A: Michael
Lennie, Lennie Literary & Authors Attorney:
"Intra-company
sales should be conducted on an 'arms-length' basis, meaning that
the price charged to a subsidiary should approximate the price charged to
an unrelated publisher. For the parent to sell to a foreign subsidiary at
an artificially low price thereby severely reducing the author's royalties
is considered in some quarters to be fraudulent.
It is not by
any means the first time this has happened, but the practice seems
to be fading since several of us, including accountant Paul Rosenzweig,
have shown the spotlight on the process. Depending on the amount involved,
you might want to consider seeking professional assistance. In
any event, you would do a service to your fellow authors to identify
the publisher which persists in this practice so that other authors
can either avoid this publisher or negotiate to avoid the consequences."