Fight Club author 'close to broke' after accountant charged with fraud

Fight Club author Chuck Palahniuk has described himself as being “close to broke” after an accountant at his literary agency has been arrested for embezzling $3.4m (£2.5m) from the company.

Darin Webb, an accountant at Donadio & Olson in New York, was charged on 15th May accused of “cooking the firm’s books to conceal a multimillion-dollar embezzlement” according to a release issued by the US Attorney’s Office. He has worked in the Manhattan agency since 2001 and his alleged fraudulent behavior dates back to January 2011, according to the Department of Justice document.

The charge states that Webb allegedly admitted in video interviews that he prepared monthly financial reports and sent emails to the agency’s clients “that contained false and fraudulent representations, in order to accomplish the theft and evade detection”. The agency is not mentioned in the Attorney’s Office press release, but the name was confirmed to the New York Post as Donadio & Olson. It was founded in 1969 and has counted authors such as Joseph Heller, Mario Puzo and Philip Roth among its clients.

The 47-year-old bookkeeper Webb is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offence. 

On his personal blog, Palahniuk described his income as having “dwindled” for several years. The American novelist had initially attributed this to reasons such as piracy or his publishers being “in crisis and slow to pay royalties although the publishers insisted they’d sent the money”.

However, the multi-million pound selling author revealed that recently “the trickle of my income stopped”, meaning his big shows on book tour stopped, with the payment for Fight Club 2, two coloring books and Adjustment Day failing to show.

He wondered if the money had been stolen, but told himself he “had to be crazy” until reports surfaced of Darin Webb’s charges.

“What if someone's stealing?,” he wrote. “But that, that was insanity.  I've worked with the same team of people since 1994.  To suspect anyone was stealing, I had to be crazy. 

"And then I wasn't... All the royalties and advance monies and film option payments that had accumulated in my author's account in New York, or had been delayed somewhere in the banking pipeline, it was gone. Poof. I can't even guess how much income.  Someone confessed on video he'd been stealing. I wasn't crazy.”

Palahniuk revealed that if “you've written to me chances are that your letter passed through the hands of the accused”. 

As a result he apologised for “cursing my publishers… And I apologise for any rants about piracy. My publishers had paid the royalties”. The situation has left him "close broke," he wrote.

The writer revealed that his current US publisher, W W Norton which published his debut Fight Club and his latest title, Adjustment Day, “had absorbed the huge extra costs of this year's book tour, costs I could no longer afford”.  He paid tribute to Todd Doughty, executive director of publicity at Doubleday, who “stepped up to save me every time I've put my head through a noose” while fellow author Chelsea Cain organised legal advice from entertainment lawyers.

The author has sold 605,197 copies for £4.3m in the UK, according to Nielsen BookScan, with Fight Club (Vintage) his bestseller at 129,246 copies sold out of his nine published novels. It was adapted into a film starring Brad Pitt and Edward Norton in 1999.

According to the District Attorney’s release, Webb had provided bookkeeping services for the literary agency and carried out his scheme by making unauthorised transfers from its accounts, before making changes to its accounting system to evade detection.  

The alleged theft was reportedly discovered last fall when an unidentified author who was expecting to receive a $200,000 advance from his publisher asked Webb why he had not received the payment, according to the Post.

US Attorney Geoffrey S. Berman said: “As alleged, Darin Webb, a bookkeeper for a firm in the book business, cooked the firm’s books to conceal a multimillion-dollar embezzlement.  Now he is in custody and facing prosecution.” 

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, Darin Webb was responsible for the financial welfare of the agency whose accounts he oversaw, but instead of upholding his fiscal responsibilities, he spent his time swindling more than $3.4 million from his victims.  Cooking the books rarely pays off in the long run, as the defendant has learned today.”

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.

Palahniuk is published by Vintage in the UK with Adjustment Day out in July this year.