Boy Band Manger and Fraud
Late last week, a federal jury in Minneapolis, concluding that South Carolina-based Mercantile Bank helped the music mogul defraud his lenders, awarded $16 million to 26 banks. The award stems from a failed $28.5 million loan received by boy band creator, Lou Pearlman. Pearlman was the music mogul behind the musical acts Backstreet Boys and ’N Sync. He’s serving a 25-year sentence in Texas after pleading guilty to running a Ponzi scheme and bilking banks and investors out of $300 million or more. But in 2006, he still looked to most like a successful business tycoon, with a fleet of aircraft in addition to his various music and entertainment ventures.
The group of smaller, community banks agreed to lend $28.5 million to Pearlman to finance an American version of a British television show called "Top of the Pops." Pearlman defaulted on the loan fairly quickly while his business operation unraveled. He was arrested in Indonesia in 2007 after fleeing authorities. American Bank sued him that year, but Pearlman’s operation filed for bankruptcy, and he turned out to be completely broke.
American Bank sued the Twin Cities loan broker that shopped the Pearlman deal to various banks: North American Capital Markets and its executives Stuart Harrington and Craig Mueller. But North American, based in Golden Valley, filed for Chapter 7 voluntary bankruptcy in 2009. American Bank then turned its scope on Mercantile Bank. The bank, based in Greenville, S.C., operated widely in Florida and did business with Pearlman in Orlando, Pearlman’s home base. In 2005, Pearlman had defaulted on a $6 million line of credit from Mercantile and Mercantile was trying to restructure it.
The kicker of this story is that Mercantile Bank had extensive knowledge about Pearlman’s bank fraud, American Bank argued, including the fact that the two accountants who prepared Pearlman’s financial records were fictitious. The jury trial started Nov. 7 and the most damning evidence was an email from one Mercantile employee to another saying that a loan analyst had figured out that Pearlman’s accountants did not exist and that they had asked Pearlman to exit the bank. Bank reps were actually presented with financial documents and tax returnes that they thought were prepared by real CPA's.
If you or someone you know has been charged with fraud, call one of the experienced Myrtle Beach fraud lawyers at The Mace Firm. Our fraud attorney is ready to speak with you about your case today.
