A trial date has been set for a $3 million dispute between former boy band the Backstreet Boys (the "Band") and the bankruptcy trustee for the Band's former manager, Lou Pearlman, who is currently serving a 25-year prison sentence for operating a $300 million Ponzi scheme. The Band, which enjoyed a meteoric rise to success in the 1990's after being hand-picked by Pearlman, filed a claim in Pearlman's bankruptcy claiming their former manager still owed them at least $3.4 million under their contract. After the trustee objected to the claim, the bankruptcy court has scheduled the dispute for an evidentiary hearing.
In July 2007, the Band filed a claim in both Pearlman's personal bankruptcy and the bankruptcy proceeding of one of Pearlman's failed companies, Trans Continental Records, Inc., claiming that they were owed nearly $3.5 million for " indemnification pursuant to a contractual indemnification provision for defending claims litigated in the Supreme Court of the State of New York " This included costs for defendant and litigating claims against Pearlman from 2000 to 2005, including fraud claims relating to the misappropriation and concealment of revenues allegedly rightfully owed to the Band.`Including a separate claim for approximately $87,000, the Band's filed claims in each of the bankruptcies totaled more than $3.5 million.
Following the Band's submission of the claims, the court-appointed bankruptcy trustee filed an objection, alleging that the claims were not only duplicative since identical claims were filed in separate bankruptcy proceedings, but also because the claims lacked sufficient documentation for purposes of verification by the trustee. Claiming that the lack of any evidentiary basis resulted in the Trustee being "in no position to examine the validity of the claims," the trustee moved for an order denying the claims.
While a final evidentiary hearing was scheduled for March 24, 2014 for resolution of the disputed claims, a recently filed motion suggests that the hearing is to be continued for 90 days. The motion also indicated that the parties have been working towards reaching an amicable resolution of the claims.
The Trustee's objection to the claim and the Band's response is below:
For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.
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