You're assuming it's a big mystery why no one wanted his book proposal or that the agent hadn't previously covered this ground, neither of which is stated in the post. (Plus, this is an author who admits he's lied about his contract numbers in the past.) From my read the facts are damning enough:

* He'd gotten a big advance on his previous book but it didn't sell. (Money loser = big red flag #1)

* His reputation alone no longer sells a book idea (evidenced by the sudden need for him to write a proposal to sell a book.) (Warning flag.)

* His financial judgment is suspect. ("The Forever Portfolio" delivered to the publisher just as the market starts a giant slide.) (Warning flag.)

* His last book was, well... Here's a sentence from the first Amazon review: "That said, the book is horribly written -- the author has about 20 pages of interesting content interspersed with 200 pages of random digressions, about his love of computer games and the longest words in the English language." (At the very least, a warning flag.)

* His proposal read like it was cribbed from Wikipedia (Big red flag #2.)

* He's a real peach to work with, insisting he knows other people's jobs better than they do (after all, he claims he chose the $20 price point for the previous loser, and we know how he treats his agent). (Warning flag.)

Now look what happens when that book idea (not the proposal) finally sells -- the publisher insists on bringing in another, trusted writer as co-author.

Sorry, but I don't think there's a mystery here that the agent needs to solve.