Facebook: Ownership Lawsuit Shows Elaborate Fraud

Attorneys for Facebook sought the dismissal Monday of what they called an “opportunistic and fraudulent” lawsuit by a New York man claiming half-ownership of the social networking site.

The attorneys asserted that Paul Ceglia, of Wellsville, had forged documents, fabricated emails and destroyed evidence, and said he had waited too long – six years- to file it and the statute of limitations had expired.

Ceglia’s attorneys say their client deserves his day in court.

In his 2010 lawsuit, Ceglia claimed that a 2003 contract he and Facebook founder Mark Zuckerberg signed entitled Ceglia to 50 percent of Facebook, which launched the following year.

Ceglia said the contract showed that when he hired Zuckerberg, then a Harvard University freshman, to help him develop a street-mapping database, he also gave Zuckerberg $1,000 in start-up money for his fledgling Facebook idea in exchange for half-ownership of the company if it grew.

Zuckerberg countered that he hadn’t even conceived of Facebook at the time. His lawyers accused Ceglia of doctoring the original “work-for-hire” contract to insert Facebook references and making up a series of email exchanges between Ceglia and Zuckerberg to try to bolster the claim.

Facebook said its forensics experts found evidence that the ink on the contract was less than two years old and that the document had been “baked” in the sun to artificially age it.

The experts also said that Ceglia had reset the system clock on his computer to 2003 and 2004 to make it appear the emails he submitted had been created at that time, and that Ceglia had used and apparently destroyed external storage devices during the course of the lawsuit which he never turned over to Facebook.

“Verifiably genuine emails” between Zuckerberg and Ceglia from Zuckerberg’s old Harvard account contained no mention of Facebook, according to the court filing by the Washington firm of Gibson, Dunn & Crutcher LLP. Instead, the emails contain pleas by Ceglia asking Zuckerberg for more time to pay him what he owed for his work, according to court documents.

Zuckerberg wrote in a January 2004 email to a Ceglia associate that the streets database called Streetfax was not a high priority for him because he was owed money and that his time would be better spent on other projects.

“There are many other things I’d like to, and have started to, work on,” Zuckerberg wrote. “I am at a school surrounded by some of the smartest people in the world, cultivating ideas and constantly coming up with great projects to work on.”

Ceglia wrote in February that he was so short of cash that his home was nearing foreclosure.

“If there is any way I can assure you that I have absolutely every intention of paying you what is owed plus some when we finally catch up to our sales goals it would be appreciated to a level I can’t express in words,” Ceglia wrote to Zuckerberg on Feb. 16, 2004, the court filings show.

“This is an untimely, opportunistic and fraudulent lawsuit,” began one of the documents Facebook filed Monday in support of dismissal. “The purported contract is a forgery, the so-called `emails’ that Ceglia quotes … are fabrications and Ceglia is a convicted felon and well-known scam artist.”

A Facebook private investigator’s report on Ceglia found a 1997 conviction in Texas for possession of hallucinogenic mushrooms, a 2005 no-contest plea to trespassing in Florida and a 2009 petition by the New York attorney general’s office accusing Ceglia and his wife of defrauding customers of their wood pellet business by accepting upfront payment for pellets they never delivered.

Ceglia’s lead attorney, Dean Boland, of Lakewood, Ohio, said the lawsuit can’t be dismissed just because the findings of Facebook’s experts contradict those of Ceglia’s experts. He accused Facebook of trying to end the case before being required by the court to provide any evidence or have it heard by a jury.

So far, all of the preliminary court proceedings have focused on the authenticity of Ceglia’s documents. Facebook, which has been given access to Ceglia’s computers, email accounts, storage devices and other materials, has not yet had to turn anything over in exchange, including the estimated 300 emails recovered from the Harvard server, many of which were included in Monday’s filings.

“Mr. Ceglia deserves his day in court, where the jury will resolve this dispute over the ownership of Facebook,” a statement from Ceglia’s legal team said.

Facebook, based in Menlo Park, Calif., has 845 million active users. It employs more than 3,200 people, the company said, adding that users spend more than 10.5 billion minutes per day on the site.

An upcoming initial public offering of stock could value Facebook at as much as $100 billion.

In 2008, Facebook agreed to pay Cameron and Tyler Winklevoss $65 million to settle their claims that Zuckerberg stole the idea for Facebook from them and a third person at Harvard.