The story of Lou Pearlman is set out in a rather lengthy but compelling article by Bryan Burrough. In short, Mr Pearlman swindled about $300 million from people who thought they were investing in his (fake) aviation business. It seems most of the money was spent on high living and to fund a Walter Mitty life as a boy-band impressario. Amazingly, he had major success. I have even heard of some of the bands he managed: Backstreet Boys, NSync, Take 5. With his energy and intelligence, Pearlman could have been a successful businessman, but he chose his path and is now serving a 25-year prison sentence.
Pearlman’s antics were shocking and thrilling to read about. But the part which most surprised me was where it tells of a dentist who handed $12 million over to Pearlman in the course of 22 years in the hope that Pearlman would make him rich. I drew three lessons from this:
- Firstly, to contribute sums over such a long time with no return indicates the kind of hold fraudsters can have over their victims.
- Secondly, it’s a good reminder why you should never invest everything you have in one thing. Even if it’s a legitimate investment, government guarantee of high return etc., wealth must be diversified to reduce risk.
- Finally, and most important, there is something wrong when a person who is able to acquire $12 million in two decades thinks he is not rich. I find it difficult to be sympathetic with someone who only invests and never tastes the fruits of his investments, but nobody deserves to be a victim of fraud. One of my pet themes is how to live within your means but not too far below them. I will be publishing articles on this topic soon. The dentist continues to live in his studio (one bedroom) apartment.