NEW YORK (CNN/Money) - Book publisher Simon & Schuster is suing Michael Pellegrino over a $500,000 book contract, alleging that Pellegrino is not the illegitimate grandson of the late Mafia boss Carlo Gambino, as he had claimed, a newspaper reported Thursday.

Simon & Schuster signed the half-million dollar contract with Pellegrino in 2001. In return, Pellegrino, a Las Vegas resident, wrote a novel under the pseudonym Michael Gambino called "The Honored Society," published last November by Pocket Books, a division of Simon & Schuster, the New York Times reported.

The book was marketed as the work of "the highest-ranking mob member ever to record the innermost workings" of the Mafia, and Pellegrino even appeared on ABC's "Good Morning America" television program to promote the book.

Carlo Gambino under arrest in NYC in 1970

But Simon & Schuster, in a suit filed in Federal District Court in Manhattan in February, is suing Pellegrino and the agency that represented him, alleging they committed fraud by making him out to be a more hardened criminal than he actually was, the paper said.

Though the suit was filed in February, the publisher publicly disclosed the suit for the first time this week when it took the unusual step of filing a second federal fraud suit against the agency, Artists Management Group, the Los Angeles talent company founded by Michael Ovitz.

Pellegrino's lawyer claims Pocket Books still owes his client the last $100,000 of his book advance, and has filed a countersuit for it. The lawyer, Leon Friedman, told the Times Wednesday that Pellegrino had fulfilled his contract by writing the book he promised, adding that the contract made no reference to his biographical claims.

Another Pellegrino lawyer, Gus Flangas, said Pellegrino does believe he is Gambino's illegitimate grandson as he has been told since childhood. And Friedman questioned why the author's biography should make a difference.

"Why do you publish a book?" he told the Times. "Because it's got literary quality or because we can advertise this as the grandson of Carlo Gambino? What's important in publishing these days?"

Simon & Schuster spokesman Adam Rothberg said questions about Michael Gambino and his authenticity emerged following publication of "The Honored Society," but declined to provide more details.

"Over the course of time neither Gambino nor his agent were able to provide us with satisfactory proof of his bona fides," Rothberg told the paper.

The book was withdrawn sometime after publication.

Criminal records in Clark County, Nev., show that Pellegrino was sentenced to a minimum of 19 months in prison in November 1999 on felony theft charges. Flangas, his lawyer, said the charges involved the misappropriation of a $2,400 rental deposit, according to the report.