Harlequin charged with funneling eBook royalties to an offshore subsidiary

Publishers Lunch reports that three authors--Barbara Keiler, writing as Judith Arnold; Mona Gay Thomas, writing as Gayle Wilson, and Linda Barrett--have filed suit against Harlequin for improperly retaining eBook royalties that are due to them. Their contracts call for a royalty of 50% of net receipts of digital sales. However, Harlequin set up a subsidiary in Switzerland, which "licensed" the eBooks back to Harlequin Enterprises, from which the authors received royalties of only 3% to 4%. The authors charge that the Swiss subsidiary performed no meaningful publishing or distribution functions, and existed only to allow Harlequin to retain the vast majority of eBook royalties that would otherwise have been payable to the authors. The three authors are suing for unpaid royalties on works published between 1990 to 2004, and are looking for other Harlequin authors to join the suit.