Judge Says Pearlman Investors May Vote on Payment Plan

Lou Pearlman’s cheated investors will soon get the chance to vote on a plan that promises to restore four cents of every dollar they lost.

U.S. Bankruptcy Court Judge Karen S. Jennemann on Wednesday authorized Mr. Pearlman’s investors to begin voting on the payment plan, according to the court docket, which one attorney called “an important moment in the history of this case.”

Investors have been waiting for payment for more than six years, when the banks Mr. Pearlman defrauded pushed the creator of the Backstreet Boys and ‘N Sync into bankruptcy protection. A bankruptcy trustee was appointed to track down assets and file lawsuits to recover investor funds, a complex and time-consuming job that will soon bear fruit for those investors.

The trustee, represented by attorneys at Akerman Senterfitt LLP and Genovese Joblove & Battista P.A., worked with the committee of unsecured creditors to come up with a plan to make sure the committee’s members, who rank near the bottom of the creditor priority list, got something.

Committee attorney Robert Feinstein, of Pachulski Stang Ziehl & Jones LLP, said he’s hopeful that continuing litigation will dredge up more funds victims, whose current 4% recovery, he acknowledged, isn’t much.

“It’s certainly not a great recovery for the victims, your honor, but it is something. And given where the case started out—in a very deep hole, with no cash, no hard assets and just the blood, sweat, and tears of the professionals—we got to where we are today,” he said, according to an audio recording of the hearing filed to the court docket.

Victims won’t receive any payment until the plan is approved. Judge Jennemann said she’d consider approving the document at a September hearing.

Write to Jacqueline Palank at [email protected]. Follow her on Twitter at @PalankJ.