Accounting & Tax

‘N Sync, Backstreet Boys, and Cohen & Siegel?

Lou Pearlman, creator of boy bands 'N Sync and Backstreet Boys, is arrested on charges of bank fraud, which allegedly involved the creation of a ph...
Stephen TaubJune 18, 2007

Say what you will about the musical talents of ‘N Sync and Backstreet Boys. At least the boy bands actually existed.

That’s more than can be said for Cohen & Siegel, the accounting firm used by Louis Pearlman, creator of both boy bands. That firm apparently never existed, and was allegedly created by Pearlman or associates of his to prepare phony documents for lenders and investors.

Pearlman was arrested late last week in Indonesia, turned over to the Federal Bureau of Investigation, and taken to Guam to appear before a federal judge. According to the Department of Justice, Pearlman has been on the lam for several months. On March 2, a criminal complaint was issued in the United States District Court Middle District of Florida charging him with one count of bank fraud. According to the Associated Press, Pearlman was accused of defrauding a bank by securing nearly $20 million in personal and business loans with fake documents from Cohen & Siegel. Pearlman faces another hearing this week.

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The website of Pearlman’s company, Trans Continental Enterprises, contains a letter from a bankruptcy receiver appointed by a Florida court, noting that “there are no liquid assets in the Company.” The site also contains a variety of of court documents relating to various schemes for which Pearlman and his companies are being sued.

Officials at Integra Bank have reportedly told investigators they relied on Cohen & Siegel documents as a “clean opinion” when they approved four loans, including two in 2004 for $19 million to Pearlman’s TransContinental Airlines. According to the AP, Pearlman promised lenders he would make payments from a large account in a financial institution called German Savings, which now also appears to be nonexistent.

In a separate scheme, the court documents for which are also posted at www.t-con.com, Pearlman also allegedly defrauded about 1,000 investors of more than $315 million by selling over a long period of time a bogus savings account plan. He is then accused of using the money to cover his losses in other businesses.

Banks are seeking more than $120 million from Pearlman and his companies, the AP noted.