One of the things that truly fascinates me is how things fail. How businesses fail, how wars start, how bridges collapse, and how factories explode. For Ellora’s Cave, a long-established erotica and erotic romance publisher, it’s a complex tale of tax liens, slow royalties, broken promises, complete lack of communication, and the founder’s weird paranoid ramblings. Technically, EC hasn’t failed yet, but it certainly appears to be flirting with the drainpipe if not outright sucking it.
Jane at Dear Author (DA) has a great post, The Curious Case of Ellora’s Cave, that documents the tax liens, including an unpaid lien dating to July of last year.
At the same time, court records showed repeated tax violations by [EC founder Tina] Engler [aka Jaid Black] and Jasmine Jade Enterprises. Since 2009, Engler has had a tax lien filed against her by Ohio Department of Taxation in every year except 2010.
Last year’s lien is $35,853.21, and this year’s is $105,819.92. The ongoing nature of the liens and their size suggest poor cash flow.
Yet, in August 2013, the Akron Beacon Journal profiled Ellora’s Cave quoted the CEO stating EC sold $15 million per year—200,000 books.
Royalty payments have been late. Not once, not twice, but on an ongoing basis. Roslyn Holcomb speaks out. Avril Ashton and Cat Grant have asked people not to buy their Ellora’s Cave titles, hoping that will reduce their sales enough to get EC to agree to a rights reversion—as well as cut their losses on royalties due. Avril self-published her latest book instead. (Avril talks more about that choice in this post.)
Quite a few are afraid to speak out about their own troubles with EC. Kenzi comments on DA’s post:
I’ve been terrified to say anything publicly. It isn’t just dealing with the repercussions at EC; it’s also the fear that you’ll make yourself undesirable to other publishers. Who wants to be seen as a troublemaker?
Ms. Black claims on her Facebook page that this is all lies. There is no proof. I wish someone would call her out and ask which parts are a lie. When was the last time her editors and artists were paid? Is she claiming they have been? Is she saying it’s untrue that authors have been told their books will be copyedited and released without their input? Even though a lot of us have gotten those emails? Does she really want us to start posting these things publicly as proof?
Eden Connor comments about a similar experience with Silver Publishing:
Speaking out is the right thing to do. And I’ll mention here what I said to the publisher at Silver when he threatened to sue me for speaking out: Sue me. Please, please sue me. Because in order for any court to determine if slander took place, step one would be for you to turn over the books for a forensic accounting by a court-appointed auditor.
And he did not sue me, because having to open his books was the last thing he wanted.
Ellora’s Cave has also been particularly reluctant to open their books, as you’ll see later.
There’s also talk about hinky royalty accounting: (Note: this was a link, but at the request of said post’s author, I’ve removed it and the quoted content.)
EC also claims that it hasn’t talked to Amazon about a massive drop off in sales.
Summary so far:
- Massive tax liens.
- Paying royalties late, and paying smaller than perceived correct royalties.
- Claiming there’s a massive drop off in Amazon sales, but not talking to Amazon about said dropoff.
- Three other authors say that the dropoff is not true for them with books published by other publishers (including self-published).
- EC principals accusing people talking about late or non-payments of lying, causing others to be more afraid (or angry) about speaking out.
On the surface, it appears that:
- The slump, to the extent that it’s real, is related to cover art issues and EC’s ebooks being too expensive.
- Hinky royalty accounting.
- If the money isn’t in EC’s accounts (which late royalties imply), could money have been diverted to other ventures and/or people?
- Authors have been left in the dark.
Some Thumbnail Numbers
Let’s make the following assumptions.
- The tax lien amounts are directly related to sales.
- The $15M number is true for 2013, correlating to the $105k Ohio tax bill.
- Engler/Black was hit with a $29,679.52 tax bill from the City of Akron in March. The City of Akron tax rate is 2.25% on adjusted net income (cite: tax form). Ergo, the adjusted net income for 2013 was $1,319,089.78. That’s after all expenses such as royalties. (Paid royalties if it’s cash-based, accrued royalties if it’s accrual-based.)
- If 15M/1.32M are for the same tax year, then the business has 8.8% net profit.
The obvious question: where’s the million-and-a-third bucks?
DA goes on to say:
In the meantime, Engler boasts of her Rodeo Drive shopping trips and her new property purchase in West Hollywood on her Facebook page.
Pity her real estate agent’s website is four years out of date.
EC’s Prior Lawsuit
Once upon a time, someone threatened me with a lawsuit. I didn’t have a good response handy, so I said, fliply, “Well, discovery should prove interesting.” It proved to be the exact right thing to say. Obviously, the lawsuit never happened.
In 2008, Ellora’s Cave was sued by Christine Brashear, who went on to become the founder of Samhain (a press I like very much). You can read her lawsuit against Ellora’s Cave six years ago, which sounds like some of the same ongoing issues. PDF here.
During that suit, Ellora’s Cave got quite the smackdown from the judge. Not only did they refuse production of documents, they no-showed for the final pre-trial conference:
Defendants willfully evaded the production of discovery, resulting in unnecessary delays of this case and increased legal fees. Defendants’ actions in this case have crossed the line from a zealous defense to malingering, malfeasance, sabotage and delay. […]
It is suspect that all three of them failed to appear for the final pretrial. The Court could understand if one of them had neglected to put it on their calendar or “forgot” to come. But the absence of all three, who concede to receiving notice of the hearing, is questionable. […]
Such continuous, systematic delays and flagrant disrespect for court orders resemble an unwillingness to defend and bad faith attempts to derail the case from moving to a resolution.
Brashear won on summary judgment. This is pretty damn rare in business lawsuits.
Personally, I’d never have been an author with them after that point. If they evaded discovery in a lawsuit, there’s no way I’d ever trust them to pay royalties accurately.
From the EC letter PV links to in the second article:
Also, please note that almost all the royalty checks have been mailed, with the exception of a handful that should be out by end of week. We are not bankrupt (rumors) and are not in any kind of shape to even file bankruptcy.
[We] are not in any kind of shape to even file bankruptcy. Wow. That’s so comforting.
Commenter Antares says:
I used to do bankruptcy law.
Based on my experience, if I saw my publisher put out that statement, I would immediately sue to get my rights back.
What do I mean by ‘immediately’? I mean today. I want my suit going forward and notice served before they file for bankruptcy. Maybe I can get relief from the stay to litigate in state court. Maybe not and I’ll litigate the suit in bankruptcy court. But I bet when I offer to buy back my rights and put money on the table, the trustee will settle.
Antares later follows up with:
Look, in an earlier comment I wrote that I would file a suit against the publisher immediately. Why?
To get my rights back? No.
To improve my position against the other creditors.
Once the publisher files for bankruptcy protection — and the minute a business owner uses the B word I know he’s gonna file, it’s just a question of when — the writers no longer have rights. Yeah, you got the copyrights, but you licensed some of those rights to the publisher. Those licensed rights are now assets of the estate. The court’s duty is to equitably divide the assets among the creditors. If you are due royalties, you are an unsecured creditor. Maybe there is some entity in the bankruptcy food chain lower than an unsecured creditor, but I never saw such. […]
Bankruptcy is a tool. You can use it to break contracts. To me, it is the start of negotiations.
If you 1) have a contract with EC, 2) are owed money by EC, 3) know two other writers whom EC owes money, and 4) want to get really nasty with EC, ask a bankruptcy attorney about an involuntary bankruptcy.
In this particular case, I’m not sure if discovery would prove interesting or not. I’m very curious about what happened to all that money. Disappearing gobs of money plus weird paranoia tends to scream one thing to me.
However, if you’re an EC reader, you might not want to add to the pile at present. Support your favorite authors in other ways. If you’re a writer, I’d strongly suggest not submitting to EC. If it’s too late, ask for a reversion.
If your payments are late and are significant, I strongly suggest you consider Antares’s words.
Meanwhile, EC is still open to submissions, and is still holding their $325 per person annual convention in Akron, Ohio next month. Complete with Cavemen.
Edited to add: and in the extra bonus unhappiness round check out the comment from Adam (sorry, no direct link, so I’ll quote one paragraph):
Wasn’t it you who told me at Romanticon™, who cares if one of the models inappropriately touched a teenaged fan, that is what the fans are here for? Wasn’t it you bragging about how endowed some of the Cavemen were because you had personal experience? Wasn’t it you who said it didn’t matter how a book was crafted, or how many typos were in it, as long as it was nasty? As the father of teenaged daughters, this is something I am very unlikely to forget, and a life lesson I want my girls far, far away from. Were this the first such incident, it would have been perturbing. But, this was just the latest in the chain of strippers behaving inappropriately with women, sometimes for money. See Romantic Times, circa 2008 and the semi-public sex one of your Cavemen engaged in for money.
Anyone happen to have that RT issue handy?
Kit Tunstall has also asked that people not purchase her EC titles. (Note: Kit has deleted this post.) Also Evanne Lorraine.