(continued)

The Backstreet Boys gambit paid off. The group's second album, Millennium, sold more copies in its first week than any record released up to that time. In due course, Pearlman built a $6 million, state-of-the-art studio near Walt Disney World. The facility featured a professionally lit stage where his expanding stable of rising stars practiced their dance routines, a pool and gym where they worked out with a trainer, and dressing rooms where they were groomed and primped by a team of image consultants. "O-Town," as the studio was called, soon become a teenybopper mecca; prepubescent fans (and their mothers) would camp out in the parking lot waiting for glimpses of their idols and begging for autographs, even from Pearlman.

"He became almost as big a star as the artists he was representing," Wright says.

Looking to double down, Pearlman created cookie-cutter boy group 'N Sync. Once again, he quickly struck gold. The group's self-titled American debut album, released in March 1998, sold more than 10 million copies by the end of 1999. Press accounts estimated that Pearlman's combined businesses—which now included a charter jet service, blimps, and production studios—were worth in excess of $950 million. Colleagues say he relished his mogul lifestyle, sleeping on a Louis XIV bed, sporting a $250,000 Rolex, and jetting to gigs in his new Gulfstream V.
Justin Timberlake trashed Pearlman in Rolling Stone, claiming he'd been ''monetarily raped by a Svengali.''

It was all part of the Big Poppa mystique he had assiduously cultivated. "He picks you up in his limo, and takes you to his restaurant and his studio, and so-and-so is recording," Wright recalls, "and on his wall are platinum records, so I can see how people could get wrapped up and want to invest in him."

To some of his artists, he's still the teddy bear with the Black card. Brad Fischetti, brother of Trans Con executive Bob Fischetti and a member of the Lyte Funky Ones (LFO for short), one of Pearlman's chart-topping sensations, remembers being put up in a New York hotel while Pearlman negotiated LFO's record deal.

"We were down in the lobby of the Millennium Hotel in Times Square. Lou and one or two of his associates come walking in, and he tells us we're going to be signed to Arista Records, with Clive Davis producing," says Fischetti, 31, who now runs 111 Records. "And you're just sobbing because you're so excited."

Asked if he ever had the sense that Trans Con was headed for disaster, Fischetti says, "All I know is, Lou is a guy who gave me a chance in the music industry. I feel sad for everyone involved—the banks, the people who allegedly lost money." And even Lou. "The guy just wants to be liked."

That became a bigger challenge when his bands started realizing just how much he was making off them. In 1998, the Backstreet Boys sued him for a bigger share of the profits. And in 1999, the members of 'N Sync settled a $150 million breach of contract suit and a $25 million countersuit against Trans Con and Pearlman, alleging they had been cheated out of royalties. Justin Timberlake would later trash Pearlman in Rolling Stone, claiming he'd been "monetarily raped by a Svengali."

Feeling betrayed by Backstreet, Pearlman was determined to retain control of 'N Sync. Wright says, "He felt he had to save face. He had two of the biggest groups in the world trying to separate themselves from him. At all costs, I think he was trying to prove to the industry that their success wasn't about them, it was about him." When Pearlman dug in his heels rather than renegotiate with 'N Sync, Wright severed ties with Trans Con, taking the band with him. He still works with Timberlake.

As the boy band phenomenon began to wane in the late '90s, Pearlman started branching out. In 2002, he bought a scandal-plagued model scouting business, Options Talent, then took it through a series of name changes in an attempt to revamp its image. But clearly, it had bigger problems. More than 2,000 consumer complaints were filed against the company in Florida alone. Customers who paid up to $2,000 each for photo shoots say they were promised more in the way of modeling work than the company could ever deliver. Former employees describe traveling around the country on "photo tours," tasked with styling and shooting the most unlikely runway hopefuls, including a male model with a lazy eye and a woman who was missing an arm. A two-year investigation into the business yielded no formal charges, but Pearlman's reputation was once again suffering.

As his troubles mounted, Wright says, he began to scramble. "Success in the music business is often compared to drug addiction," Wright says. "When it goes away, you try to get it back, no matter what it takes."

It was just after 9 p.m. on January 5 when, faced with evidence of massive fraud, Paul Glover made his fateful decision. Hired to stave off Trans Con's implosion, he decided to blow the whistle instead. As he collected evidence of Pearlman's shady dealings, Glover kept his poker face.

"I didn't want to tell them, 'Hey, it's a scam and anyone associated with it is going to jail,'" he recalls. "I was trying to pretend I didn't know what I was staring at, operating as though I was there to help them out."

Eventually, Glover told Fischetti and Hart that he needed a week to come up with a plan of action. And then, his heart racing, he got up to leave. "I was wondering, are these people going to jump me on the way out of the office?" Glover glanced at the beefy guards standing between him and the door. They let him pass peacefully, taking along a box of heavy documents that, he expects, "could indict virtually everyone there."

He then called the state attorney's office fraud hotline, setting the investigation that was already underway into high gear. But even with dozens of alleged victims still emerging and talk of a class action suit, Pearlman has yet to be charged with what could be hundreds of counts of federal fraud charges related to his bogus savings account scheme.

"We're looking into Mr. Pearlman and his entities, and at this point, he's charged with bank fraud," says Steve Cole, spokesperson for the U.S. attorney. "We have a very aggressive investigation that is ongoing."