The Return of Boy-Band Impresario Lou Pearlman, an All-Time Music Industry Swindler

Bad deals are inescapable in sports and pop culture. Endless, exorbitant, ridiculous contracts can destroy a team’s future, ensnare a rising young star, or cripple a major studio. Also, they’re hilarious. In honor of these horrible agreements, we present a look at some of the most egregious in their respective fields. This is Worst Contracts Week.

Last month, one of the more infamous ghosts of pop music’s past made a surprising reappearance in the pages of Billboard. Actually, as is his custom, disgraced boy-band impresario Lou Pearlman didn’t merely “reappear” so much as lumber gracelessly back into the spotlight. It was almost charming if you mistook Pearlman’s lack of shame for a lack of self-awareness. But when you’re conducting your first interview in five years from the confines of a low-security prison, it’s hard to make a case for guilelessness.

I can’t say for certain that Lou Pearlman is the most crooked music manager there ever was in pop. Determining a single “worst contract” or “sleaziest scumbag” in the record industry is like trying to pinpoint the most culpable hooligan participating in an endlessly violent riot. There is, shall we say, a lot of guilt to go around. In the history of the music business, I don’t know that there has ever been such a thing as a “good” contract, as far as properly compensating the artist is concerned. Unlike with sports, where team loyalty among fans tends to trump the interests of athletes, the artist is all that matters when it comes to the public’s sympathy. Nobody is cheering for creatives to get screwed over so a record label can have a good “season.” Pop fans don’t recognize corporations as people the way sports fans do (often at the expense of actual people).

But Pearlman is certainly among pop’s shadiest behind-the-scenes figures, though this is only coincidentally evidenced by his state of incarceration at the Federal Correctional Institution, Texarkana, in Texas. In his pre–orange jumpsuit prime, Pearlman was a genuine celebrity and TV personality, starring in the ABC/MTV reality show Making the Band as a benevolent kingmaker whose meaty palms were brushed up against the pulse of young America. He was most celebrated for conceptualizing, then creating, then cashing in on two of the most profitable pop phenomena of the 20th century, the Backstreet Boys and ’N Sync. He then parlayed his wealth and influence into creating knockoffs like LFO, Take 5, and the all-girl group Innosense. The first season of Making the Band chronicled the formation of another Pearlman act, O-Town, named after the spiritually vacant central Florida tourist destination Lou had transformed into the nation’s top manufacturing hub for teen pop.

With his pale complexion and morbidly obese physique, and incongruous background as a blimp-industry magnate, Pearlman seemed an unlikely music mogul. His only real connection to the business as a kid was his cousin, Art Garfunkel — that Garfunkel was the cool one in the family explains just how far young Lou was from the epicenter of pop culture when he started out. Pearlman later related (in his 2002 book, Bands, Brands, & Billions) childhood stories about making pint-size fortunes via his paper routes and lemonade stands. Pearlman was also obsessed with the Goodyear blimp, which he first witnessed descend at an airport near his home in Flushing, New York. “Fat Louie,” as he was known, supposedly smooth-talked his way into the hangars to get closer to the blimps.

When Pearlman grew up, he founded a company, Airship Enterprises Ltd., in 1980. His fleet consisted of a substandard blimp that crashed into a garbage dump less than a mile into its inaugural flight. An insurance settlement later awarded him $2.5 million, after which Pearlman rebuilt his budding empire via a Wolf of Wall Street–like “penny stocks” scheme that made him flush with cash and foreshadowed far more lucrative (and ultimately much more destructive) scams on the horizon.

In the late ’80s, as the head of a new company called Trans Continental Airlines, Pearlman chartered a plane for the New Kids on the Block. It was his life-changing eureka moment: These kids could afford their own plane! Pearlman’s entrepreneurial instincts instantly guided him away from the airline business and toward boy bands. In 1992, he placed an ad in the Orlando Sentinel seeking young male aspiring vocalists to plug into his first group, the Backstreet Boys. The rest is history. By the end of the decade, as Pearlman bragged to the Billboard reporter, he had made each member of Backstreet “well over $50 million apiece.”

“I, of course, got my piece, and it was very nice and substantial,” he added.

What Pearlman didn’t mention was that the Backstreet Boys sued him in 1998, because they were in fact making far less than $50 million each. As Vanity Fair reported in 2007, lawyers hired by the group discovered that from the time the Backstreet Boys were founded in 1993 until 1997 — when the band finally became a sensation in the U.S. after years of success overseas — the members had earned a cumulative total of only $300,000. That comes out to $12,000 per person per year, practically sweat-shop wages compared with the fortune Pearlman was sneakily raking in. (When the Backstreet Boys filed suit against Pearlman, they learned Pearlman was legally a sixth member of the band.) Backstreet and Pearlman eventually settled, with the band members successfully extricating themselves from the contract they signed with “Big Poppa,” though not without surrendering a cut of their future profits to him.

While Pearlman’s fame (and his empire) continued for years afterward, the Backstreet lawsuit was the beginning of the end. Pearlman had ingeniously started up ’N Sync as a counterpoint to Backstreet without informing his original pet project that he was also making millions off of their biggest rival and most hated teen-scene carpetbagger. Soon ’N Sync followed Backstreet’s lead into court; looking back on this period in a 2006 Rolling Stone interview, Justin Timberlake said he and his fellow ’N Syncers were “being raped financially by a Svengali.”

Pearlman’s fall from grace was humiliating. The Vanity Fair story not only dwelled on his shady dealings with young, gullible, and frequently teenaged artists, it also alleged that he sexually harassed and even assaulted the cute boys and handsome men who populated both his professional life and 12,000-square-foot mansion. While the evidence offered up in the article was strictly of the “skeezy innuendo” variety, the preponderance of lurid quotes strongly suggested that either (1) Lou Pearlman was probably a sex offender or (2) Lou Pearlman had so alienated people in his inner circle with his boorish and arrogant behavior that they had no problem telling a reporter he was a sex offender. Take this passage, which reads like a parody of the grossest “casting couch” showbiz clichés, except that it’s (allegedly) real:

At Pearlman’s insistence he drove to the mansion at two a.m. and found Pearlman in his office, clad in a white terry-cloth bathrobe. A long argument ensued. It climaxed, [former assistant and aspiring singer Steve] Mooney says, when he beseeched Pearlman, “What do I have to do to get in this band?” At that point, Mooney says, Pearlman smiled.”I’ll never forget this as long as I live,” Mooney says. “He leaned back in his chair, in his white terry-cloth robe and white underwear, and spread his legs. And then he said, and these were his exact words, ‘You’re a smart boy. Figure it out.'”

Now, Pearlman won’t be stuck in prison until 2029 because of what he did to the Backstreet Boys or ’N Sync or for what he maybe coerced underlings into doing to him. Pearlman was prosecuted in 2008 for engineering one of the worst and longest-running Ponzi schemes in American history, stealing as much as $500 million from 1,700 investors, mostly Florida seniors, who poured their life savings into a variety of companies that existed only on paper. A condition of Pearlman’s deal stipulates that his sentence will be reduced one month for every $1 million he recovers for those he swindled. According to the Billboard story, “recovered funds total in the high $30 millions, of which about 4 percent has been returned to victims.”

“But this has nothing to do with him,” explained the case’s Chapter 11 trustee Soneet Kapila. “It’s recoveries made by my efforts combined with the professionals I hired. It’s not like he wrote me a check.”

Shortly before he was sentenced, Pearlman argued that he should be allowed to develop new boy bands while behind bars, as a way to pay back the people he ripped off. Which brings us back to Pearlman’s aforementioned shamelessness: His apparent reason for granting Billboard an interview was to announce his desire for a comeback, even if it’s from inside a prison cell.

“If I was given a chance to put another band together, that would have paid everybody back. But I never had that opportunity, and that’s what was very upsetting,” he told Billboard. “I know if I was out there, we’d give One Direction a run for their money.”

The timing of Pearlman’s interview was weirdly synchronized with the impending end of an era he helped foster. In the story, Pearlman describes having a “friendly rivalry” Simon Cowell — a contention Cowell’s spokesperson disputes, though even if it’s not literally fact, it is true that both men became famous in the early ’00s by placing the machinery of pop stardom into the foreground. Where Pearlman diverged from Cowell was taking his talents for selling an illusion into the realm of real-life crime.

Now that Cowell’s The X Factor has been canceled, and American Idol is “winding down,” Pearlman’s push to create more boy bands feels like the final scenes from a near-concluded epic story. I picture him practicing sales pitches in the jailhouse’s bathroom mirror. You’re a star, you’re a star, you’re a star. You’re a big, bright, shining star.

Filed Under: Worst Contracts Week, Lou Pearlman, Backstreet Boys, N\'Sync, Boy Bands, steven hyden, Music, vanity fair

Steven Hyden is a staff writer for Grantland. His first book, Your Favorite Band is Killing Me, will be released in May.

Archive @ Steven_Hyden