Facebook web site and founder Mark Zuckerberg are hit by a new lawsuit: a complaint that claims 84-percent ownership of the company per alleged contract. Paul Ceglia provides documents and emails as proof in the legal claim.
If the former Winklevoss lawsuits against Faceboook seemed scary, things seem about to get a whole lot scarier. The Wall Street Journal provides the full amended legal complaint of Paul Ceglia -- the newest man to claim he has ownership in Facebook. Big-time ownership, he says. And documents now submitted as evidence for a federal court case may back that theory.
Mark Zuckerberg's just walked out of one lawsuit with the Winklevoss twins, right into another with the newest person to claim ownership. The latest Winklevoss courtroom drama involving Facebook has just come to a close -- Zuckerberg emerging victorious, for now. But things are most likely about to get very, very bad for Mark Zuckergerg -- at least for his stress level, if not for the purported billionaire's amassed fortune and worth. He's reported to be worth billions, but it's beginning to look more and more like the Facebook founder's fortune could be at stake.
It's a twist that could make "The Social Network" movie's story line seem insignificant in comparison. He's said to be the youngest self-made billionaire in history. But is it all true as portrayed? Right now, it appears the small sum of $1,000 or two could mean the loss of billions for Zuckerberg. If Mark Zuckerberg didn't like the portrayal of his character in "The Social Network" the Facebook founder is sure to be less than pleased now.
Backing up slightly, Mark Zuckerberg isn't new to the legal arena, despite his young age. Twins Cameron Winklevoss and Tyler Winklevoss -- also portrayed in "The Social Network"-- settled a lawsuit with Mark Zuckerberg years ago. The Winklevoss twins originally sued for Facebook ownership issues in 2004. Legal matters concerning the Winklevoss' didn't stop there, and in are fact far more current, but that lawsuit led to the Winklevoss twins' eventual stake in 5-percent ownership of Facebook -- acquired through a settlement agreement between the involved parties.
The Christian Science Monitor, in fact, published a headline only days ago in April and entitled "Winklevoss Twins Fraud Case: Is 'Social Network' Saga Finally Over"? The answer to that is a resounding "no", only this time it doesn't have to do with the Winklevoss'.
As a brief Facebook history reminder, the Winklevoss twins were the upperclassmen who were reported to have an idea for a web site they called "ConnectU" -- an idea Cameron and Tyler Winklevoss claim was stolen by Mark Zuckerberg, and instead turned into a web site now commonly known to the world as Facebook.
Only days ago, a more recent Winklevoss court appearance in April didn't seem to turn out quite so well for the twins: their original settlement agreement over Facebook wherein they received web site shares in exchange for settling the case, the former Harvard students claimed, had occurred -- but, they claim, that settlement they made was based on the pair being fraudulently misled. Winklevoss attorneys for ConnectU have since argued that not only were the twins misled in making the legal settlement -- but also misled about the value of the Facebook web site including crucial details, they say, that were omitted from the settlement.
Facebook is now estimated to be worth at least 50 billion dollars. The Winklevoss twins just suffered a legal blow of the Ninth Circuit, which disagreed with their argument on April 11, 2011. Cameron and Tyler Winklevoss stated they'd file for “en banc” review of their latest lawsuit involving Facebook, in hopes of full court rule in their most recent case.
Interestingly, legal analysts had been betting on April's Winklevoss court ruling to stand based on a unanimous three-judge panel. But could Paul Ceglia change the fate or wealth of Cameron and Tyler Winklevoss?
It surely hasn't escaped attention of the Winklevoss' legal team that what Paul Ceglia is claiming to be email evidence of a partnership with Zuckerberg includes alleged written statements by the Facebook founder that seem to discuss the Winklevoss twins. Paul Ceglia claims he has November 22, 2003 email evidence pertaining to Ceglia's claim of Facebook ownership. It seems any such evidence just might help someone else out as well, like the Winklevoss'.
Since three men are laying claims to ownership of the same Facebook web site, how that possible evidence could be used is unclear. But the email communication Ceglia claims is true seems to have a reference to Cameron and Tyler Winklevoss -- unless, of course, there are fourth and fifth parties about to lay claim to Facebook also.
An allegedly true, according to Paul Ceglia, November 22, 2003, email which Ceglia says is from Mark Zuckerberg in the early days states, in part, "I have recently met with a couple of upperclassmen here at Harvard that are planning to launch a site very similar to ours. If we don't make a move soon, I think we will lose the advantage we have if we release before them. I've stalled them for the time being and with a break if you could send another $1000 for the facebook (sic) project it would allow me to pay my roommate or Jeff to help integrate the search code and get the site live before them. Please give me a call so that we can talk more about this."
Sounds kind of familiar. Upperclassmen. Two of them. The thought of launching a similar web site.
They say business is brutal -- and it would seem there's no shortage of casualties in the battle for the Facebook empire. Not that the most current claim against Mark Zuckerberg strays completely far from what his become pretty much similar accusations from two previous men. The difference in this third, Paul Ceglia, may be the wisdom in obtaining proof to back his claim. The federal court will have to rule but it's going to be nothing less than interesting.
There seems to be some startling similar recurring themes involving allegations against Zuckerberg -- among them, a sum of $1,000 that seems to be repeated. In "The Social Network," the character representation of Mark Zuckerberg approaches his friend Eduardo, telling him of an idea he's got -- called "The Face Book". The web site is supposedly going to be an online social networking website exclusive to Harvard University and its students, designed to allow people to network with one another through sharing personal and social information. Not at the bottom of the list, that sharing on the web site is secure.
In the movie, Eduardo agrees to assist Mark Zuckerberg with finances, providing a sum of $1,000 in order to help start the social networking web site.
There's that damned, recurring $1,000 again.
Which brings things to current status: someone else is talking about $1,000 that he says he provided to Mark Zuckerberg early on -- as in before the beginning of Facebook as the world knows it. That someone, Paul Ceglia, says more: that he was promised a 50-percent partnership with Zuckerberg in exchange for the investment. It may sound crazy on the surface, but maybe not so much -- as things begin to surface. Way back then, it all involved something referred to as "the face book" or "Page Book".
So who is Paul Ceglia? The world is about to find out, if it wasn't paying attention in 2010 when Mr. Ceglia brought his first suit against Mark Zuckerberg. There's no longer a case at the state level, it's now been moved to federal court -- and, again, involves Paul Ceglia.
Current headlines may be slightly different but it all means about the same, if evidence is true -- and a federal judge, or a settlement, agrees: Mark Zuckerberg could stand to lose billions related to a newly-filed federal claim that alleges the Facebook founder may not have really owned all the Facebook shares as owner. Those Facebook shares have since been divided, split numerous ways -- which could make things even stickier yet. The numbers vary on how much a man, who purports to have been Zuckerberg's true partner in the web site, would really be owned if the claim is true. The man: Paul Ceglia, the claim: that he owns at least half of the original Facebook company per a contract he claims are authentic. And then there are the emails.
Some headlines claim a 50/50 Facebook company split while others insist Paul Ceglia could own up to 84% percent of the Facebook company. Paul Ceglia himself claimed 84-percent ownership of Facebook in his initial June 2010 lawsuit. For anyone confused by the difference in how much Paul Ceglia could really own, it all comes down to what could be the most crucial evidence in the case against Mark Zuckerberg: emails that Paul Ceglia claim to be authentic and true.
Well, emails and a contract that Ceglia claims is authentic and sets a deadline of January 1, 2004 for Zuckerberg's launch of the web site. The contract and written word combination could be deadly for those attempting to defend: if all that evidence is real, the emails could back up the contract claim through evidence of a written, back-and-forth, communication between Zuckerberg and Ceglia.
If those emails are true, the results could be far beyond devastating for the 26-year-old who recently topped the list in richest men with his worth reportedly passing Apple's Job and Microsoft's Gates. In January 2011, Zuckerberg reportedly owned about 26 percent of Facebook. It's unclear what his exact stake may be, but estimates are at between 20 to 30 percent. Whatever Zuckerberg's percentage in Facebook, with a worth estimated at about 35 billion, his fortune could quickly become far less -- after attorneys fees alone.
Facebook may not really belong to Mark Zuckerberg -- or at least in the amount that he claims -- is Paul Ceglia's claim. New evidence submitted by Ceglia says that Zuckerberg agreed to a 50/50 split back in the beginning of "the face book," all over less than $2,000. Technically, according to Ceglia, there was an initial $1,000 investment related specifically to Facebook -- the other $1,000 provided to Zuckerberg was for an additional project Zuckerberg was allegedly working on for Paul Cegnia, called Streetfax.
There may have been more funds provided to Zuckerberg by Ceglia -- that part's a bit hazy, since the emails submitted by Ceglia seem to indicate a consistent request from Zuckerberg for more money from Ceglia. $1,000 seems to be a common theme as a request, so it's hard to tell -- but it's sounding like a minimum two thousand and possibly three.
Paul Ceglia's name first popped up on the media radar in 2010, when Ceglia's case with the state first became news -- with his claim that he owned part of Facebook. The idea was dismissed as lunacy by most of the world, and so was the case. Ceglia has filed again -- the case now moved to federal court, from the state level. And along with the new filing comes new evidence -- at least that's what Ceglia and his attorneys claim.
In his June 30, 2010 lawsuit and filed complaint of Ceglia v Zuckerberg, Paul Ceglia claimed to own 84-percent of Facebook. If the documents are accurate and true, however, email evidence related to the current 2011 Ceglia claim reflect the claimant agreeing -- in writing -- to a re-negotiation of sorts, with Mark Zuckerberg, in which Ceglia says he'll return to the original 50/50 company split and ignore the late clause that stated Paul Ceglia would accrue one more percent of the company per day that Zuckerberg was late.
Of course, Facebook's legal team has blown off the new evidence submitted from Paul Ceglia's side, as essentially a bunch of malarky -- no less would be expected from the social networking giant. The current federal lawsuit wouldn't just throw a kink in the works, it could throw the whole technology industry on its head, if true. And it's kind of appearing like Ceglia's claim could hold a possibility of truth, if the emails are counted in as evidence and authentic.
Plaintiff Ceglia's newly-acquired law firm of DLP Piper seems to be insinuating it's got even more to be revealed -- and that the evidence including emails between Ceglia and Zuckerberg, are in fact authentic. As copies of at least part of the evidence circulate, even references by top journalists seem to cast doubt on Facebook's "absolute" that the evidence is a fake. It seems there's a canceled check in the Facebook scandal -- which appeared last year publicly -- but now also what appears to be a lot of correspondence between what Ceglia and whom he claims to be his partner, Mark Zuckerberg.
Facebook and its lawyers seem to be screaming that what Paul Ceglia claims is evidence or valid documentation and proof is really fake. Interestingly, even top journalists seem to now be insinuating otherwise. The DLP Piper firm now representing Paul Ceglia is a major firm hired within just recent weeks, with what appears a stellar reputation. Not that Facebook doesn't appear to have its own stellar legal resources on-hand. But many argue that Ceglia's recently-acquired law firm would never put its reputation on the line through taking on a case that involved even potentially false documents, that testing analysis of the document evidence has most likely been performed by the law firm already.
Facebook's response -- to the concept of evidence in a case involving the social networking giant -- has been that Paul Ceglia is a "felon". That may be, but that's about all they've got on him.
In truth, Ceglia is technically a felon. Facebook's argument seems to be that a felon is a felon. Facebook lawyer Orin Snyder has called Paul Ceglia a scam artist. But while the fact may remain that Paul Ceglia is technically a felon, circumstances and background can cast a bit of a different light.
Paul Ceglia may have screwed up, or even screwed up big-time, but it remains to be seen whether his actions were malicious or a badly-botched business plan that went haywire.Technically Ceglia is a felon, as the financial amount involved was no small sum or insignificant -- it involved around $200,000, related to a wood-pellet business he began years ago. Paul Ceglia and his wife were arrested in 2010 in relation to the wood-pellet business. It seems Ceglia took orders that, for one reason or another, he did not end up fulfilling -- that much is clear. As to whether his actions were intentional from the outset isn't clear.
It's possible Paul Ceglia simply made some bad, bad business decisions that threw him in a hole from which he was unable to climb. Ceglia claims he tried to refund 10 of 20 orders related to the wood-pellet business he formerly started. Whatever the case, things didn't turn out right, and people lost money that should have been theirs -- at what seems to have been Ceglia's hands. And, that is about the end of that story.
Except for an interesting and unique twist -- that Paul Ceglia says he owes his ability to file a June 2010 lawsuit over Facebook ownership to those felony charges. There was a document he found while being prosecuted by the New York District Attorney's Office.
Paul Ceglia's story involving Mark Zuckerberg is much more interesting though. If in fact the emails, correspondence, canceled check and other documents do prove real and true, Zuckerberg could be in for the fight of his career -- and he's got a lot of years left.
Ceglia's been finding himself under fire on some other counts. Granted, not all of it makes complete sense -- but then sometimes people do some odd or even stupid things. First, Paul Ceglia's been pummeled over the fact that he waited some time, yeas, before choosing to file even the initial lawsuit against Facebook and Zuckerberg -- proceedings for which landed Ceglia in the middle of media limelight last year. It does seem odd, but then life is odd.
The fact remains: there's a 6-year statute of limitations on the suit that Ceglia's filed. Ceglia's lawyers say there's no doubt that Paul Ceglia's lawsuit has been filed within that statue of limitations, without doubt. Everyone wants to know why he waited so long to lay claim to such a profitable business, with Facebook clearly worth a fortune. Whatever his reason or circumstance, the fact remains that the duration of time really isn't relevant as long as he made the cut-off -- and that he has, even if just under the wire.
One reason Ceglia seems to provide for a later lawsuit filing time pertaining to his alleged Facebook ownership, is that he supposedly -- only more recently -- happened to run across at least one piece of the crucial documentation involving the Facebook suit. Reportedly, the canceled check involving the Ceglia and Zuckerberg partnership, Ceglia allegedly says was somehow filed in with documents related to his former wood-pellet business. Critics dismiss the event or discovery as outlandish -- or "coincidental," that Ceglia just happened to run across the check copy or document now, rather than years ago. Stranger things have happened. For anyone who's run a business, or even contract work, that type of incident may be on the least strange things that could happen.
Paul Ceglia has had a battle on his hands. The canceled check document provided by Ceglia the June 2010 lawsuit with Facebook even had circulating rumors that it was a forgery. But if you're messing with a giant, expect some giant backlash.
Interestingly, Zuckerberg allegedly asked to use code from a second project Ceglia says the Harvard student was also working on with him, called Streetfax. Email correspondence offered by Ceglia in his claims reflects Zuckerberg asking to use code from the Streetfax project for Facebook -- the idea: that perhaps "the face book," as it was then known, could benefit from the code through helping locate people's names quicker or easier even if mis-spelled.
It's all fascinating, even down to the fact that Mark Zuckerberg has been touted throughout the press as a genius of sorts -- most commonly compared to Microsoft's Bill Gates, if in a slightly different sphere of the new and profitable realm of social networking. Zuckerberg was still technically a teenager when media reports began showcasing the "man" that built Facebook and, what the press seemed to claim, his demonstrable skills. It seemed there'd be non stopping Zuckerberg, or at least no major bumps in the road.
All of which makes the Ceglia claim shed a new light on Zuckerberg and that level of genius -- if Paul Ceglia's lawsuit proves triumphant. Who would think that such a social networking genius and supposed businessman could possibly make such stupid, basic mistakes. If what Ceglia says is true, and his documents prove valid, it would appear Zuckerberg would have made mistake after mistake from the outset in the building of Facebook.
If the allegations are true, Zuckerberg would have given away shares in a company, he claims to have built, for investment funds -- but not an exchange of shares from an investor offering hundreds of thousands or millions of dollars -- but simply a measly $1,000. A grand. Maybe it was two grand. Whatever it was, if true, it would have been a mere pittance.
Agreeing to a 50/50 split of the company with anyone, period, would have been a startling action for Mark Zuckerberg to take. Regardless of any investment amount Zuckerberg may have considered, the crucial part in any deal would be to maintain control of the company. Company control would have been maintained through a minimum 51/49 split -- a vital one percent difference. A 50/50 split, if true, would make the reported Ceglia email evidence -- where Zuckerberg allegedly has a February 6, 2004 email discussion addressed to Ceglia -- extremely interesting; on the February 6, 2004, date, Zuckerberg allegedly begins referring to "creative control" of what he deems "my company," but at a 50/50 split, the comment would seem extremely odd.
Believing that written communication, a contract, or other documentation would never resurface would also seem a startling mistake if made by Zuckerberg. A canceled check, with no surrounding records, could possibly be dismissed by a judge. All alone, a check copy could even appear simply preposterous, even if authentic. But a contract -- yeah, there's the rub. Worse yet for a lawsuit against Zuckerberg: email communication; if true, the written word could cause some serious demise, particularly if it's not even one-sided email communication, but back-and-forth responses that are detailed and reference details like a contract and company split.
Any e-mail details that could shed light on things like character could also be less than flattering. For instance, communication that, say, talks about re-negotiating a contract that has been agreed to, with communication that appears more like a threat than a negotiation.
On the date Paul Ceglia claims "The Face Book" web site was due to launch -- January 1, 2004 -- he alleges Mark Zuckerberg sent e-mail stating, in part, that "all individual parts of the back end for the site have been completed" and that "the extra $1000 really helped us get further ahead and if you can send some additional funding I believe we will be online in a few weeks."
What Ceglia claims is evidence pertaining to his Facebook ownership with Zuckerberg continues in the e-mail, with Zuckerberg allegedly stating by e-mail: "I think it is unnecessary at this point...to hold me to the original completion date. I should not be penalized for delays that were out of my control...thereby delaying my start on our second project. Thus, I am requesting a written waiver on your part exempting me from the obligation to give you additional ownership in the project that is outlined in our original contract." Paul Ceglia allegedly replies the same date, in part stating by e-mail: "I guess I am somewhat torn as on one hand in your interest you want me to consider not enforcing my contract while then also making it clear that more money is owed to you for things that weren't a part of yours, does that make sense to you?"
Paul Ceglia's e-mail communication, if true and authentic, includes Zuckerberg reportedly admitting that he's over 30 days (or 32 days at that point on February 2, 2004) late in meeting the original contract deadline for "the face book" web site, that Mark Zuckerberg isn't happy with the concept that he would therefore own less than 20 percent of the web site, and his suggestion of returning to the original 50/50 Facebook company split as outlined in the contract. If Ceglia doesn't agree, it seems from the e-mail correspondence that Zuckerberg's allegedly willing to even bar the Facebook site from going live -- unless Paul Ceglia agrees to his demand or re-negotiation.
Paul Ceglia says February 2, 2004, email communication from Zuckerberg states, in part, "Paul, I have a rather serious issue to discuss with you, according to our contract I owe you over 30% more of the business in late penalties which would give you over 80% of the company. First I want to say that I think it is completely unfair because I did so much extra work for you on your site that caused those delays in the first place and second I don't even think it is legal to charge such a huge penalty. Mostly though I just won't even bother putting the site live if you are going to insist on such a large percentage. I'd like to suggest that you drop the penalty completely and that we officially return to 50/50 ownership."
That alleged concept or "proposal" by Mark Zuckerberg could be interesting if it makes it into court proceedings, at least in terms of any appearance that the Facebook billionaire would've demanded he regain 50 percent of the company rather than what would have been 16 percent in accordance with the original contract terms -- with Facebook's February 4, 2004 launch date that was 34 days past January 1. It all seems a bit unusual -- considering the allegations that Zuckerberg's been receiving investment funds for the company from Paul Ceglia.
On February 3, 2004, Paul Ceglia says he responded to Zuckerberg by e-mail, in part reading: "OK fine Mark 50/50 just as long as we start making some money from this thing...Let's get it live and open up the store."
It will be interesting to know how such a statement from Ceglia, if true as he alleges, could impact things in federal court; while it does appear Ceglia agrees to 50/50 ownership of The Face Book, and to forgo the penalty of any original contract that could have provided him up to 84-percent ownership in the company, Paul Ceglia immediately follows his statement with "as long as we start making some money."
That could prove an interesting argument for Ceglia's legal team and attorneys, since the soon-to-follow timeline seems to reflect Mark Zuckerberg moving to California -- with what Ceglia argues is involvement in Facebook.
The Face Book web site went live on February 4, 2010 -- a date just two days following Zuckerberg's alleged demand for written waiver from Paul Ceglia, that would give Zuckerberg back 50 percent of the company rather than just 16 percent ownership based on penalties from any original contract.
Provided by Ceglia in the lawsuit, Zuckerberg allegedly communicates by e-mail on January 5, 2004: "It is well past January 1st and to my knowledge you don't have a single thing done for the site (sic), I gave you an extra 1K in November so we could rush it ahead of these other guys and as far as I know you don't even have a domain name or a home page built, let alone the actual database. For now I suggest you use my search engine and we work out the details. I'm starting to think you just blew that money Mark. You know perfectly well that you can't just take a person's (sic) investment and then spend it on women and beer or whatever you do up there in Harvard. I've been stalled long enough on this thing and if I don't see something soon (sic) I'll have no choice but to contact the school and your parents...and let them know what's been going on."
If Paul Ceglia's claim is true and his newest federal lawsuit proves valid, what would the partner's true stake in Facebook? Reports abound that Ceglia should've been attributed 84 percent and Mark Zuckerberg 16 percent in strict accordance with contract terms. All of it rests on whether the alleged contract and emails are in fact authentic, but if authentic : the original deal was reportedly a 50/50 split of the company with a stipulation of an exact cut-off date for web site completion or going live; for every day following that cut-off date, Zuckerberg would reportedly lose another one percent of the company per day that the web site remained incomplete. At the reported time that Zuckerberg contacted Ceglia about the issue via email, it was about 34 days past the contract completion date -- meaning Mark Zuckerberg would only have owned 16 percent of the original Facebook web site.
Paul Ceglia's legal counsel claims that Mark Zuckerberg finally tried to sour the business relationship with Ceglia, and essentially misled him into believing the web site was not as successful as it was -- basically, to get rid of Ceglia. Ceglia claims a July 22, 2004 e-mail from Zuckerberg states, in part: "Another summer is here and I still don't have time to build our site, I understand that I promised I would, but other things have come up and I am out in California working during break. I just don't want the obligation of having to answer to you for not following through and I won't be able to."
The allegation is that the Facebook web site had been so successful that Zuckerberg was in California -- to work on Facebook or funding for the web site. Ceglia's lawsuit claims, in part:
"56. At the time Zuckerberg wrote his July 22, 2004, email, he had received or was about to receive funding from angel investors and was in the process of meeting with venture capital funds to provide additional capital. At no time did Zuckerberg inform Ceglia of these facts."
In the same e-mail, Ceglia alleges that Mark Zuckerberg also stated: "Please give me your address and I will mail you back the $2000 for your trouble, more if it will repair our business relationship."
Not necessarily that such funds would've impacted any pre-existing contract, but Ceglia's legal team has claimed that Paul Ceglia was never delivered such funds either.
But, if Ceglia plans to argue the authenticity of those emails -- as proof in a federal lawsuit that he is in fact an owner of the Facebook web site -- there may not be any way around that argument cutting both ways. If the emails that Ceglia purports to be true are in fact proven authentic, Paul Ceglia seems to be shown in email communication as readily agreeing to a re-negotiation in contract terms -- and accepting a return to a 50/50 company split with Mark Zuckerberg, rather than the 84 percent he may have been entitled to per an original contract.
For Ceglia's lawyers to argue that he is instead owed 84 percent would seem a virtual impossibility -- but then, Ceglia's immediate follow-up statement about "making money" seems a possible argument against Paul Ceglia's full acceptance or waiver of the ownership penalties.
Not that a ruling in favor of an original 50/50 Facebook company partnership would be so bad for Paul Ceglia. It could make him an instant billionaire -- with a winning verdict, Ceglia could even potentially bypass Mark Zuckerberg's worth. The easier part could be if Paul Ceglia and Facebook, including Zuckerberg, were to come to a settlement in the new federal lawsuit -- allowing the amount of funds and/or shares in Facebook to be clearly stipulated. At this point, Zuckerberg only owns roughly one-quarter to less than one-third of the Facebook company -- making any original deal of any 50/50 split no less than a negotiations nightmare.
Things are about to get very ugly.
If you want to see Mark Zuckerberg sweat before the Ceglia v Zuckerberg case heads to federal court, check out the video on privacy issues here.