlman to expand Airship, and he did, eventually acquiring four more blimps, which were leased to SeaWorld, Metropolitan Life, Gulf Oil, and others. To raise the needed funds, Pearlman, true to his penny-stock roots, turned to a shady Colorado brokerage house, which in two public offerings helped raise about $17 million selling Airship stock to investors.

The firm was what Wall Street calls a “boiler room,” that is, it hawked risky, overpriced stock to unsuspecting investors. In 1993, shortly after the Pearlman offerings, the firm, Chatfield Dean & Co., was hit with $2.4 million in fines by the National Association of Securities Dealers for swindling investors; it later agreed to a settlement with the Securities and Exchange Commission (S.E.C.). Among the allegations were charges that Chatfield brokers took investors’ orders for one stock but actually bought Airship shares instead.

Pearlman was thrilled with Chatfield’s work. When one of its brokers, Anthony DeCamillis, was banned for a year from the securities industry and fined $25,000, Pearlman hired him to help raise still more money for Trans Con Air from banks and private investors. Another Chatfield executive was hired as well and ended up handling merchandising for the Backstreet Boys. “I remember asking Lou, ‘You know, do you think it’s wise to hire a guy who’s been banned from the industry?'” Benscher recalls. “And he said, ‘Oh, Tony’ll be great for getting us financing!'”

The real problem, Benscher saw, was Pearlman’s spending. He and his men hired private jets and helicopters for every business trip; every meal seemed to be a dozen people on the company’s tab, a habit that drove up not only Pearlman’s expenses but his weight, which hit 316 pounds and may have gone as high as 350. (“He was so unbelievably fat—he used to sit down and his middle tire was down to the floor,” recalls Jennifer Emanuel, one investor’s daughter. “His favorite place was that all-you-could-eat buffet at Olive Garden.”) “I remember sitting his guys down and saying, ‘Look, at this rate, you’ll go through this $17 million in no time,'” Benscher says.

So Pearlman raised more money. He had been gathering small amounts from family and friends, mostly in the New York area, but in the early 1990s he aggressively began soliciting outside investors. Some, such as the late Eric Emanuel, a Wall Street investment banker, were sophisticated; Emanuel ponied up several million dollars and persuaded a Long Island real-estate mogul, Alfonse Fuglioli, to do the same.

Many others weren’t as savvy. Dr. Joseph Chow, a Chicago engineering professor whose wife ran a successful long-term-care organization, entered Pearlman’s orbit when a Chatfield Dean broker cold-called him. Pearlman took it from there, wooing Chow intensely, sitting next to him at his daughter’s wedding and, in later years, inviting him to kibitz with the Backstreet Boys and ‘NSync. Chow came to consider Pearlman the son he never had and eventually lent him more than $14 million.

At first Pearlman’s new investors received Airship stock. Then he began selling small lots of Trans Con Air stock, which paid an annual dividend of about 10 percent. At some point in the early 1990s, Pearlman began offering investors a new option, a chance to participate in Trans Con Air’s federally insured employee stock-ownership plan, what he termed an Employee Investment Savings Account, or eisa.

Trans Con’s eisa, which paid an annual return of about 8 percent, was a rock-solid investment, Pearlman said, guaranteed by the Federal Deposit Insurance Corporation (F.D.I.C.), the giant American International Group (AIG) insurance company, and Lloyd’s of London. In time Pearlman began selling eisa investments through a series of small brokerage houses in Florida. Many of his buyers were retirees.

Typical of Pearlman’s investors was the Sarin family. Steven, a Manhattan dentist, his brother, Barry, and their parents began investing with Pearlman in the 1980s, after the elder Sarins heard someone in their Florida retirement community speak glowingly of Pearlman. “He constantly sent promotional materials, you know, first on the blimps and the airplanes, then later on boy bands,” recalls Steven Sarin, who occasionally stayed in Pearlman’s home when he visited Orlando. “The company was always doing phenomenal.

He kept saying it would all go public. And, you know, we were getting a decent return, so we were happy. Besides, we got to meet ‘NSync and the Backstreet Boys.” Over a span of 15 years, the Sarins invested more than $12 million with Pearlman.

There was just one problem: neither the Sarins’ investments nor those of Dr. Chow or any other Pearlman investor were actually guaranteed by the F.D.I.C. Or AIG. Or Lloyd’s of London. It was all a lie. In 1999, Lloyd’s caught wind of it and fired off a letter to Pearlman demanding that he stop. He said it was all a misunderstanding. Lloyd’s went to the S.E.C.; there is no evidence the agency followed up on the complaint.

For the most part investors simply took Pearlman at his word. When someone did ask to see proof of AIG and F.D.I.C. backing, Pearlman invited them to his office and displayed what appeared to be a massive AIG insurance policy, as well as a letter confirming F.D.I.C. protection. According to Bob Persante, a Tampa lawyer representing 15 Pearlman investors, the AIG policy was unrelated and the F.D.I.C. letter a fake, believed to be dummied up by Pearlman himself.

The bigger lie, though, was the simplest: there is no such thing as an eisa account. There is a legitimate, federally insured vehicle called an erisa—an Employee Retirement Investment Savings Account—but, according to Persante and others, Pearlman’s fictitious eisa accounts were nothing more than a transparent attempt to capitalize on confusion between the two names.

It was a startlingly simple, and fabulously successful, con. Between the early 1990s and 2006, Pearlman took in more than $300 million in eisa sales. In fact, the state of Florida alleges, it was a straightforward Ponzi scheme: Pearlman paid old investors with money from new ones. “What he told people was that ‘I’ve got this eisa plan, and normally these plans are restricted to employees, but I’ve built in a special clause that allows me to give it to friends and family,'” says Persante. “The genius was he promised only a point above prime or so, so people never got suspicious.”

There is scant evidence many other than Pearlman knew the extent of his frauds. One way Pearlman protected himself was hiring inexperienced people. In a business that rarely numbered more than a few dozen employees, several top Pearlman aides, including both his general counsel and his last right-hand man, Robert Fischetti, began their careers as Pearlman’s driver.

Fischetti’s earliest duties, one investor recalls, included handing out paper towels in a Trans Con men’s room. Pearlman found another of his top men, Paul Russo, working at a convenience store. “None of these guys knew anything,” remembers Jay Marose. “If you needed a decision made, they would listen to you and go, ‘Uh-huh, uh-huh, uh-huh,’ and then go back to Lou.”

As he told the story in later years, Pearlman began to think about entering the music business during the late 1980s, when one of his charter planes flew New Kids on the Block to several concerts. His epiphany, Pearlman claimed, came when the band’s manager told him New Kids was grossing $100 million a year. Pearlman wanted in.
Julian Benscher says he sensed Pearlman’s love of the blimp business waning as early as 1991. “I remember we were in his living room, and I said to him, ‘Lou, what is your dream? What do you really want to do?'” Benscher says. “And he said, ‘The music business.’ He wanted to start a group like New Kids. I said, ‘Well, then, let’s do it. You put up half, I’ll put up half.'”

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In early 1992, Pearlman placed an advertisement in the Orlando Sentinel, announcing auditions for a band to be composed of teenage boys. Among the first to reply was Denise McLean, whose son, A.J., was an aspiring singer; after A.J. auditioned for Pearlman in his living room, he became the group’s first member. The McLeans came with a pair of music managers, Jeanne Tanzy Williams and Sybil Hall, who began working with Pearlman to complete the group.

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Dozens of teenage boys auditioned for them at Pearlman’s home. Eventually, in January 1993, Pearlman held an open casting call in which hundreds of young performers danced and sang at his blimp hangar in Kissimmee, south of Orlando. After several starts and stops, four young men—Brian Littrell, Nick Carter, Kevin Richardson, and Howie Dorough—were selected to fill out the group. Pearlman came up with a name, the Backstreet Boys, after Orlando’s Backstreet flea market.

The rest is music history. The group staged its first show, at SeaWorld in May 1993, and soon went on the road, appearing at amusement parks and malls. Pearlman brought in a pair of professional managers, Johnny and Donna Wright, and within a year the Backstreet Boys had a deal with Jive Records. After U.S. radio stations ignored its first single, the band began touring in Europe, where its first album, released in 1995, became a smash hit. Through it all, Pearlman remained a smiling father figure to the boys, paying for everything, the tours, housing, clothes. He preached that they were all a “family” and urged the boys to call him “Big Poppa.”

Even though the Backstreet Boys would not find success in America until 1997, Pearlman was soon spending so much time on the music business he all but lost interest in blimps. As a result, Airship International went down in flames. The company posted a $2 million loss in 1992 and a $4 million loss in early 1994; by late 1994 its stock had fallen to 13 cents a share, down from $6. Of its five blimps, only one was still flying in late 1994. The SeaWorld blimp was dismantled after the park declined to renew its lease. Another, leased to promote a Pink Floyd tour, was damaged in a windstorm. Another crashed in North Carolina. Yet another, en route to the U.S. Open tennis tournament in September 1994, crashed into a Long Island man’s front yard. The end came when the lease on Pearlman’s last blimp expired, in 1995.

Pearlman’s investors didn’t care much about Airship’s death. Most, like Pearlman, were too excited about the music end of the business. But what made many investors feel secure was the knowledge that, even with Airship gone, the second and far larger leg of Pearlman’s empire, the $80 million Trans Continental Airlines, was thriving. Its income grew steadily through the 1990s.

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In fact, almost all Pearlman’s ventures became subsidiaries of Trans Con Air—the Backstreet Boys, the Chippendales male-stripper franchise (acquired in 1996), Trans Con Records, Trans Con Studios, even Trans Con Foods, which included a string of TCBY yogurt franchises and a small chain of deli-cum-pizzerias called NYPD Pizza. Pearlman regularly mailed out glowing letters to Trans Con Air shareholders, detailing how the aircraft-leasing and other businesses were doing.

By and large Pearlman’s investors owned only tiny lots of Trans Con Air stock; he told people Theodor Wüllenkemper controlled most of it. Only Julian Benscher, after years of pestering Pearlman, was able to buy a significant stake in the company, about 7 percent.

It wasn’t until the late 1990s, after Benscher began disentangling his affairs from Pearlman’s, that he stumbled onto the truth. When Benscher complained that he wasn’t receiving dividends on his Trans Con stock, Pearlman blamed Wüllenkemper, saying the German magnate was refusing to pay out. Irked, Benscher flew to Germany in November 1998 and pleaded his case directly to Wüllenkemper, with whom he had become friendly.

 

As Benscher remembers their meeting, “Wüllenkemper said, ‘What are you talking about?’ I said, ‘Trans Continental Airlines.’ He said, ‘What’s Trans Continental Airlines got to do with me?’ I said, ‘You own it. You own 82 percent of it.’ He starts laughing. [I said], ‘Trans Con Air? Forty-nine airplanes?’ He said, ‘I have planes, but not this Trans Con Air. Julian, this has nothing to do with me.’ I went cold inside. Everything I had believed for eight years was a lie. I didn’t know what to do.”
There was no Trans Continental Airlines.

 

Stunned, Benscher investigated how many airplanes Pearlman actually owned. He found precisely three, and all appeared to belong not to Trans Con but to a small charter service Pearlman had formed in 1998, Planet Airways. “Trans Con Airlines existed only on paper,” Benscher explains. “But it was always so believable. There was always a plane or helicopter there whenever he wanted. When we flew to L.A. on MGM Grand Air, Lou said the jet was one of his. When he said he owned the plane, well, how could you tell he didn’t?” But Benscher struck a settlement agreement with Pearlman in which he promised not to publicly disparage him, and he has never revealed his discovery to a soul until now.

 

When I mention Trans Con Air to Alan Gross, he grins and disappears into another room, then returns with a pair of faded Polaroids. Both show a massive “Trans Continental Airlines” 747 landing at what appears to be New York’s La Guardia Airport; they are the same photos, I realize, that adorned the Trans Con Air brochures Pearlman had shown Benscher and other investors for years.

 

“Look closer,” Gross says, eyeing the photos. “You notice you can’t see the entire airplane. You can’t see the tail numbers. You know why? Because that’s where Lou was holding his fingers!”

Gross erupts in gales of laughter.
“It’s a model!” he guffaws. “It’s one I built for him. Louie was using those fake pictures all the way back in the late 70s to try and raise money. Can you believe it? People thought it was all real!”

 

By his own estimate, Pearlman sank $3 million into the Backstreet Boys before he saw a penny of profit. Still, the music business thrilled him. Even before the band hit it big, he began planning more groups. The first was ‘NSync—composed of Justin Timberlake, JC Chasez, and three other singers—which Pearlman formed and dispatched to tour in Europe in 1995. Other groups were soon in the works, including a five-teen band named Take 5, a three-teen group called LFO, and an all-girl group named Innosense.
With money pouring in from investors, Pearlman began work on a state-of-the-art recording studio. When it was finished, artists as varied as Kenny Rogers and the Bee Gees would record there.

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From the very beginning, people remarked how odd it was for a blimp-industry executive to be diversifying into boy bands. In fact, insiders raised questions about Pearlman’s motivations almost from the moment the Backstreet Boys was formed. The group’s initial co-manager Sybil Hall and her partner, a singer named Phoenix Stone—he had been one of the original Backstreet Boys before starting his own company—remained close to Pearlman as co-investors in the band. “Basically this was an excuse for Lou to hang around with five good-looking boys,” says Stone, who now runs a record label with Hall in Los Angeles. “He was along for the ride. What he liked to do was take boys out to dinner.”

 

From outward appearances, Pearlman was not gay; in fact, over the years he dated several women, including a nurse. But even in those early years, when Pearlman shepherded the Backstreet Boys to appearances around the U.S. and Europe, members of the group and their families frequently gossiped about his sexual proclivities. “As a mother, you kind of put two and two together,” remembers Denise McLean, A. J. McLean’s mother. “Yet there was always that fine line where you sat back and went, ‘O.K., is this a guy who always wanted to be a father or an uncle? Is this all innocent? Or is it more?’ I kind of thought that there might have been some strange things going on. But you just didn’t know.”

 

Others felt Pearlman was above reproach. “I spent quite a lot of time with Lou from ’90 to ’94 and never did he behave inappropriately in any sexual fashion,” says Julian Benscher. “Did I a couple of times think that maybe with one of the drivers he had an unusually friendly relationship? Sure. But I spent a lot of time with the boys and Lou, and I can tell you there was no inappropriate behavior. No way.”

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For Pearlman, and for all the people around him, everything changed in June 1997 when the Backstreet Boys charted their first U.S. hit, “Quit Playing Games (with My Heart).” Overnight the band became an international sensation. Reporters rushed to profile Pearlman as the unlikely impresario—some said “Svengali”—of a new era of boy bands. The success of the Backstreet Boys and later ‘NSync created a huge new music scene in Orlando, with thousands of fresh-faced boys, and girls, flocking to audition for Pearlman.

Part 2. This week

 

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