Facebook has answered the suit that claims an upstate New York businessman owns half of the company, calling it a fraud on the court.
Paul Ceglia filed a complaint last summer, amended in April, in which he says he owns half of Facebook. The evidence, his filings say, is that Facebook's founder, Mark Zuckerberg, did some contract work for him, involving a payment of $1,000. Ceglia also says Zuckerberg defrauded him, essentially walking away with his money and trying to convince Ceglia to take a payment for his part of the business that was well below what he knew it was worth. That payment, Ceglia says, entitles him to 50 percent of Facebook, which would be worth billions.
Facebook's lawyers say that the suit is bogus and that the contract Ceglia uses as evidence is a cut and paste job. Their filing also says Ceglia is an inveterate scam artist whose misconduct extends across decades and borders.
Ceglia faced fraud charges in 2009, when he was charged with one count of first degree scheme to defraud and 12 counts of fourth degree grand larceny. Customers of his wood pellets business had complained that they had paid for them but never received any.
Part of the suit depends on when Zuckerberg did the work for Ceglia and whether a contract relating to Facebook was signed. Ceglia says he signed a contract with Zuckerberg in April of 2003, to do some work on a project called StreetFax, and later allowed Zuckerberg to adapt the code to a social networking site, called The Face Book. Zuckerberg's lawyers say he didn't start the social networking site until 2004.
Ceglia's complaint quotes several emails, which show Zuckerberg accepting the terms of a deal in which he would do some Web development work for Ceglia -- including work on a social networking site that would become Facebook. Essentially, by denying nearly every factual claim made in the suit, Facebook's lawyers are saying the emails are fakes.
In addition to accusing Ceglia of fraud, Facebook's answer also says Ceglia has simply waited too long. The purported contract was signed in 2003, yet Plaintiff waited until 2010 to file this action -- a seven-year delay during which Plaintiff remained utterly silent while Facebook grew into one of the world's best-known companies. Plaintiff has now come out of the woodwork seeking billions in damages, the filing says. Beyond that, the statute of limitations for many civil suits in New York is six years, and similar limits apply in the federal court system.
If it is true that Ceglia's suit is fraudulent, the consequences would be serious. While the courts can (and often do) deny access to people who file frivolous lawsuits, defrauding a federal court can land a jail sentence. DLA Piper, the firm representing Ceglia, is also known for handling high-profile cases for major corporations and for doing due diligence, but that doesn't eliminate the possibility that they were fooled.
Ceglia, for his part, says he waited so long because he had forgotten that he signed a contract with Zuckerberg - until the fraud allegations made him dig through his own records.
The case is Paul D. Ceglia v. Mark Elliot Zuckerberg and Facebook, Inc., 1:10-cv-00569-RJA.