Some thoughts from Kris Rusch on the literary agency bookkeeper who is charged with embezzling $3.4 million from the authors represented by the agency. PG first mentioned it here.
From Kristine Kathryn Rusch:
The news broke publicly over the holiday weekend. If you blinked, you missed it.
The bookkeeper for a prestigious New York literary agency pled guilty to embezzling millions from the agency, leaving the agency “on the brink of bankruptcy.”
Donadio & Olson has existed for 49 years. Started by legendary agent Candida Donadio, the agency has represented some of the biggest names in fiction for decades.
. . . .
The actual criminal charges against the bookkeeper, Darin Webb, were filed on May 15 in federal court. Webb was charged with wire fraud for embezzling $3.4 million. A forensic audit is now occurring at Donadio & Olson, and there is speculation that the amount of money Webb stole will go much, much, much higher.
Here are the facts of the case as reported in the press. $200,000 that an unnamed writer represented by Donadio & Olson expected last year never arrived. The writer kept contacting Webb, who lied about what was going on with the money. Finally, fed up with the delay, the writer contacted someone else at Donadio & Olson. (That person isn’t named either.)
. . . .
The panic is clear in the calm language of Donadio & Olson’s attorney on the civil case. He said, the agency is focused on “ensuring that all of its impacted clients are made whole to the greatest extent possible.”
To the greatest extent possible.
. . . .
Even if the agency is insured against this kind of disaster, it would take years for the insurance to pay out, because the court cases have to go through first. And really, there are other questions here that an insurance company would want answered.
How much of this problem inside Donadio & Olson was caused by negligence on the part of the agency? Webb apparently worked alone, with no back-up. He handled the finances for the agency, received the money and the paperwork from publishers/movie studios/game companies, and then (in theory) passed that money onto the clients, retaining Donadio & Olson’s 15% commission. Did Donadio & Olson require this bookkeeper, who was hired at the tender age of 28, to be bonded? What level of degree did he have? Was this his first job?
How come no one backed him up? Did Donadio & Olson hire a CPA to review their books every year? Did Webb fudge those books before they went to the CPA?
How much of this could have been prevented with average due diligence, the kind of stuff you expect someone who has a fiduciary responsibility to clients to have?
All of those questions and more need to be answered before any insurance settlement would be considered, let alone paid.
To the greatest extent possible.
In other words, my friends, Donadio & Olson does not have the financial resources to make up for a theft of $3.4 million, let alone any more potential losses that the forensic accountant might turn up.
. . . .
[I]magine what’s going on with estates like [the estate of the author of The Godfather, Mario] Puzo’s, which includes all of the monies still coming in from the movies, from licensing, from the books (which are still in print). These are multimillion dollar ventures, handled every year by Donadio & Olson, with no one overseeing the day to day running of the finances.
Oh, my. The money was simply there for the taking.
The thing is, Donadio & Olson is a “reputable” agency. The New York Post used the word “prestigious” in describing the agency. Donadio & Olson was, until last week, a gold-standard agency, one that most young writers might have aspired to have as representatives.
. . . .
According to The Post, Webb confessed to “company executives and their attorneys” in March. A videotaped confession, mind you. Donadio & Olson was still blogging about writing and such on its site in April, acting as if nothing was wrong.
And then…and then…
Well, here’s The Post:
Some writers represented by the agency told The Post they had not been contacted about the theft, and did not know if it affected their royalties.
“This is the first I heard of it,” said McKay Jenkins, a nonfiction author.
Bert Fields, a lawyer representing the Puzo estate, said he learned of the arrest from The Post.
In other words, Donadio & Olson has not informed its clients—to whom it has a fiduciary responsibility—that their one and only bookkeeper confessed to massive embezzlement. The agency has known about this since last fall.
Sadly, I am not surprised by any of this. As I have blogged about before, literary agencies are not regulated. Prestigious agencies embezzle. I’ve personally had one of the biggest boutique agencies in the world embezzle from me. (And I suspect they still are, although I can’t prove it. But there are licensed properties—tie-ins—that I wrote whose royalty statements I cannot get my hands on because no one at the licensor will cooperate with me. The books have been in print for 25-30 years and I have never seen a dime in royalties. Ever.) I’ve also had one of the biggest fraudsters in the industry steal from me. I speak from hard-earned life lessons here.
. . . .
I understand how someone could notice the missing $200,000 payment that they knew was coming. But what about the subsidiary rights sales that no one bothered to tell them about? The royalties on already sold foreign books? The licensing payments from movie-related merchandise? The reprint fees?
I keep imagining those Donadio & Olson writers who have big book deals still working a day job because “there’s no money in writing.” There’s no money in writing when your agent is stealing it from you, that’s for damn sure. In fact, if you want to read a very sad illustration of what happens when an agent embezzles from a big name writer who only has a few properties (not hundreds like, say, Nora Roberts), read this about Chuck Palahniuk from The Guardian.
. . . .
If writers have literary agents—and no writer should—but if a writer for some reason feels they need an agent, then that writer needs to make sure the publisher/game company/film company splits payments. The company pays the writer her 85% and the agent his 15% directly. No money ever ever ever goes through the agent’s hand, except the money he earned.
Better yet to pay 100% to the author, and have the author pay the agent the 15%, just like you’d pay the housekeeper. But agents complain about that. Seems agents think the writers won’t pay them in a timely fashion.
Link to the rest at Kristine Kathryn Rusch
Here’s a link to Kris Rusch’s books
PG has done a little online research.
- Here is the website of Donadio & Olson. PG couldn’t see any indication of the tiniest cloud on the horizon when he checked the site.
- Here’s a Tweet on the first page of the agency’s website:
Donadio & Olson @DonadioandOlson
The Guardian article which Kris mentions in the OP quotes Chuck Palahniuk saying he’s “close to broke” because his royalties have evaporated.
The agency website lists two agents:
Neil Olson has been with the agency since 1987 and became a partner in 1996. He represents most of the agency’s estates, as well as mainstream literary and commercial fiction, and nonfiction in the areas of history, biography, science, travel, and nature. His clients have won the National Book Award, the Edgar Allen Poe Award, and the William Dean Howells Medal, among other prizes. Neil can be reached at email@example.com.
Edward Hibbert began working at the agency in 1989. His clients include bestseller Chuck Palahniuk, Christopher Bram, and the biographers Ed Sikov and Brian Kellow. Additionally, he sold the film rights on such titles as the cult classic Fight Club, Choke, Oscar Wilde(based on the Richard Ellmann biography) and Gods and Monsters, winner of the Academy Award for Best Adapted Screenplay. He represents literary and commercial fiction, and non-fiction in the area of biography and the performing arts. Edward can be reached at firstname.lastname@example.org.
This has apparently not been a large agency, at least in the last few years. PG checked the agency website via the Wayback Machine on some random dates from about 2012 on forward and the largest number of agents listed were four. Most of the time, there were three agents – the two listed above plus Carrie Howland.
PG mentions the small number of agents because he would suspect that the scale of embezzlement listed in the OP would be less likely to be noticed in a larger agency with a couple dozen agents and several hundred authors.
If there were two agents and Chuck Palahniuk phoned one of them to ask about his royalties, PG would think that agent might ask to see some recent royalty reports from the client’s publishers.
At least one and likely both agents would seem likely to have a reasonable idea about how much income the agency was generating and, almost certainly, how much money the agent took home each year. But perhaps there were more important concerns than whether the agency was paying its authors in full and on time.