Lou Pearlman taken into custody by FBI
Source: LOCAL6 (orlando)

Boy-band mogul Lou Pearlman was arrested and taken into custody by FBI agents Thursday morning in Indonesia. Pearlman, who hadn’t been seen or heard from in months, was turned over to U.S. authorities and was being flown to Guam, the nearest U.S. territory, to have an initial apperance before a federal judge, officials said.

Pearlman has not defended himself against a blizzard of lawsuits and two involuntary federal bankruptcy cases against him and his Trans Continental companies. He doesn’t have an attorney in either federal case and was also being investigated by the FBI, the IRS and state authorities.

Pearlman allegedly defrauded individual investors of more than $315 million by selling for years a bogus savings account plan, using their money to cover losses in other businesses. Banks are hounding him and his companies for more than $120 million, according to court documents. Pearlman already lost several companies in February, when a state judge appointed receiver Jerry McHale to take over the books. Four banks filed the involuntary federal bankruptcy cases against Pearlman and his companies March 1.

In the companies, McHale has found few assets and considerable debt. Employees trashed and shredded mounds of documents in late 2006 or early 2007, he told the court, when they believed investigators were close.

The cousin of musician Art Garfunkel, Pearlman was involved in several businesses. He started with a New York flight charter company and later spread into pop music management, restaurants, real estate and talent scouting. Pearlman is best known as a music mogul who pieced together several bubble-gum pop acts that sold millions of records. Pearlman allegedly created around 100 companies but treated them as one — headquartered in the same downtown Orlando office with cross-paid expenses and shared accounts.

It is not entirely clear what finally drove Pearlman into hiding. The telephone and trash bills were not paid for at his office when the state took over. Pearlman’s belongings were auctioned off earlier this week. The auction was populated mostly by middle-aged men, not the screaming young girls who drove Pearlman’s bands to multiplatinum success. The first part of the auction happened in Pearlman’s former office, where he used to court aspiring stars. Dozens of bidders stood elbow-to-elbow and sweated while an auctioneer rambled. A tall, thick man in a Pittsburgh Steelers shirt paid $2,200 for a wall hanging commemorating the Backstreet Boys selling 7 million copies of a record. He declined to be interviewed but said he was still deciding whether to sell it. A key to the city of Orlando that Pearlman was awarded sold for $1,400 — a big raise from the $300 bidding start. Pearlman’s home in a posh Orlando suburb was also to be sold and listed for $8.5 million.

Proceeds will pay off his considerable debt, though authorities are still trying to determine how much that is.