Tuesday, November 21, 2017
Business

Trustee for Lou Pearlman bankruptcy defends settlement

RECOMMENDED READING


Six years ago, it looked like a lost cause.

When he became bankruptcy trustee for convicted Ponzi schemer Lou Pearlman's companies, Soneet Kapila wondered if he'd be able to retrieve any money for victims who lost more than $300 million in the scam, let alone pay his legal team.

At the time, Pearlman was still on the lam, hiding in Indonesia.

"We had a case with no money in it. Some hard assets, but not much meaningful," Kapila said in an interview Friday. "And this had been running as a fraud for 15 years plus. Getting the records itself was a huge challenge. We had to gather by subpoena voluminous banking transactions from numerous banks."

Payday has finally arrived.

Under a settlement plan that Kapila filed this week in the Orlando division of U.S. Bankruptcy Court, attorney fees will capture the bulk of the money: as much as $25 million of the $37 million that has been recovered through asset sales, royalty payments and lawsuit settlements.

About $10 million will go to unsecured creditors. As the Times first reported Thursday, that works out to about 4 cents on the dollar for thousands of mom-and-pop investors victimized by the Ponzi scheme.

Kapila defended the settlement. The victims, many of them seniors who lost their life savings, would likely have received nothing without the years-long litigation, he said.

He acknowledged attorney fees were "not insubstantial" but stressed many of the lawyers were working on contingency with no guarantee of being paid.

"It's been a case where myself and my professional team has been willing to hang in there and take a lot of risk on fees (being reimbursed at all) because there was no money to pay anyone," he said. "This case required quantum effort."

One of the biggest break-throughs came when the Internal Revenue Service, which was owed millions, "was kind enough" to subordinate its priority claim, Kapila said. Under the agreement, the IRS would be paid $100,000, leaving more money to go to investors.

Kapila said he's reached a settlement with many of the banks who have agreed to waive tens of millions in claims as they stand in line with other unsecured creditors. The settlement, he said, has not been filed with bankruptcy court yet.

Depending on the outcome of pending litigation with other banks, the amount funneled to unsecured creditors could increase beyond $10 million, he said.

The creditor payment plan, which already has the blessing of the unsecured creditors' committee, will be considered at a July 17 bankruptcy hearing.

Pearlman, best known as the creator of boy bands 'N Sync and the Backstreet Boys, was captured in 2007 after a German tourist saw him at an Indonesian resort and contacted the Tampa Bay Times, which passed the information to the FBI.

He admitted to the Ponzi scheme and is now nearly five years into serving a 25-year prison sentence.

Jeff Harrington can be reached at (727) 893-8242 or [email protected]

Comments
Eight women say Charlie Rose sexually harassed them - with nudity, groping and lewd calls

Eight women say Charlie Rose sexually harassed them - with nudity, groping and lewd calls

Eight women have told the Washington Post that longtime television host Charlie Rose made unwanted sexual advances toward them, including lewd phone calls, walking around naked in their presence, or groping their breasts, buttocks or genital areas.Th...
Updated: 10 hours ago
St. Petersburg council okays restaurant deal for Manhattan Casino

St. Petersburg council okays restaurant deal for Manhattan Casino

ST. PETERSBURG — The City Council on Monday approved a lease for the Manhattan Casino, a landmark building in the city’s historic African-American business and entertainment community.It was a controversial decision for some of the city’s black resid...
Updated: 10 hours ago
Tampa Electric, contractor fined $43,000 in gas leak

Tampa Electric, contractor fined $43,000 in gas leak

APOLLO BEACH — The federal Occupational Safety and Health Administration fined Tampa Electric $18,108 and gave the company two "serious" citations for its response to a gas leak at the Big Bend Power Station in May, the agency announced late Friday.T...
Updated: 10 hours ago
Forecast: Florida retailers expect strong holiday shopping sales

Forecast: Florida retailers expect strong holiday shopping sales

‘Tis the season for holiday shopping, and this year is expected to be particularly kind to retailers.The Florida Retail Federation’s holiday shopping forecast predicts that a combination of high consumer confidence, strong tourism numbers and a littl...
Updated: 10 hours ago
Up for sale? Activist investor grabs stake in Tampa’s Bloomin’ Brands

Up for sale? Activist investor grabs stake in Tampa’s Bloomin’ Brands

TAMPA — If you tread water too long in the same spot, someone might start asking why you’re not trying to swim somewhere.Tampa’s Bloomin’ Brands — parent company of such prominent restaurant chains as Outback Steakhouse, Carrabba’s Italian Grill and ...
Updated: 10 hours ago
Glenn Thrush, New York Times reporter, accused of sexual misbehavior

Glenn Thrush, New York Times reporter, accused of sexual misbehavior

The New York Times said Monday that it was suspending Glenn Thrush, one of its most prominent reporters, after he was accused of sexually inappropriate behavior.The move came after the website Vox published a report containing allegations that Thrus...
Published: 11/20/17
Most air travelers say taking off your shoes is okay. An etiquette expert disagrees

Most air travelers say taking off your shoes is okay. An etiquette expert disagrees

Unless you are ensconced in first class, sleeping on a plane is as intimate as dozing off in a waiting room on jury duty — everyone on the aircraft knows the decibel level of your snoring and the sad state of your socks.To gauge how passengers percei...
Published: 11/20/17
Senator Nelson on tax reform bill: Small business will ‘get it in the neck.’

Senator Nelson on tax reform bill: Small business will ‘get it in the neck.’

TAMPA — A week ahead of the expected vote on a controversial tax reform bill, U.S. Sens. Bill Nelson and Ron Wyden, D-Ore., visited Tampa to deliver a message to small businesses: This bill will hurt you."Small businesses are the economic engine of F...
Updated: 6 hours ago

Stolen car crashes in St. Pete, leaving passenger, 15, with life threatening injuries

Two boys in a stolen car struck a dip in the roadway and crashed into a tree, leaving the 15-year-old passenger with life-threatening injuries, St. Petersburg police said.The crash occurred about 11:25 a.m. Sunday as the car sped west on 11th Avenue ...
Published: 11/19/17
Updated: 11/20/17

Search suspended for missing Cortez boater who left from Egmont Key

The U.S. Coast Guard suspended its search for a missing 63-year-old boater on Sunday evening, two days after he and his dog were reported missing 5 miles northwest of Mead Point, just inland from Anna Maria Island.On Friday, Fraser Horne of Cortez le...
Published: 11/19/17