Thanks for voting on the con artist you’d like to see in the Hall of Infamy. If you missed this round, we’ll have another group for you to vote on next week.
And the crook with the most votes is…Lou Pearlman. At the same time that he launched two wildly successful boy bands, ‘NSync and the Backstreet Boys, Pearlman ran a huge 20-year Ponzi scheme. Among the investors he persuaded to fork over millions for two non-existent companies were close friends and the elderly; such details don’t go unnoticed. As the judge who sentenced Pearlman noted: “…The sympathy factor doesn’t run high with the court.”
So Pearlman is serving a 25-year prison sentence. According to several articles published in March 2009, he’s keeping busy behind bars and looking to promote a new band called Biteboy. Last year, he was working on a deal for a reality television show about Biteboy’s attempts to hit the big-time. “It’s part Charlie’s Angels, part Making the Band,” the band’s manager told Portfolio magazine. If this show pans out, Pearlman might even play a minor role in the show — or at least his voice on speakerphone would play a role. The tentative name for the show: “Jailhouse Rock.”
If it sounds like I’m making this up (and I know it does), check out this article in Portfolio magazine. Apparently, there are ways for convicted felons to work outside the confines of prison. And, apparently, some people still want to work with Lou Pearlman.
Crazy, I know. But, then again, as the Portfolio article points out, maybe Pearlman is just the guy to pull this off:
“Before he filed for bankruptcy in early 2007, Pearlman had parlayed a cash-strapped helicopter service into a blimp company, crashed his first blimp minutes after its launch, then used the insurance money to take a second blimp company public. At the same time, he lured investors by selling shares of 727s and 747s in his charter airline fleet—jets he never owned.”
We’ll learn more about this character soon – look for him when we roll out our 2010 inductees this summer.
We’re gearing up for our 2010 inductions — and we need help deciding which crooks deserve a spot! We’ve selected some of the best nominations submitted by visitors to the Hall of Infamy; every two weeks, we’ll post a bit about these schemers and ask for your VOTE. We’ll post the results the following week — and then give you another chance to vote on who you think we should add to this infamous crew.
VOTE #1:
Courtney Chauncey Julian may have had a big, flowery name but he used down-home folksy tactics to run his con in the 1920s. He reeled in thousands of people during the speculative oil frenzy that gripped the city of Los Angeles with clever newspaper ads that promised easy money. When the bubble burst in 1927, shareholders lost up to $150 million.
Jordan Belfort, the “Wolf of the Wall Street” ran a pump-and-dump operation in the 1990s; investors who bought his artificially inflated stocks lost $100 million. A movie about his life (and based on his autobiography) is due out in 2010 – it’s directed by Martin Scorsese and stars Leonardo DiCaprio.
The Jacobowitz family of New York ran a huge decade-long fraud with Allou Healthcare, from imaginary sales and inventory to phony insurance claims. The con collapsed when the family bribed an undercover Fire Marshal to describe the fire in an Allou warehouse an “accident” (rather than “arson”). Losses totaled about $160 million and three Jacobowitz brothers are serving prison time.
Philip M. Musica was known to the world at various times as Frank D. Coster and F. Donald Coster; under all three names, he ran afoul of the law until his suicide in 1938 – for bribing customs officials while importing cheese, for borrowing on invoices for a company that dealt in human hair and, finally, for masterminding a major financial fraud through McKesson & Robbins, a pharmaceutical company.
Lou Pearlman launched two of the biggest “boy bands” of the 1990s — and he swindled banks and individuals of more than $300 million. Over 20 years, Pearlman took funds from hapless investors for companies that only existed on paper. In 2008, he plead guilty to four counts of conspiracy, money laundering and making false claims of bankruptcy.
I remember feeling such outrage over Enron. I remember seeing news footage of grim-faced employees carrying boxes of their belongings from the corporate headquarters. Those employees – about 20,000 people in total – lost their jobs, along with billions of dollars in stock and retirement savings. I remember feeling such contempt for the architects of that gigantic fraud; feelings that were reawakened when I watched the excellent documentary, “Enron: The Smartest Guys in the Room.”
We learned about Enron nearly ten years ago. A lot has happened since then (much of it worthy of outrage), but it’s interesting to think back to that time and that particular outrage. Enron turned out to be the first in a significant wave of revelations of fraud. There was Bernie Ebbers of WorldCom, a company with inflated stock prices and as many as 55 distinct billing systems. Then there was Dennis Kozlowski, the CEO of Tyco known as “Deal-a-Day Dennis.” Like Enron and WorldCom, the details of Tyco’s $600 million fraud were shocking. But what really seemed to stick in the mind (and the craw) was Kozlowski’s gross and over-the-top extravagance on the company dime. Film footage of the $2.2 million party that Kozlowski threw in Sardinia (complete with an ice sculpture of Michaelangelo that dispensed vodka) was hard to stomach. Apparently, the jurors in his trial agreed; he was sentenced to 8-25 years in prison.
The crimes of Skilling, Ebbers, and Kozlowski (and the attendant front page headlines) happened in a very different atmosphere. An article that appeared in Fortune Magazine a few months ago poked at the question of then and now; David A. Kaplan, who’s working on a new book of great interest to us (”The Age of Avarice”), offered a “contrarian’s take” on crime and punishment. His article, “Why Tyco ex-CEO Kozlowski should get clemency,” laid out a case for clemency for Deal-a-Day-Dennis — or inmate No. 05A4820 as he’s now known.
Kaplan quotes the inmate himself, who acknowledges that he was “piggy” but feels he doesn’t deserve to be behind bars. In the light of the current “sea of financial shenanigans,” Kozlowski looks a bit different. He looks more like a “scapegoat deserving retrospective leniency.” Kozlowski was indeed piggy, but he didn’t bring Tyco down; Kaplan wonders if it’s fair for him to serve more time than that of most killers.
It’s a thought-provoking commentary. Do you think the punishment matches his crime? Bernard L. Madoff got the maximum sentence of 150 years. Fair? What about the execs who brought down AIG or Lehman? What do they deserve?
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