When Darrin Webb, a bookkeeper for Donadio & Olson, pled guilty to embezzling over $3.3 million from the literary agency late last month, it seemed like a bizarre episode in the industry was reaching a close. Webb’s theft, which leaves a storied agency facing the possibility of bankruptcy and a cadre of authors with holes in their bank accounts, was, by all industry accounts, an aberration. The tale, though, may not be over, as a lawyer is considering taking action against the firm and could file a class-action lawsuit on behalf of the authors affected.
News of the situation at D&O broke in late May, when the New York Post reported that the firm, which represents estates including those of Mario Puzo and Edward Gorey, had been swindled out of millions of dollars. Around that time, Chuck Palahniuk, who was represented by Edward Hibbert at D&O, went public with the news that he was in dire financial straits. Palahniuk, who declined to talk with PW for this article, blogged that he had been complaining to his publisher for years about being stiffed on royalties and seeing his sales adversely affected by piracy, and that he was unknowingly a victim of Webb’s theft. Palahniuk said he “can’t even guess” how much money was taken from him.
Other authors affected by Webb’s crime are in similar situations. Like most professional writers, they receive their royalty statements and payments from their literary agency. Publishers send royalty statements directly to agencies, who usually look them over, deduct their commissions from the monies received, then cut checks to the authors and send them along with the statements. The problem, many industry members acknowledged, is that most authors don’t know how to read royalty statements.
That authors rely on their agents to make sure they’re getting paid in full is not surprising. An agent’s first responsibility is a fiduciary one. Though most people assume that an agent’s primary role is to act as a champion of their authors’ work and as a conduit between artists and publishers, their first responsibility is to look out for the financial well-being of their clients.
That this system broke down in such dramatic fashion at D&O is something many insiders, most of whom spoke to PW on the condition of anonymity, conceded is rare. Some also lay the responsibility for authors losing out on their royalties at the feet of the agents at the firm who weren’t paying enough attention to its finances.
Neil Olson, the current principal at D&O, declined to comment when contacted by PW. His lawyer offered a public statement that the firm has stood by since the embezzlement became public; it said that “the agency’s singular focus at this time is ensuring that all of its impacted clients are mode whole to the greatest extent possible.”
But the question lingers: how could a well-respected agency be bilked out of millions of dollars over a span of seven years? One insider said it was an example of “management not paying very close attention.” Though all sources spoke highly of Olson and his colleagues, many said that they might not be the best businessmen.
Gail Hochman, head of the Agency of Author Representatives (AAR), said the situation at D&O is “very rare.” She added, “I do think here and there [in the history of the industry] a bookkeeper has made off with some money, but most of the agents in the AAR are incredibly scrupulous about their bookkeeping. This situation is very unusual and obviously very upsetting.”
Donald N. David, a partner at Manhattan-based law firm Akerman LLP, is currently looking into the situation at D&O on a pro bono basis. He said that at present, he is working with three authors who have been affected by the embezzlement. He noted that his current focus is not on securing lost funds but on working to gather accurate information about what money the authors are owed.
David confirmed that Laura Albert (who wrote under the pseudonym of JT LeRoy) is one of the authors he’s currently working with and said he believes Webb swindled money from authors in three different ways: by neglecting to send royalty statements and checks altogether; by sending royalty statements but no royalty checks; and by sending altered royalty statements (with royalties remitted) and accordingly altered royalty checks.
David said he is open to working with more authors and putting together a class for a potential lawsuit, but the problem is that the authors affected “don’t know how much money they’ve lost.” Pointing to the agency’s vow to make its authors whole again, he noted that this cannot be done until “their authors get their royalty statements, and they’re accurate.”
Another question swirling around the D&O case is how many authors have been significantly affected. Palahniuk admitted that he doesn’t know how much he lost; some insiders guessed it could be in the high-hundred-thousand-dollar range. David was coy about answering this question but did say that “there are undoubtedly authors who got stiffed of a very large sum of money.”
James Curtis, who was represented by Olson for a number of years and sold four books with the agent (including the Pantheon-published 2015 title William Cameron Menzies), said his initial interaction with Webb led him to believe he was dealing with a case of negligence. Theft, Curtis said, was not on his radar. He noted that after contacting Webb repeatedly about a check for a “piddly sum of money” that had gone missing, he just assumed “Darren was incompetent.” Adding that he “always had problems dealing with Webb,” Curtis said he “brought Neil in” but that “Neil had a hands-off” policy in dealing with his bookkeeper.
Ultimately, Curtis said, he thinks he didn’t lose too much money, because he “kept on Darren’s tail.” He said he thinks Webb “didn’t try to screw with me, because I was paying attention.”
The Authors Guild, which has encouraged D&O clients who believe they’ve been affected by Webb’s actions to contact it, said there are ways authors can better protect themselves against the kind of financial malfeasance on display in this case. One option, according to Guild president Mary Rasenberger, is for authors to request that their publishers send them their royalty statements directly. While this is not often practiced, all publishers are required to comply with such a request, and it allows authors to see firsthand what (according to their publishers) they are earning.
The Guild also encourages its authors to strike representation agreements with their agents. Though rarely employed (or spoken about), these agreements, Rasenberger said, can make presumed aspects of the author-agent relationship more clear and put them in writing—such as what happens if an author and agent part ways after the agent sells an author’s book and what happens if an author’s book is not sold. Presumably, such agreements could also address theft and financial loss. The Guild said these agreements, which it can draft as part of its services to members, “help manage expectations” in the relationship between authors and agents so no “misunderstandings” occur. Rasenberger added that they are valuable tools in a world where “sometimes there are bad actors, and sometimes bad things happen to good actors.”
Correction: An earlier version of this story incorrectly referred to Chuck Palahnuik's agent as Edward Kastenmeier; his agent is Edward Hibbert.