Accountant gets prison for embezzling $3.4M from famed literary agency

“Fight Club” author Chuck Palahniuk was financially coldcocked by a crooked accountant who embezzled millions from his Manhattan agent.

Bookkeeper Darin Webb was sentenced to two years in federal prison last week for ripping off the best-selling writer along with other literary luminaries, including the estates of “Godfather” author Mario Puzo, Peter Matthiessen and Studs Terkel.

“This chain of events leaves me close to broke,” Palahniuk said, according to court papers. “Since the crime was uncovered, people have offered their children’s college funds. They’ve offered to mortgage their houses to keep me afloat. They’ve come forward with legal advice and stop-gap, hands-on help.”

Palahniuk was bilked of more than $1.4 million in royalties and advances after Webb fleeced more than $3.4 million from his agency, Donadio & Olson, which was forced to file for bankruptcy last month.

“Webb’s actions have irrevocably ruined our company’s reputation and left us insolvent,” wrote Edward Hibbert, one of the firm’s principals, in an impact statement to federal Judge Edgardo Ramos.

Heirs to Puzo’s estate were bilked of more than $757,000 in royalties, court records show. Survivors of “Catch 22” author Joseph Heller were cheated out of $35,665 — and the Edward Gorey Charitable Trust lost nearly $60,000, according to bankruptcy filings.

“At the point the theft was uncovered, the agency’s bank accounts were virtually empty,” agency principal Neil Olson told the court. “The cost of aggressively pursuing the thief was enormous … He has destroyed our business, a prestigious agency that endured for decades.”

Olson, who managed the firm for 32 years, worked with the company’s founder, Candida Donadio, a former secretary from Brooklyn who shot to fame in the late 1950s after she sold Philip Roth’s
“Goodbye, Columbus” and Heller’s “Catch 22” to publishers.

Webb, 48, managed the firm’s books for nearly 20 years, but the theft occurred over the last seven years, court papers say. Executives grew suspicious earlier this year when an author, since identified in court papers as Palahniuk, repeatedly called the agency when he did not receive a $200,000 payment he was owed from his publisher.

“Mr. Palahniuk did not receive the payment because Webb had converted the funds to his own use,” court papers say.

Webb confessed to the theft in a videotaped interview with company execs and their attorneys at the agency’s Chelsea office in March, saying he filed monthly financial reports that “contained false and fraudulent representations in order to accomplish the theft and evade detection,” court papers say.

Lawyers for Webb said he used most of the stolen cash to cover expenses at his own accounting firm, SUM Innovation.