Embezzlement in Catalyst

[Maxus]

It's apparently a tax issue unless the person in question repays the funds within the same tax year, so he could be in deep for that. Otherwise, the company has to go after him for him to get burned.

But who is 'the company' when the person in question is the top man and the second-in-command feels Money Jes-- Mormon Jesus is telling him it's a good thing for a known thief to not be prosecuted?

[Username17]

Question: even if Mormon man gets his way and Catalyst all say "Yeah, it's okay" and nobody feels like pressing charges, given Loren Coleman actually did steal a lot of money, can the police charge/arrest him anyway?

I'm a bit fuzzy on law, after all. It seems a whole bunch of things rely on the victim pressing charges, but it'd be nice if he was arrested despite all his buddies deciding that stealing is actually okay.

That's an excellent question. Taking someone else's money without asking is not a crime if they don't mind. But not paying people for work that they did is a federal crime. And not paying taxes is a big deal, in addition to being a federal crime. And Topps is an unsenimental corporation who isn't going to be happy with the prospect of royalty licenses being unpaid. That's breach of contract (which is civil) and fraud (which is criminal).

And except for the stunning loyalty that Randall Bills has shown Lore Coleman, he hasn't shown a lot of loyalty to the people covering up his crimes. To whit: there are actually a few copies of Midnight out there (a poor to mediocre adventure, but a huge collector's item now), because after the cease and desist came down, Randall Bills "forgot" to tell Troy Garner to not ship it out the door and didn't cancel the orders under some copies had been sold ad shipped. And then... Troy Garner got fired, and his job is currently being "done" by Randall Bills' wife. And I put little quotey things on the word to do, because she doesn't know what she is doing and only seems to come into work 2 days out of the week (admittedly with a small sample size of weeks).

So it's difficult for me to imagine anyone wanting to cover for them in investigations, considering that people who actually violated a court order on their behalf didn't receive any compensation at all and were instead kicked to he curb.

-Username17

[Gelare]

And in case any of you were wondering, Frank hasn't even touched the tip of the lawsuit iceberg there. Topps can sue for breach of contract, as can anyone else who was not paid royalties, as can any freelancers who were not paid for their work, as can probably several other people, some directly, some as third-party beneficiaries. Furthermore, fraud is a crime and a tort, and there's a lot of people out there who can sue for fraud and third-party fraud, and it gets better still. Fraud has compensatory and punitive damages as a remedy (breach of contract only has compensatory damages), plus fraud debts are non-dischargeable. Which means even if Loren Coleman goes bankrupt and gets out of his breach of contract woes, he'll still owe the fraud money until he either pays off every single cent, or his estate runs out of money after his death (or he moves to Florida).

[virgil]

I'm amazed that people are still arguing that there hasn't been embezzlement, the accusation being pure speculation, as it were.

[Koumei]

(or he moves to Florida).

And aside from the 50-50 chances of getting randomly executed*, living in Florida is punishment enough, right?

*Going by CSI Miami

[Gelare]

(or he moves to Florida).

And aside from the 50-50 chances of getting randomly executed*, living in Florida is punishment enough, right?

*Going by CSI Miami

Well I sure wouldn't want to live there, but thousands of people each year move to Florida to escape their judgment creditors.

[Jilocasin]

I prefer the Burn Notice version of Miami. Although I guess that doesn't rule out random death.

[Username17]

And that is the $726,000 in direct withdrawals from Catalyst Game Labs. Well, seven hundred and twenty six thousand, two hundred and twenty dollars and eighty four cents between 2004 and 2009, with almost all of it occurring in 2007, 2008, and 2009.

And I now must admit to another mistake. I had been under the impression from the descriptions by my sources that the $726k included the fraudulent checks. It... doesn't seem to. The people that Loren Coleman funneled money to on the company dime with fake freelancer contracts is in addition to the cash withdrawals every other day or so.

-Username17

[Username17]

Second piece of clarification:

The money that was undisclosed from conventions and put into Heather and Loren Coleman's bank account or pants? IMR owes a tax liability on that. So the fact that it was never reported to the company, means it was never reported to the accountant, which means it was never reported to the IRS. So that's like 100k or more of unreported income that is all now "Tax Evasion."

So yeah. IMR/Catalyst could seriously go bankrupt by the end of the week.

-Username17

[Lokathor]

Sounds like more "SR5" to me.

[Gelare]

I really hope a lot of people are going to sue Loren Coleman. I mean, sure, they're going to be one in a long line of creditors, but the guy used the embezzlement money to build a house, which means he has a house, which is a much better situation for his creditors than if he'd spent it all on booze and hookers.

[Dominicius]

Who the fuck is this Dr. Funkenstein guy over on Dumpshock? He comes off as an unbelievable bitch in every thread he tries to derail.

[CatharzGodfoot]

When CGL fails, I bet more fingers will be pointed at Mr. Trollman than Mr. Coleman.

[Lokathor]

Oh yeah, I'm already blaming Frank. If he hadn't talked about it, it would never have been a problem.

[Josh_Kablack]

Wow.

If it's seriously possibly to embezzle nearly a million bucks, I may need to re-consider my decision to not pursue a career in RPG design.

That decision was entirely predicated on the fact that flipping Rothlisburgers paid better and much more reliably.

[Gelare]

Who the fuck is this Dr. Funkenstein guy over on Dumpshock? He comes off as an unbelievable bitch in every thread he tries to derail.

He is an unbelievable bitch. You nailed that one.

[Kaelik]

I apparently missed his glory. Any good examples?

[Username17]

When CGL fails, I bet more fingers will be pointed at Mr. Trollman than Mr. Coleman.

Absolutely. A huge number of people are going to blame me for the set of problems that Catalyst has. Heck, the future of Battletech looks bleaker than the future of Shadowrun. With massively more company support and infrastructure given to producing and promoting Battletech - it pulls in about the same amount of money as Shadowrun does while SR gets a major release maybe twice a year. When new companies come in to look at taking these licenses, there is a very real chance that while SR gets a new home with likely faster releases - that Classic Battletech won't get picked up at all - or if it does get picked up that it becomes a minor concern with black-and-white print runs. Can you imagine how hated I will become in the Battletech community if that happens? I'll be "The man who killed Battletech" - the guy who CBT fans spit sideways after saying the name of.

Right now discussion on the CBT forum is tightly controlled. Randall Bills is still the Messiah of Battletech, and such as the situation is talked about at all, it is in terms of an attack by me against the good name of the people struggling to save the game. But of course, the reality is that while Randall and Loren showered Battletech with perhaps higher production values than were really warranted economically - they did this in no small part by simply not paying for it. Over and above the Embezzlement issue, there are Battletech writers who have not been paid in 3 years. Royalties have been unreported, I'm frankly not sure if foreign royalties for products have ever been paid to Topps. This system was simply never sustainable. And it's been getting more ridiculous every year, which is why we are in the situation we're in now.

But a lot of people, especially on the Battletech side are going to blame me. Because they are going to think back to 2008, when they were getting high quality writing and art in full color books on a regular basis. And it won't really occur to them that the reason they were getting this was that Loren Coleman had contracted writers and artists with no intention of ever paying, and was getting those books distributed with no intention of ever paying the royalties on them. Yeah, I'm sure that there are people who resent the Enron whistle blowers too. It's inevitable.

But I'd rather be right than liked.

Wow.

If it's seriously possibly to embezzle nearly a million bucks, I may need to re-consider my decision to not pursue a career in RPG design.

That decision was entirely predicated on the fact that flipping Rothlisburgers paid better and much more reliably.

Don't worry. Back in 2007, I made the same choice, for the same reason. And I think it was the right one.

Yes, there's a surprisingly good investment return on RPG materials. Every book you print and ship basically doubles your money (better than that with direct sales). The problem is that volume is pretty low. Profit margins are kind of absurdly high, but total sales are pretty low. And people on the creative end - the writers, artists, and designers, are still being given the same wages that people were satisfied with in 1981. And yeah, word processors are around now, so it's not unreasonable to expect that our output will be larger than it was back then. But it doesn't cover for inflation.

Printing is not only less than it was in real dollars back in 1980, it's less in absolute dollars. It costs less today to print up a 300 page full color rulebook than it cost Gygax to get the old black and white 112 page Monster Manual. Printing technology has come a long way. And writers simply are not seeing a cut of that - the publisher pockets the whole difference.

I'd suggest a royalty model, but of course there is no way that I would trust Catalyst to pay royalties. They don't pay royalties to a company that owns their intellectual property and makes hundreds of millions of dollars a year - what makes you think they'll pay up to loan writers who can't see any of the numbers?

The short answer is that there is money in RPGs. And there's substantial margins in RPGs. So everyone could be making decent money. Or one person could make a million dollars. But not both. When Catalyst shorted me, they left me like a hundred dollars short or so. Which was petty of them. But I long ago wrote it off. The number of hours I would have to spend to get that back (assuming I ever did) would be make my hourly wage for that hundred bucks compare very poorly to simply flipping burgers.

Quite simply: until a major wage adjustment and transparency imperative hits the RPG market, there simply will not be a reasonable financial incentive for talented writers who also have marketable skills in other areas (including... writing) to remain in the RPG writing industry. RPG books have a low startup cost and some of them produce substantial returns. Other publishing areas handle this by giving writers money up front and then a cut of the profits later on. And that would make a lot of sense, except that without a lot more transparency it's just not even reasonable for the writers to sign such contracts.

-Username17

[Zinegata]

Moral of the story: Get a wad of cash and self-publish.

[Zinegata]

Moral of the story: Get a wad of cash and self-publish.

[Starmaker]

I just love how Coleman goes completely nuts in 2009, like a monkey pushing the "Food!" button. "Woot! A fuckload of money! Why didn't I think of it earlier!?"

I am reminded of that one time in WoW our guildmate started ninjaing loot. I then said, "Hey, I found this awesome button! If you press it, you always win the item!" Turns out the guy went afk and let his 5-year-old kid play. The leader was quite angry with the guy, since the kid stood at risk of learning a new word or two if anything actually valuable had dropped.

[Username17]

I really should summate things a bit at this point. My original ballpark estimate of $850,000 was probably low. From the beginning, I have been told by my sources of four points of fraud:

• Direct monetary transfers out of IMR's accounts. These can be anything from Bank Transfers to simple ATM withdrawals.
• Unreported sales where the money was simply diverted to the Colemans rather than given to the corporation at all.
• Checks written on behalf of IMR/Catalyst that were in fact for Loren Coleman's personal stuff and not for anything business related.
• Inventory that was simply taken by the Colemans or the Bills that was never paid for or declared.

When I collated the different accounts and the numbers being thrown around, I put the first and third together and the second and fourth together. That is, I thought that the $726k figure was the withdrawals of currency and the fraudulent checks. I thought that the $120k+ figure was th unreported convention income and the missing inventory. And I was wrong.

Apparently the $726k is just literal monetary transfers, and the $120k+ is just income from conventions and the like that got pocketed rather than reported. The truth is that no one knows how many of the checks Catalyst sent out were to artists and writers and how many of them were to gardeners and plumbers. The truth is that no one knows how much company product that Loren and Randall decided to give themselves. But when you add it all together, the figure I quoted in mid-march is likely low. Maybe very low.

That being said, there are broadly speaking four groups who have been victimized by this:

• Topps Incorporated. They have had their royalties paid short and late. I am unaware of them having ever been paid their owed foreign sales royalties. They are a corporation that makes over $200 million a year, so I don't expect a lot of sympathy for them - but I also suspect that they will be less forgiving than other victims.
• The Creative Staff. There are Battletech writers who have not been paid in 3 years. I gather there are artists in the same boat. Catalyst has been operating without a cost-of-living adjustment in wages for its entire period of operation, and it hasn't even been paying those wages on-time or in full. It's hard to even know who has been paid and who has not, since apparently Loren would write checks in front of people and then mail them much later or even just destroy them outright.
• The Other Owners. IMR/Catalyst is an LLC. This means that its yearly profits are, for tax purposes, considered to be the income of the owners. This means that when Loren Coleman pocketed sales from conventions or simply took money out of the coffers without sourcing that as a valid business expense, that each of the owners still has a tax liability on some portion of that money. A tax liability on money that they did not have and did not know about, so the chances of them having reported or paid it are extremely slim. Since tax forms from 2008 were do some time ago, all of them are in the position of having explaining to do to the IRS. And that's even assuming we knew who all the owners are, which we don't since apparently some people got duplicate shares and one of the owners died without a will and Loren Coleman announced that ownership of the shares reverted to him (and not, for example, the widow).
• The Game. Money has not always been available for production and shipping costs. Many books have been given a short or delayed printing. Fed up writers have abandoned numerous projects, causing delays and cancellations of upcoming products.

Moral of the story: Get a wad of cash and self-publish.

Well... not exactly. Here's the deal: if you personally get together and write a book... then what? First off, it probably took you like a year to write and assemble it on your own. Secondly, are you going to do all the art yourself? Even if this all magically comes together, you're still basically looking at a pile of money that is not that big for a year's work.

No, what you want is high production values and a reasonable release schedule. And that means splitting the labor up and specializing. Artists make art, writers write, editors edit, layout does whatever it is that you call being the guy who does layout, and yes... administrators administrate. You simply can't self publish the 5-8 books per year that an RPG line seems to want to have produced for it. You need to incorporate.

And that means that you need to figure out some profit sharing mechanism by which everyone playing their part in the grand machine is financially incentivized to do their job in a timely and professional manner. And that requires transparency. And of course, a willingness on the part of the administrators to allow some portion of the profits to slip through their fingers and go back to the creative staff.

-Username17

[Murtak]

But since we do have the interwebz this is at least feasible. I suspect it is not even hard. You can rent online shops and cut out the pdf shop middlemen, you can have a read-only web back end to your payment software and you can jolly well have software write up what every artist, writer and layouter is owed, even if you operate on a royalty model. Heck, if you go for mail-order and pdf downloads you can do all of that in realtime. And even if you go with less tech, it should not be hard to make monthly numbers available to everyone working with you.

Instead of displaying even a modicum of transparency everyone seems to be treating their sales and finances as state secrets. Is there a logical reason for this? Despite wanting to steal money from your company that is.

[Juton]

Instead of displaying even a modicum of transparency everyone seems to be treating their sales and finances as state secrets. Is there a logical reason for this? Despite wanting to steal money from your company that is.

WotC, Paizo, everyone does this. As part of this they also don't release sales numbers. They really gain nothing by publishing this information, I'm not sure what they'd lose if they told people though.

[Dominicius]

I apparently missed his glory. Any good examples?

Honestly I don't read much dumpshock. Before this I didn't even know of its existence but now I cast the occasional glance there. I found the Dumpshock News, Bug Reports, Feature Requests, & Discussion to be particularly interesting since it has become the stage for the weaksauce "revolt" going on at dumpshock.

There are now about five (!) threads there directly or indirectly related to Franks banning and Dr.Funkenstein posted in most of them, acting like a passive-aggressive ass-clown more often than not.

Here are the threads in the subforum that contain his "contributions":

http://forums.dumpshock.com/index.php?showtopic=30601
http://forums.dumpshock.com/index.php?showtopic=30391
http://forums.dumpshock.com/index.php?showtopic=30661
http://forums.dumpshock.com/index.php?showtopic=30632