But Why Would You…Not Think Your Agent Will Take Your Money?

Second installment in this new series. This series will be made up of short, sometimes very short questions and puzzlements about publishing.

Since I started yesterday with asking why anyone would let their agent be their publisher, I figured I might as well talk about the money for a moment. Because it is tight times in the agent business that is causing this shift to what I call “the publishing scam.”

Writers, as I said yesterday, as a class are the dumbest business people on the planet. With no group a close second. Even kids doing pretend businesses in middle grades are smarter. Not kidding.

My evidence?

1) Writers get excited about “getting an agent.” This “agent” is a total stranger who printed up a business card, said they were an agent, and that was it. Nothing more.  Not one ounce of training needed, not one test to take, and no idea of agency law.

2) Do writers do any background checks at all on this stranger with a business card? Nope? No criminal history, no financial report, nothing. The writers hire this employee without even asking for the agent’s Social Security Number. You can’t get a job at McDonald’s without filling out forms and going through a background check.

3) Writers give this perfect stranger with no training the right to get all their money from major publishing contracts, the right to get all the paperwork on that money as well before the writer sees anything. This money often totals into the hundreds of thousands per year. Often a lot more.

Yup, without a doubt, writers are the dumbest business people ever to come down the pike.

So, with no background checks, giving all your money to a stranger, giving that stranger all the paperwork that tracks that money, wouldn’t you just EXPECT that stranger to keep some of your money that should go to you???

Let me think… that wouldn’t even make a good plot on a bad sitcom.

Have your ever read a mystery novel???

Or read the financial page of a newspaper??

The answer is “Of course!!!”

Duh…

Don’t think it happens? You trust your agent? Yeah, and I got swamp land in Florida I want to sell. No, make that a bridge.

So, you ask, how can this happen? Well, besides the stupidity of hiring an untrained stranger, the ways agents pocket writer’s money are legion.

1) Writers never check royalty statements and agents know this. And if you get a big pile of statements from your agent with just one check, it’s easy for the agent to just accidentally keep some. Only about one in a hundred writers will check the statements and plug them into an adding machine. Kris and I do, but most never do. For a few years early on we found problems in royalty statements not matching payments, then never again because the agents knew we checked. And which way did the problem always go? I’ll give you one guess.

2) Overseas sales. Getting a royalty statement from an overseas publisher through the overseas agent your agent uses (a person you don’t even know their name) and your agent is mostly impossible. Knowing there is money even due you is even more impossible in many cases. Only way is to be talking with your overseas publishers and have them send you direct statements when any money is due. Otherwise you will never know and the agents know this and can just keep your money. (Yes, early on Kris and I got ripped off by this one. And stopped another one from one of our old agents overseas agent just last year. Honest.)

Often a writer will be off-the-charts stupid and give their agent (the stranger) power of attorney over contracts for overseas publishers. Meaning the agent (stranger) can sign the contracts and you wouldn’t even know you had sold something. If you have been that stupid, just walk away from your computer. You are in the running for the dumbest writer alive and should go work in McDonald’s to learn business. And yes, there are bestsellers who have done this. Their agents are very rich for some reason.

There are many other ways, but that’s enough for now. Just put on your mystery writer hat and you’ll come up with fifty in an hour. (A new song. “Fifty Ways Your Agent Can Steal From You” sung to the music of Fifty Ways to Leave Your Lover.)

But now to my biggest worry at the moment. “The Agent Ponzi play.”

Remember, agents have no training and do not know agency law which requires by law for all clients money to be held by itself in secure accounts until paid to the client. Instead, book agents just mingle YOUR money in with all the other clients.

And out of that fund they take their payments, including their rent and employee and grocery money.

Right now publishing contracts are way, way down. Sales are way, way down. Agents are dropping away like crazy and many are resorting to this “publishing scam” to try to get more money flowing. Things are tight and expenses high. Got it?

So here comes your money from your last advance or royalty statement into the pool and some of the agent’s bills need to be paid. So the agent, knowing there is more money from other contracts coming, just takes a little “extra” money from the pool to pay those bills. What can it hurt? Right?

And suddenly your check is late.

Agent is telling you the publisher is late paying you. Have you checked with the publisher, not your editor, but the financial department? More than likely not. Your check is just late, you trust the total stranger you hired, you have not split payments, so the agent has all your money and all your paperwork with that money.

(Note: For those who do not understand how this works, the publisher sends the agent a large check with paperwork. Often this is ganged with numbers of writers being paid in that one check from the same publisher. Agent then deposits the publisher check (you never see it) and takes your paperwork and sends you an agent check. You never see the original check or when it was mailed or printed or dated. And unless you have asked for royalty statements to be sent, you often won’t see those either.)

So agent doesn’t have enough money left in the pool to pay you until the next author’s check comes in. They used your money to pay a bill, or to pay an author ahead of you in line, and they tell you the check is late.

That folks is a Ponzi scheme. Dickens talked about it a long, long time ago in one of his books, actually, long before it was named.

And an interesting point. Lately, writer after writer after writer (writers with agents) have mentioned lately how checks are slow or very late.

Oh, oh….

Have you been to your agent’s home? How high on the financial scale do they live? How big is their office in New York? Of course you have never been to your agent’s home. Why should you? They just control all your money and your paperwork on that money and you trust them. Right?

Have you checked if they are near bankruptcy at the moment and behind on house and credit card payments? Are they about to be kicked out of their office? Of course you have not checked that because you never got your employee’s Social Security Number so you could have an agency do that. You just trust them with all your money and all your paperwork.

So my question stands. “Why Would You Not Think Your Agent Will Take Your Money?”

Of course they are going to do that. Not all of them, but in these tough times many more then before. And there were a lot before times got tough.

And why would nice agents do such a thing as run a Ponzi scheme to pay their bills with your money?

Because, as a class, writers let them.

Solution?

Learn business, get away from all agents for the next few years until all this settles.

If you have an agent, make sure you are talking with the people at your publishing house. If you have sold overseas, check when royalty statements are due and make sure you get them. Do vanity searches overseas to find out if you have been published and don’t know it. Don’t be afraid to call your overseas publisher. Europe is going through tough times as well and agents over there are just as bad. The publishers want to keep their writer’s happy.

When a check is late, and your agent says it hasn’t arrived yet, call your publishing house and check with accounting. If they sent the check two weeks before you have troubles. Actually, you and your agent have troubles.

These are tight times. Trust no one, verify everything.

Learn business.

And for heaven’s sake, on all future contracts, SPLIT PAYMENTS. And get two sets of the paperwork. And if your agent says it’s too much trouble to split payments or the publisher won’t allow it, fire the agent quickly.

The last thing you need is all your money tied up in a criminal investigation on a Ponzi scheme.

-

Copyright © 2011 Dean Wesley Smith

 

This entry was posted in On Writing, publishing and tagged , , . Bookmark the permalink.

18 Responses to But Why Would You…Not Think Your Agent Will Take Your Money?

  1. Most agents are not thieves or embezzlers, and would never dream of stealing or even “borrowing” their clients’ money.

    But here’s the key problem:

    Nonetheless, a small percentage of agents -are- dishonest, and do/will steal and embezzle from clients; and, alas, these dishonest agents do not wear badges, uniforms, hats, or matching T-shirts that let know you that they are rotten apples. I would be very helpful of them to do so, of couse, but they universally resist and refuse to cooperate with such a notion. Indeed, although it’s darned inconsiderate of them, they do their best to CONCEAL their larcenous activities.

    And THAT is the problem with the gaping holes Dean has just described in the business model. There is ZERO, zilch, nada, none, NO protection -whatsoever-, in any way, shape, form, or kind, for the author to protect herself from embezzlement by a dishonest agent in the traditional agent/author business model where all your professional legal paperwork and earnings go straight to a total stranger who is untrained, unlicensed, and wholly unsupervised by any sort of professional oversight.

    The problem is not theoretical. As has been recounted on this blog in multiple discussions, there are -numerous- instances of well-known, well-established, reputable, respected literary agents and agencies… that collapsed and closed in embezzlement scandals. In at least one case, the agent was arrested (and is, btw, now back in the business and working as an agent again, under an altered name). In others, the agents were sued. In a case last year that this blog linked to, the agent seemed to have disappeared/vanished/fled. And so on.

    And THOSE people weren’t even the unknown, lunatic-fringe, bush-league charlatans whom many aspiring writers hire (and then get taken to the cleaners by) because they don’t know any better and can’t be bothered to read Writer Beware, check out Preditors and Editors, or do any research before hiring an agents. THOSE examples–and are too many others–are the sort of agents who got hired by writers who had good careers, knew the business, and did their research!

    So if you think there’s no need to establish sensible precautions in your legal and fiscal dealings with a literary agent–sensible precautions such as split payments, for example–then you’re being naive and sticking your head in the sand.

  2. The additional thing to consider is that although not many agents are dishonest (but it only takes a few–and there ARE a few)… many agents/agencies ARE poor at administration, details, and paperwork.

    Yes, I know. It seems peculiarly counter-intuitive, given that the agent is the =businessperson= (or the agency is the -business-) in association with the artiste (the writer), and part of business competence is handling fiscal paperwork and money responsible, reliably, and accurately.

    But, in fact, problems in this area are notorious and widespread in the agenting profession. The business is neck-deep with anecdotes (not vague urban myths, but real and current complaints in any given year from writers I know) of, for example:

    You receive a royalty statement and check for a -different- client of the agent, isntead of your own money and paperwork; and when you call to report this, it takes the agency two weeks to figure out where -your- money and paperwork are. When they find them… your private earnings information turns out to have spent the past week in the hands of another client who is (a) a total stranger, (b) your worst enemy, or (c) a clueless airhead who has already gossiped all over the place about your weak sales and poor earnings.

    Your agency sends out payments late (REALLY late) or inaccurately, because it was “installing new accounting software, and there were some problems”

    Your agency goes a month without sending out anyone’s checks or paperwork because the accountant was, er, the agent’s girlfriend/wife/whatever, and stopped coming to work when they broke up

    Your agency spends half a year telling you it has not received a check that your publisher keeps saying it has sent. Finally, you get the publisher’s accounting apartment to confirm in writing the date on which the check in question cleared their account. Only after being shown -proof- that they deposited that check five months earlier does your agency at long last condescend to pay your your money.

    As soon as you become a -former- client, the much-boasted-about four-person accounting department at your agency never sends you another royalty statement, and no one at the agency ever acknowledges or answers your many calls, emails, and letters asking after your paperwork.

    These are all common scenarios. In fact, these are all real-world examples that have happened to me and to writers whom I know. In some cases, more than once.

    So an additional problem to keep in mind is that although many reputable, respected, well-known, large and small literary agencies wouldn’t dream of embezzling… they are, despite their high profile and experience, sloppy and careless with clients’ money and paperwork, simply through ineptitude.

    And is that really a problem you want for YOUR money, fiscal records, and legal documents??

    • dwsmith says:

      If you believe Laura, which I do, that agents are not all scams (many are not) but most are very bad at paperwork, then my question is WHY ARE YOU TRUSTING THEM WITH ALL YOUR MONEY AND PAPERWORK???

      I also, many times, have gotten checks meant for other writers. I once got a cashier’s check, not kidding, with a bank name on it, sent to me by an agent. For over six figures. No author name, no paperwork, just a six figure cashier’s check made out to a bank.

      I could have SO easily just cashed the check. But I did not. I worked with my agent accounting department to figure out where the money SHOULD have gone. And how stupid was I? I didn’t fire that agent at once. Yes, I was caught in all this also.

      I once got a check and royalty statements from someone I thought was a bestseller, only the money sucked and the sales were poor. I sent it back to the agency with instructions to not tell the other client that it had been sent out to the wrong place. But then I got a nice call from the other guy, who had gotten my statements and was stunned I was making so much. His comment: “I didn’t know there was so much money in writing Star Trek.” I didn’t tell him I had seen his numbers and he mailed me directly my check.

      And we both, stupidly, stayed with the agent. And this was in good times.

      And Laura’s story and my examples of true events should just send shudders up the spines of anyone with agents. Some are crooks. Some are just using money with the intent to replace it. Others are so bad with bookkeeping as to be scary. And we writers let them.

      Time to change this, folks. Time to wake up an entire class of people and change this.

  3. Blarkon says:

    So what you’re kinda saying is that if we’re a bit “ethically challenged”, the gig we should be getting into is the agent caper ;-) – Must register “Blarkon The Space Lizard Literary Agency and Publications” and have some sort of modest application fee for writers who want to be “represented”.

    It’s a good thing you haven’t gone to the dark side Dean.

  4. While I’m on the subject… (g)

    Dean alluded to what hard times the ecnomy–and particualrly the publishing economy–is in, and how that will affect many agents and their fiscal situation.

    It occurs to me that something NO agency agreement I’ve ever seen (including one which I signed and one which I declined to sign) specified is… What happens to the client’s money if it’s recently deposied in the agent’s bank account on the day that there’s an IRS or court or other sort of seizure of all of the agency’s fiscal assets due to bankruptcy, unpaid back taxes, or other serious fiscal problems?

    The check that the publisher sends to the agent for Brilliant Writer’s new contract… is made out TO THE AGENT/AGENCY and deposited IN THE AGENT’s/AGENCY’S account. At that point, the publisher has met their payment obligation. THEN the agent/agency writes a check drawn on their own account which they send to the author or authors whom the funds should be disbursed to. (At royalty time, as Dean noted, an agency that does a lot of business with a major house will–particularly during sei-annual rotalty periods–receive one huge lump-sum check covering multiple clients, and is then expected to divvy up the payouts properly, less his commission.)

    Even if the agency’s creditors or the IRS, etc., don’t seize the -clients’- money which is sitting in the agencys bank account… chances are that it’ll take a while to collect it, when there’s a problem as serious as a lien.

    And, as I say, neither of the agency agreements (nor that agency clauses in the few publishings contacts I’ve signed over the years where there was an agent involved) specified what would happen to MY money if it happened to be in the agent’s account (where a writer’s money often sits for a week or two) when the account was frozen or seized. How MANY agency agreements neglect to protect clients’ assets in the event that the agency’s assets are frozen or seized?…. Quite a few, I’ll bet, given how generally careless and sloppy the profession is, in general, when is comes to the ethics, practices, and standards of handling other people’s money, fiscal paperwork, and legal documets.

    • dwsmith says:

      Yup, what Laura said. All the way.

      This is a tough time for publishing, traditional publishers and agents. Especially for agents. Do NOT let your money get tied up in a bankruptcy or suit or IRS action. Again, back to my suggestion. Two years. Just hold off and see who survives, who goes under, and what is happening.

      Then when you go with an agent, split money, and get all paperwork and get a background check done on the perfect stranger with a business card.

      And right now, if you are reading this and your check is late, get on the phone. Both to your agent and your publisher’s accounting department. There is a trick on surviving Ponzi schemes. Get out first and be the wheel that needs the oil first.

      And size of agency means NOTHING. Bernie had a huge investment firm, remember? Then Enron Ponzi scheme was huge. Get out first and fast if payments are running late and your agent can’t seem to get them for you.

      And one more thing. These agencies who are going to publish your books without any upfront cost to you, WHERE ARE THEY GETTING THAT MONEY??? Where are they getting the time, the hired help? Where is that money coming from to make you so rich off letting your agent be a publisher??? Publishers put up a lot of money up front on every book. Agents think like publishers. They are not going to do it like I have been suggesting writers do, which is cheaply.

      Where is that money coming from???????? In tight times? With 15% of a smaller pool than they had a year ago?

      Caution, caution, caution. There are so many red flags flying right now, it’s hard to see the horizon.

  5. Passive Guy says:

    Great post, Dean. A classic.

    • dwsmith says:

      K.W., I agree, and that’s the problem right now. Money pressures are causing the rot to spread quickly. We are just seeing the surface because of the “publishing scam” that has started. That’s pure money pressure talking. And late payments everywhere through agents??? Wow, I know at our house, without agents on board, the payments have been way ahead of when we have expected them. (Our expectations were based on when we had agents.) It is stunning how fast money arrives to the writer when no agent in the middle. Stunning.

      Thanks, Passive Guy, and thanks for the comments on your site as well.

      Here is the problem I see more than anything. Those with agents will never believe THEIR AGENT would do this. Of course, this thinking is normal for humans. We watch the stupidity in Congress and get mad at them, but it is NEVER OUR CONGRESSMAN who is part of the problem. Yeah, right. No matter which side you are on. (No political discussions allowed here. (grin))

      I am just trying to get writers to act like business people. Nothing more. It is insane, flat insane to give a perfect stranger all your money and your paperwork. A writer’s good nature may hope that their agent is one of the honest ones, and there are honest ones. But it is just as likely their agent isn’t one of the honest ones. Just as likely.

      And one writer wrote me and said they didn’t have this problem because their agent was with a big agency. I think I caught myself before I rolled out of my chair laughing. I want one writer, just one, to tell me the name of the person in the accounting department at the “big agency” and how much do you know about that person? They have unlimited amounts of untraceable amount of money flowing through them. They have the only paperwork, the only trace of the money. I walked into a car repair show here in my small town to find a woman’s mug shot framed on their wall with the newspaper article under it. She had been the accountant for the car repair shop, not a large one, and had taken out over two million in three years. She said she needed the money for her gambling.

      These are hard times for most people. You tempt anyone with unlimited, untraceable money, especially a person wondering how to keep food on the table, and they will take money.

      Writers can stop this simply by splitting payments. Your money comes to you. You have a contract with the publisher, publisher pays you. Then if the agent has someone with a problem in accounting, it’s the agent’s money they are taking, not yours. Very simple. Very smart business. Split payments, folks. Get your 85% if you have an agent. And if your agent won’t split payments, you have a red flag the size of a city flapping in your face.

  6. Frank Hood says:

    And writers have been lining up for years to have agents deign to say they’ll take their money! I’ve talked to a few agents who took just that attitude.

    As for your song, I propose the alternate version, “50 Ways to Fleece a Writer.” Now I’m going to have to stop myself from writing lyrics to go with it in order to get it out of my head.

    Curse you, Paul Simon!

    And thanks Dean and Laura!

  7. K. W. Jeter says:

    Very much agree with everything said so far, and I could throw my own horror stories in support of Dean’s and Laura’s points. My only additional comment is that when rot sets in, it tends to spread. In this case, the rot in the publishing industry began a long time ago with the publishers happily and openly embezzling money through the reserve against returns and other scams. This became standard operating procedure — everybody knew it happened and nobody did anything about it, including all the various writers organizations with their meaningless little audits, etc. At a certain point, agents saw publishers getting away with embezzlement and succumbed to the temptation of doing a little themselves. Just like they say about murder — only the first one’s hard. Then a little becomes a lot, and the rot spreads further through the industry.

    Should any agents have gotten dirty this way? Of course not, no more than the publishers should have. But it’s a sad commentary on human nature that it’s only to be expected that they would.

  8. Mark says:

    So if a writer signs with a publisher, isn’t the writer reliant on the publisher honestly reporting sales?

    And if a writer self-publishes with Amazon, B&N, and Smashwords, isn’t the writer reliant on these entities honestly reporting sales?

    At what point is the writer fully protected?

    • dwsmith says:

      Yes, we are reliant on bookstores and publishers reporting sales, and there are some suits right now pending on that issue. Numbers of protections, actually. Reporting services report sales of books and you can check those numbers with your publisher. Also, you have the right in most publishing contracts to audit your publisher’s books at any time. Part of most publishing contracts. And often done. All safeguards.

      But once that money is earned, you want to get it. And putting a stranger with all the records and all the money in the middle is just foolish. I have no problem with writers having agents. Just understand what they can and can’t do for you, and for heaven’s sake, split payments. Have the publisher send you your money directly. Then you will know if there is a problem with your publisher. And not allow a problem to happen with money and your agent.

      Never fully protected. But taking stupid chances with strangers just because you are not protected in other places is not a good plan in any business. Agents do not add in a level of protection. They add levels of theft.

  9. Dean wrote: “It is stunning how fast money arrives to the writer when no agent in the middle. Stunning.”

    I echo this.

    I didn’t work with agents for my first 10 book sales, and I certainly noticed a difference after I switched to working with agents. In any deal handled by an agent, I was flabbergasted at how much longer it took to get paid, whether it was a question of advance check, D&A check, or semi-annual royalties.

    As soon as I ceased working with agents, I immediately noticed a BIG improvement in how fast I got paid. Not just how much sooner royalties and fiscal paperwork arrives when it’s addressed to -me- rather than to an agency, but also how much more promptly my advance checks and my D&A checks are sent.

  10. “And one writer wrote me and said they didn’t have this problem because their agent was with a big agency. I think I caught myself before I rolled out of my chair laughing. ”

    For that person’s benefit, let me reiterate:

    The moment I left my fourth agency, I immediately (and perpetually, consistently thereafter) had trouble collecting my fiscal statements from this agency. This is despite that large agency having a four-person accounting department that it boasts about on its website (presumably because many agencies only have one accountant), also boasting about this accounting dept’s EFFICIENCY. (sigh) Nor could I get anyone at the agency to answer my calls, emails, and letters asking after my never-sent paperwork.

    Additionally, that large agency’s consistent failure to FWD fiscal and legal paperwork to me cost me additional legal fees when I was trying to sort out a mess with a publisher 3 years after leaving the agency. The agency had “represented” me (I use the term loosely–nay, ironically), but I had to pay a lawyer to advocate for me when a problem arose. During the course of sorting out that problem, the lawyer discovered that one of the -causes- of the problem was indeed that I had never received -any- of the fiscal paperwork the publisher had been sending to me via the agency, with expectation that the agency would FWD it to me. In this case, it was paperwork whose existence I had never even KNOWN about until after the legal problem arose and my lawyer investigated.

    And, as you note, Dean, there are plenty examples in the media every month–nay, every week!–of, er, SIZE being no protection whatsoever against embezzlement. So what on EARTH was that writer thinking, to tell you that s/he has no worries on this score by virtue of being a client of a large agency???

  11. This one is a little different but upsetting nonetheless. I DID request separate checks when I signed with this agency two years ago. (I had heard of authors whose agents died, or were late with money or whose checks bounced). But when the agent sold my book she said the publisher would not agree to split checks (I should have contacted the publisher myself to see if that was true) but my book was about the Titanic and I wanted it out before April 2012 which is the 100th anniversary of the sinking, so I didn’t check. I also didn’t understand one clause in Paragraph 10 of the contract, trusted the agent to know what it meant. But, now, when I want to enter my book for the RWA Rita Award, I find it’s not eligible because of that one sentence in the contract which RWA says makes it a “subsidy” publisher, even though I never sent them a penny (nor did they ask for it). Worse, it turns out the agent knew about the problem with that clause and NEVER TOLD ME. Okay, maybe my book would not win the Rita or even be a finalist, but thanks to the agent, I don’t even get to try. By the way, we clashed six months ago when I rejected a publisher she wanted to sell a different book to, and SHE FIRED ME. Best thing that ever happened. She gets no more of my books, nor will any other agent. After all, I sold nine books without an agent before I was “lucky” enough to acquire this one. P.S. how do I forward your blogs to my writer friends to warn them?

    • dwsmith says:

      Phyllis, glad you escaped from what sounds like a mess. Great luck there. (grin) And you should be worried.

      If an agent won’t split checks, you have a huge problem. They have no logical reason to want to handle your money and do the paperwork and tax aspects of handling your money. It saves them a vast amount of time and energy to split payments. So their only reason to not split payments is because they are thinking of theft. Publisher’s, at least normal publishers, will always agree and be glad to send paperwork to both parties. No big deal in these modern times.

      Just copy and paste the blogs as you want. Please include the copyright notice and name is all, but I have no problem in forwarding or linking these posts. My goal is to try to help writers. I am yelling at them, sure, but it is the spirit of trying to help.

      Harsh love I guess it would be called. (grin) Great job getting away from that scam agent. Keep at it.

  12. William Greeley says:

    The money should go from the publisher to the writer, with a statement to the agent. The agent can then send a bill to the writer for his 15%.

    • dwsmith says:

      William. That’s how it should work, but splitting payments is a good half step. I just want to get writers moving to splitting payments first. (grin)

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