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An Agent Nightmare Revealed

6 June 2018

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:

 @DonadioandOlson 

Who’s excited to pick up a copy of @chuckpalahniuk new book?! It’s already made it to number seven on the @nytimes bestseller’s list! pic.twitter.com/Q1eEtQNDOP
#7 on the NYT bestseller list and Palahniuk is not receiving any royalties.

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 neil@donadio.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 edward@donadio.com.

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.

Agents, Kristine Kathryn Rusch, The Business of Writing

19 Comments to “An Agent Nightmare Revealed”

  1. But perhaps there were more important concerns than whether the  agency was paying its authors in full and on time.

    The “more important” concern was whether the agents were getting their 15%

  2. So the agents were so in the habit of fielding writers calling about their late payments that a few more calls were just so much chatter.

    Also from reading Palahniuk’s post it’s not clear if he ever did make that call. From what CP said it sounds like he felt like it would be uncool to question his good friend about where all his money went. I don’t know any agents personally, but I’m guessing they’re the basic charming salesperson type. A really good one can make you believe that they’re your friend with your best interest at heart while being dodgy about the numbers. There’s a reason the car dealership hands you off to a different person to sign the contracts.

    I’m interested to hear from people with experience with agents. How do they respond to specific questions about the numbers?

  3. Just another reason to stay far away from those so-called ‘agents’.

    Better yet, maybe it’s time to treat ‘agents’ like you would any other service, paid once and done. And don’t hire just any old hack, if you need a contract lawyer to make sure the publisher doesn’t have a nasty little trick hiding in their contract then hire an actual contract lawyer. (And if you ‘agent’ claims you don’t need a lawyer then run! If they claim to be a lawyer then make sure they are in good standing with the bar – no, not the one down the street! 😛 )

    Though I will admit to liking self-publishing through Amazon, They show me the sales, the payment roll straight into my bank account and they’ve never been late or gone ‘missing’.

  4. Forgot to add that the title’s wrong. 😉

    It’s a nightmare for the writers burned by this bum, the only nightmare for the agents is that one of their own got caught.

  5. It’s an absolutely nightmare. I wonder for how long that bookkeeper could siphon off money…

    Kris also has an article from way back (2012) talking about how hard it is to get an agent audited. She also claims one agency is still stealing from her.
    https://kriswrites.com/2012/11/14/the-business-rusch-agents-and-money/

    After my experience with an agency (not nearly as bad, but still not satisfying), I’m glad I’m an indie author now. I like having full control over my books and my royalties.

  6. This is Kris’s 30 May post. It’s also worth reading her latest one – it turned up in my feed from Feedly at the same time as PG’s post – where she talks about what happened to Chuck Palahniuk.

  7. I wonder if this will give those authors who’ve been screwed on their royalties a way to cancel their contracts with this agency.

    And I’m sure there will be lawsuits by authors against the agency. Might be eligible for class action status, too.

  8. As if there weren’t a host of other reasons to stay away from the big New York publishing circus.

  9. If the authors’ organizations had been advocating properly for authors, they would long ago have lobbied congress to pass laws about companies with fiduciary responsibilities being required to have outside audits on a regular basis.

    Frankly, I don’t trust anyone, but there’s only so much you can do. Even self publishing–and especially with ebooks because there’s no inventory to account for–you’re taking Amazon’s word for how many copies they’ve sold. Outside auditors wouldn’t be able to catch fraud if the company/programmers were even a little smart about it.

  10. Felix J. Torres

    The thought that comes to mind is where the bookkeeper got the idea for skimming the accounts…

    Odds he wasn’t the only one?

  11. Just imagine that you are an honest agent, working for a Super Agency, and you have a client who’s been earning mid-five figures in royalties per year, who’s work is well respected and comes out like clockwork, a going concern.

    And then one year the royalties all but stop.

    And the next year same thing.

    You are sitting there with the author asking about it and actually you should be, too, since you get a big portion of the agency’s 15% cut.

    But you let it slide from one year to the next to the next?

    Meanwhile the publisher continues to publish the author’s new writing (a sign that they are not completely disillusioned as they would be if his sales went to zero).

    Does any of this seem remotely plausible?

    Not to me.

    To me, it feels like something more would be afoot. Collusion? Negligence in not seeking internally and externally (from the publisher) clarity about the royalties, etc.

    • Felix J. Torres

      Being of a suspicious bent, I tend to wonder if the bookkeeper found ongoing skimming and instead of blowing a whistle decided to deal himself in.

      It’ll be interesting to see this thing play out.

    • There are only a few agents in the agency. My assumption is that the bookkeeper made sure that *they* kept getting their money.

  12. Newbie Writer Pete Z.

    The Guardian news article quoted the agency as saying their main focus is their writers and they would cooperate with the government t. But if they care about their writers so much how come they don’t even mention this huge event on their website or their websites blog? Nothing. Nada.

    They have a,out of writers in their client list. I suspect is zero chance that these writers did not complain to the agents who could have checked out the bookkeeper and audited his company but but did not.

    Either a) they did not care as long as they got their cut as Dave and Felix said or
    b) everybody is in on it! agents and bookkeeper. (My ‘wild’ theory): Most agents know nothing about accounting and bookkeeping so they invited him in on the racket to ‘help us cover our tracks’.
    I hope mr bookkeeper squeals like a pig to the feds if any if that is true. Not saying it is but maybe Ryan above is onto something. Where their is smoke…

    Even if only a) is true it shows you how corrupt ( or clueless) and self centered the average agent can be by not at least posting about it on their site. Chuck only learned about it via the new articles his agency told him nothing! The papers called this agency ‘ prestigious’. If this is a prestigious agency what on earth is an verafe bench like.

    Kris talked about her experience with agencies embezzling from her in the past.

    If any of you have similar horror stories will you please post them

  13. Newbie writer Pete Z

    Pardon the typos.
    Correction: “…..what an earth is an average agency like?”

    Also check out this interview of dean and kris where they mention how agents negatively affected their work click around 19:59 and onwards

    https://m.youtube.com/watch?v=prnsXCQxNII

  14. Correction: “ what on earth is an average bench like.”

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