The debate about James Frey and J.T. Leroy seems to divide between two positions: on the one hand, some find it worth pursuing that things represented as true about the author's life are false, casting a pall of disingenuity or indeed dishonesty over the enterprise; on the other, some note that in each case it's a literary production we're talking about, wherein truth is in the experience the text conveys, about which (potentially hypocritical) games of literary gotcha have little to say. To put it in old-fashioned terms, there's the author-based and text-based responses, facing off.
(It's worth noting the substantial irony that the text-based position, which in these last decades has been understood as an idea of the theoretical margins (often described as "postmodern") — indexed to the Barthes essay "The Death of the Author" and understood to privilege the reader (and, in a dominating synechdoche, the critic) over the author — is now employed by the very nexus it supposedly banished, and which otherwise profits from the production of authors. This is particularly piquant in the case of "James Frey," as the producers known variously as James Frey, Oprah Winfrey, and The Publisher scramble in all-but-identical words to assure us that the fringey text-based understanding is in fact at the very center of common sense.)
Predictably, author-based/text-based proves an insufficient antithesis (and not just because Doubleday has modeled for us in the purest terms that sublation is the methodology of capital just as much as it is the methodology of history itself; see previous paragraph). The division between the two positions, insofar as it might be imagined at all, is contingent — in particular, contingent on qualities of readership and the text both. All this hubbub is a story about the nature of the readership istelf, and what it consumes; as long as the drive obtains to extract some kind of "real-world" value from literature — and this includes not just the self-help virtues of Frey's memoir but the self-congratulatory encounter with the seamier side of "life" vended mercilessly by Leroy, a pleasure which defines faux-populist hipster narcissism and is the enabling ideology of gentrification — the crudest mechanisms for opening a route between the page and daily life will hold sway, and the crudest among these are the explicit and implicit claims on "real life" which "Frey" and ""Leroy" proffered at every turn.
And yet. Among the things that will not finally suffice, a critique of readership ideologies takes its place as well. Surely another reason that people feel betrayed and ripped off by the demolishing of authorial integrity in both cases is exactly because the authority of that position was so necessary for the books. That is to say, neither Frey nor Leroy can lay legitimate claim to a text-based understanding because neither could produce texts that suffer such engagement. To put it bluntly — and here's what the hand-wringing responses shy away from, even as they claim to have smelled a rat all along — readers are led to a need for the author's truth-value because that's about all that's on offer: the only folks with a right to I-told-you-so are those who noted all along that both Frey and Leroy are terrible prose writers; neither could build a truth out of text no matter what had or had not befallen them otherwise.