Publishers, parties, and court: Julian Assange faces the music

What could be the WikiLeaks founder's last days of freedom are turning out to be distinctly colourful

Julian Assange is having a hectic time. Next week, he is due in the high court for two days, for the next round of his battle to avoid being extradited to Sweden. This week, he turned 40, and at the weekend he is planning a birthday bash with an A-list of celebrities on the guest list, including Oprah Winfrey, Brad Pitt, Angelina Jolie, Johnny Depp, Anna Wintour and Eliott Spitzer – though whether any of the above named will turn up is quite another matter. Assange is not the easiest or most reliable man to deal with, as a small Scottish publishing firm is learning to its cost. They face a looming financial disaster because of the mercurial behaviour of the man who has become the public face of WikiLeaks.

Mr Assange accepted an advance of nearly £1m from publishers, including the Edinburgh based publishers, Canongate, for his ghostwritten memoirs. But now they are written, he has had second thoughts about them. He reportedly fears the content could be used by the US government to support the case for extraditing him across the Atlantic.

This has left the publishers with a severe headache as they wonder how to recover the money they paid out. Their problems are compounded by the fact that the advance was put into escrow, which means that Mr Assange's lawyers have first claim on it. He has run up vast legal fees in a battle to avoid being sent for trial on sexual assault charges in Sweden. The next phase in that battle will be fought out in the high court next week.

Mr Assange, who is now living in the home of the journalist Vaughan Smith at Ellingham Hall, a 10-bedroom property in rural Norfolk, never wanted to write his memoirs, or have someone else write them for him, but agreed to the deal because the money was good and he was in severe financial straits. Interviewed by The Sunday Times in December, he revealed that the publishing was worth more than £850,000, of which $800,000 – or just over £500,000 – was being advanced by the New York firm Alfred A Knopf, an imprint of Random House, with another £350,000 coming from Canongate. He added: "I don't want to write this book, but I have to. I have already spent £200,000 for legal costs and I need to defend myself and to keep WikiLeaks afloat."

To add to an already complex picture, last month Mr Assange parted company with his solicitor, the media lawyer Mark Stephens, who had been representing him in his extradition battle, and replaced him with the civil rights lawyer Gareth Pierce.

It is believed that there is a book, ghost-written by the Scottish novelist Andrew O'Hagan and based on interviews with Mr Assange, but he is not willing to put his name to it.

Canongate may now be hoping either to get Mr Assange to change his mind, or to persuade Mr O'Hagan to write an account of the six months he has spent working on it, which they hope would retrieve at least part of their investment. The firm's managing director, Jamie Byng, was not available for comment yesterday.

An Australian by birth, Mr Assange shot to worldwide fame after a series of sensational leaks of classified US documents, including about 250,000 State Department cables, were published by Wikileaks. Last August, he made a 10 day visit to Sweden. While he was there, two women complained to the police about his alleged sexual conduct. His immediate reaction was to blame "dirty tricks" by the US government.

That allegation was repeated by his legal team during February's extradition hearing. Before it was held, his barrister, Geoffrey Robinson QC, released legal papers claiming that Mr Assange was the victim of "illegal and corrupt" behaviour and a "secret process" by Swedish prosecutors. The papers added that there was a "real risk" if the Swedes handed him over to the US authorities he could be sent to the detention camp at Guantanamo Bay, or executed. But a district judge said there was no evidence to support the allegation that the charges were political, and added that he did not accept that Mr Assange would not get a fair trial in Sweden. It is expected that his new legal team will take a less confrontational approach in next week's hearing.

Since rising to fame, Mr Assange has shown an aptitude for falling out with people. The German spokesman for Wikileaks, Daniel Domscheit-Berg, resigned last September after he had unsuccessfully tried to persuade Mr Assnage to stay out of the public eye while the allegations of sexual assault were hanging over him. Mr Assange owed much of his success to a partnership with Nick Davies, the Guardian journalist who was also a prime mover in exposing the News of the World phone hacking scandal. But in December, Mr Davies ran a carefully researched account of how the sexual assault charges had come about, which offended Mr Assange, who broke off relations with The Guardian and took his complaints to The Times, owned by Rupert Murdoch.

Mr Assange's second thoughts about his memoirs could be a serious blow to a firm which has enjoyed an exceptional run of succession the past decade. The Canongate imprint was on the verge of extinction in 1994 when the company that owned it, Albany Books announced that they could not sustain its losses any longer. It was rescued by Jamie Byng, an Edinburgh University graduate then in his mid 20s, who had originally joined the firm as an unpaid volunteer. He used the financial clout of his step-father, Sir Christopher Bland, the future chairman of the BBC, to organise a buy out. Canongate had a major success in 2001 with Yann Martel's Life of Pi, which won the Booker Prize, and sold a million copies within a year.

Life of Pi is a fantasy involving a shipwreck – an appropriate metaphor for the shipwreck threatning the firm who signed a deal with a man who seems to deal in fantasy, as when he drew up the guest list for his birthday bash.

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