Many of us are now looking for viable ways to make money from home. One way is by self-publishing a book. During my research I came across a fascinating self-publishing book scam every crooked politician would be proud of.
I'm assuming that the more dire the economy gets the more scams there will be. The same thing goes with the more free stimulus money that gets pumped into the economy. When desperation increases, it's just human nature to do shady things.
However, right before the pandemic began, there was this fascinating self-publishing book scam I came across. On February 27, 2020, ex-Baltimore Mayor Pugh was sentenced to three years in federal prison and three years of probation for a fraud scheme involving a children's book series.
Trouble for Pugh began when The Baltimore Sun reported the University of Maryland Medical System bought 100,000 copies of Pugh's book, Healthy Holly for $500,000.
100,000 is quite a lot of copies for a children's book. The University of Maryland Medical System would need to have 1,000,000 young students to potentially justify a 100,000 buy.
If I sold 100,000 copies of How to Engineer Your Layoff in one tranche, I'd use some of the $9.7 million in gross profits to charter a Gulfstream 700 to Hawaii to see my family. We'd rent a beachfront mansion and live the good life until an effective vaccine ever becomes available.
OK, enough fantasizing for now. Let's go back to the self-publishing book scam.
Self-Publishing Book Scam To Receive Bribes
If the University of Maryland Medical System had only bought 1,000 copies, the purchase might have seemed reasonable. However, buying 100,000 was just too fishy.
It turns out that Pugh sat on the board of the University of Maryland Medical System. Therefore, one could easily perceive the massive 100,000 copy purchase order to be equivalent of a $500,000 bribery attempt.
Take a look at who else purchased Pugh's self-published book in the chart below.
In total, Pugh netted more than $850,000, which can only be achieved if Pugh is self-published.
If Pugh had gone through the traditional publisher route, there's no way she would have made this much from a children's book.
She would have received a book advance and then earned 10-15% royalties on every book sold after enough books had ben sold to cover her book advance.
A “Win” For Self-Publishing!
If you're confused about how an author who signs with a traditional publisher gets paid, here's an example.
Let's say Pugh received a $10,000 book advance for Healthy Holly. If the book sold for $10 and she got a 15% royalty for each book sold. 15% times $10 equals a royalty of $1.5 per book.
However, before Pugh could start earning $1.5 per book sold in royalties, she would first need to sell 6,667 books ($10,000 divided by $1.5). That's a tough way to make a living!
By self-publishing, Pugh gets to keep all her profits.
Her Biggest Mistake In Self-Publishing
Pugh might have been able to get away with her self-publishing book scam had she done one simple thing: provide the purchased copies to her buyers!
Pugh was sentenced to three years in jail because she failed to print thousands of copies, double-sold thousands more and took many others to use for self-promotion, according to prosecutors.
Investigators also uncovered that she laundered illegal campaign contributions and failed to pay taxes.
Below is a hilarious review of Health Holly. Any homeowner who has tried to get a building permit approved will appreciate the review. Remember, local politicians usually don't make very much. Therefore, the propensity to use their power for bribes may be higher than the average person.
If Pugh had printed out all the copies that were purchased and had delivered them to the book purchasers, it's hard to see her getting sentenced to prison.
Pugh may have been asked to step down as Mayor for her quid-pro-quo dealings. However, if she had delivered the goods, I think she would have avoided prison time. She also may not have had to pay a $400,000 restitution penalty to the medical system and forfeit nearly $670,000, including her home.
Hard To Not Get Lured In By The Money
“Like other advance-fee scammers, she falsely promised to print and deliver books commensurate with what purchasers paid her, and then simply kept their money,” the federal sentencing memo said. “Pugh misrepresented her intention to provide books to almost every major purchaser.”
In total, prosecutors say, Pugh’s personal inventory of Healthy Holly books never exceeded 8,216 copies. Yet, she was able to sell 132,116 copies for a total of $859,960, the memo states.
What Pugh should have done was publish Healthy Holly as an e-book as well. By creating an e-book, Pugh could have then legally sold $850,000+ worth of her books and e-delivered them to her purchasers.
She could have e-mailed her books one-by-one or set up a website where once payment was made, the purchaser could click a link and download her book.
Other Benefits Of Self-Publishing An E-Book
Saving yourself from a jail sentence if you are a crooked politician looking for a less obvious way to collect bribes and kickbacks is one thing. Another benefit of publishing an e-book is that you get to set the book's price.
But the key here is that you should publish the e-book on your exclusive platform, not on someone else's platform, e.g., Amazon's, in order to determine the book's retail price. To determine price, you must be able to control the channel and the supply of your e-book.
Amazon is so rich and powerful that if it wanted to, it could one day decide to cut your e-book price to $1. If your royalties are dependent on the price Amazon decides to sell your book, you’re at their mercy. Hopefully, Amazon takes the loss and you still get paid your royalty regardless of what Amazon charges. Either way, the optics of having a severely discounted book is bad.
Below is an example of Amazon or Pugh setting her Healthy Holly book price to a whopping $32,924.03! What a bargain! Good thing anybody looking to bribe Pugh wasn't stupid enough to fall for the trap.
More Pricing Stability With A Traditional Publisher
If you go the traditional publisher route, the publisher will probably set a standardized hardcover price of between $25 – $30. At a 15% royalty payout rate, that's $3.75 – $4.5 you'll earn after your book advance is covered.
The standard softcover price is around $15. At a 10% royalty, you'll earn $1.5 per book. The royalty percentage is generally lower for softcovers. Lots of books will need to be sold for the author to make substantial money.
If you believe your book provides much greater value than a standardized book price, as I do for my book, then publishing an e-book on your platform is the way to go. Just don't go crazy listing your e-book for $32,924.03 on Amazon!
Always Deliver The Goods
Once you gain power, it's common for you to start craving money. This insatiable desire for money is why so many politicians are so corrupt. A self-publishing book scam is both new and a creative way to receive bribes.
Politicians have numerous opportunities to take advantage of their power. If corruption doesn't get politicians, hypocrisy often does. We know so many politicians who vilify the rich, yet who are rich themselves. Interesting!
Before the Pugh judgment, it never would have occurred to me that self-publishing a book was a way to solicit bribes. Her fatal mistake was not creating an e-book version so she could deliver the goods.
On the flip side, Pugh's scandal is great news for traditional publishers who should see more interest from legitimate authors deciding between self-publishing and a traditional publisher.
If you want to build your reputation as an author, going the traditional publisher route may be the better way.
Now, if any of you have suggestions on which political office I should run for, I'm all ears! I hear all our mayors and governors are getting paid full salaries plus benefits during shelter-in-place.
Readers, any other self-publishing book scams or online product scams you are aware of?
Note to self: sell e-books instead of soft or hardcover books.
Oh wow that is fascinating! What a scam. I was just thinking about how annoying it is there are so many scammers nowawads this morning. False marketing is a big one especially scammers who utilize social media to overhype a product that doesn’t actually work of that’s vastly different from how its marketed. So annoying. Crazy amazon screenshot of the price of that book. So many shady people doing shady things.
Although I do like that Amazon has democratized publishing; there are still challenges for a self publisher.
Amazon does demand that their platform have the lowest price and often can drop prices as well.
I remember when this story first broke. I didn’t understand how the book sales were bribes. I guess I missed the part where she never actually provided the items “purchased” to the bribers, er, I mean, “buyers”. The whole scam makes MUCH more sense now!
I hate to be the bearer of bad news — really, truly awful news, in fact — but the Gulfstream G700 won’t enter service for a year or two, so you might get stuck with a lowly G650 when you make that trip to Hawaii.
I remember this story, my recollection is it was lightly reported and not on television news. The part of it that struck me was a concurrent deal, with Kaiser Permanente health services. Kaiser bought 20,000 copies of the Holly book, and then bid on, and won, a $48 million contract to provide health care to City of Baltimore employees. An investment company also bought some books, then won a $40 million contract to invest some of the pension funds for city employees.
Thanks for telling us “the rest of the story.”
P.S. – there is a West Coast governor who received clear title to a $3.7 million tennis court estate in 2019, transferred from his cousin’s LLC. The gov then took out a $2.7 tax-free cash out loan that wasn’t available on the Wells Fargo rate sheet. As our host Financial Samurai has noted, sometimes it pays to have a personal relationship with your banker.
These folks are pikers. I’ve got a much better deal that Sam should have thought of being from the finance industry. :)
I set up a fund – 2% load. We get really rich people, or just government pensions, to place $1 billion in the fund. The money goes into an index replicated portfolio. The ‘donors’ get a market return minus the 2% fee – very common.
The fee is $20 million a year. In exchange the fund creator has his famous political father protect the donors and hand out a few billion in foreign aid. A great deal for the father/son pair and the donors. The DC mayor is a so bush league.
Combine this deal with an NGO/foundation and the book deal is chump change!
This is a pretty funny story. Thanks for lightening my day. Also, this is a good example of why people don’t trust the government.