The other strange tale of Facebook’s disputed origins
Two contracts dispute whether 18-year-old Zuck sold half to accused scammer for $1,000.
Mark Zuckerberg in front of his original "The Facebook" profile.
But perhaps there's an even bigger scam afoot, and it involves the ownership of Facebook. The social networking site is valued at $190 billion and used by billions of people daily across the globe.
Unlike Madoff's intricate accounting scheme that netted him a life sentence in 2009, the criminal proceedings surrounding the ownership of Facebook, at its core, rely on a two-page document—a contract that is either forged or worth billions of dollars. Either Facebook Chief Mark Zuckerberg, as an 18-year-old Harvard University student, promised half of his company to a rural New York man named Paul Ceglia, or he didn't.
Round One of this high-stakes battle went to Zuckerberg, who sits in the corner office of the Menlo Park, California-based social networking site. Ceglia, on the other side of the country, is currently free on $250,000 bond and must wear an electronic-monitoring ankle bracelet. He's in legal hot water, facing criminal fraud charges following accusations he forged a contract to hijack half of Facebook [PDF]. The wood-pellet salesman is staring down a maximum 40-year prison term if convicted—yet maintains that he's the true victim.
Paul Ceglia
Harvard gives birth to Facebook
History books are already filled with writings that Zuckerberg, as a Harvard University student, launched the social-networking site in 2004 as a Harvard-only network.What's less known is that, as a computer science student, Zuckerberg freelanced programming work on the side. In 2003, one of his clients was Ceglia, whom he met via a Craigslist ad. Ceglia hired him to perform programming work for Ceglia's former online venture, StreetFax, which provided photographs of intersections to insurance adjusters.
Neither Zuckerberg nor Ceglia dispute this part of the story. It's essentially the only fact upon which they both agree. Herein lies the billion-dollar brouhaha:
As part of that so-called "work for hire" contract, Zuckerberg agreed to provide Ceglia with at least a 50-percent Facebook stake, and Ceglia fronted Zuckerberg $1,000 to make it happen. The contract references a project called "The Face Book" in one place and "The Page Book" elsewhere. At least that's Ceglia's position, according to the contract he submitted to the courts [PDF]. He sued Facebook and Zuckerberg in 2010, demanding the New York federal courts enforce the contract. Along the way, he produced as evidence e-mails between himself and Zuckerberg that seemingly bolstered his position.
Enlarge / Federal prosecutors say this paragraph from an April 28, 2003 contract between Ceglia and Zuckerberg is a hoax.
Lawyers, lawyers, and more lawyers
Where there's a courthouse, there are lawyers. And where there's a courthouse with a lawsuit potentially worth billions of dollars, there are plenty more lawyers.Maybe Facebook would just settle up with Ceglia to make the New York federal lawsuit go away? After all, it happened at least once before.
Facebook agreed in 2008 to pay Cameron and Tyler Winklevoss $65 million to resolve a dispute about whether Zuckerberg hijacked the idea for Facebook from them. The movie The Social Network dramatized the issue in its 2010 debut. But there would be no settlement offer to Ceglia from Facebook, and Ceglia began to churn through plaintiff's lawyers.
Ceglia went through at least nine law firms in his quest to assume half the Facebook helm.
Facebook's lawyers took that as evidence of sorts to bolster their position, at least in the public relations arena—saying the "revolving door of lawyers" underscored the fact that Ceglia was perpetrating "a hoax and a fraud."
As it turned out, even Ceglia's lawyers had doubts about the authenticity of Ceglia's claims, according to a 2011 document from a law firm that represented Ceglia. The document was admitted as evidence, Exhibit R.
The exhibit is a letter from Aaron Marks of the New York firm of Kasowitz, Benson, Torres & Friedman. It's to Dennis Vacco, of Buffalo's Lippes Mathias Wexler Friedman. Kasowitz is explaining that a data examination firm it retained, Capsicum Group, took some images of the alleged "work for hire" contract from Ceglia's computer, and Kasowitz would release the firm to work with Vacco.
"In fact, upon my review on March 30 of certain documents that the Capsicum Group had retrieved that established that page 1 of the Exhibit B Contract is fabricated, I directed the Capsicum Group to stop work on analyzing Mr. Ceglia's materials, but to preserve the images," the letter said. "My firm also immediately withdrew as counsel to Mr. Ceglia that evening."
Digital forensics for sale
By 2012, Ceglia's lawsuit against Facebook and Zuckerberg devolved into what best could be described as a he-said, she-said affair. But Facebook dropped a bombshell in March of that year, a report [PDF] from the digital forensics firm of Stroz Friedberg.Among other things, the firm concluded that Ceglia manipulated the original contract's text with a hex editor so the datestamps would appear real. The report also said that Ceglia performed a process known as "baking."
"Ceglia appears to have used clothespins or binder clips to suspend the document and expose it to sunlight," the report said. What's more, the report identified six versions on Ceglia's computer of the "work for hire" contract, all of which displayed a "metadata anomaly." The report said "the last printed dates are later than their last modified dates, which is impossible absent system clock backdating."
One of them came from San Francisco-based forensics consultant James Blanco. The "work for hire contract," he concluded, [PDF] was "an authentic, unaltered document."
In a June court filing that year, Blanco said the tan lines Stroz Friedberg discovered on the contract could have come, not from baking, but from "finger or thumb imprints that had lotion (or other chemicals or substances) on the hand, the result of gloved or ungloved hands touching the face/exposed arms then inadvertently leaving a protective coating on the document pages thus protecting those areas from exposure. That is, either gloved or ungloved fingers, having touched/rubbed the skin thus being contaminated with a cream or suntan lotion."
Four months later, in October, Ceglia was criminally charged, accused of mail and wire fraud. When announcing the charges, US Attorney Preet Bharara of the Southern District of New York said Ceglia was seeking a "quick payday based on a blatant forgery." Bharara added that "Ceglia’s alleged conduct not only constitutes a massive fraud attempt, but also an attempted corruption of our legal system through the manufacture of false evidence. That is always intolerable. Dressing up a fraud as a lawsuit does not immunize you from prosecution.”
US District Judge Richard Arcara, who was presiding over Ceglia's lawsuit, eventually dismissed the case. In March of this year, Arcara declined Ceglia's petition to block the government's criminal charges against him. The judge ruled that "the purported contract upon which the motion is predicated is a fabrication and that plaintiff knows it." Along the way, Arcara ordered Ceglia to pay at least $97,000 in fees and sanctions for stonewalling the forensics analysis that gave rise to his criminal prosecution.
It just keeps getting "weirder and weirder"
Ceglia, who is appealing the dismissal of his lawsuit, told Ars the judge decided to "choose to believe only Facebook's 'experts,'" adding:It is the only case on record where a citizen has been charged with mail and wire fraud for filing a lawsuit. The implication is clear. If filing a lawsuit can be mail and wire fraud, then every single lawsuit filed in America can be indicted for as it is in my case, it does not matter what the evidence shows or how many forensic tests you have completed to prove just that, it only matters who has friends in (the) Justice Department. For every lawsuit or at least almost every lawsuit, involves a dispute about property or money, the law requires that you use the wire and mail to submit court documents and all that is left is to allege that one party was lying. Now if that doesn't send the fear of God into you, if that doesn't send a shiver up your spine at how utterly frozen our right to a jury trial would be under this deluded thinking, then you really don't get it.Ceglia said that the so-called original contract that does not mention him getting half the Facebook fortune was "forged" and planted, "perhaps by Zuckerberg himself," on his parents' computer, which was examined by Facebook as part of the civil discovery process.
"This 'image' they claim is the original is forged and we will prove it has no authenticating properties what so ever," Ceglia wrote in an e-mail to the Daily Reporter, his hometown newspaper, in 2011. "I would have expected more from him and his henchmen. We have known about this photoshopped 'image' for some time and I willingly handed it over to them, now they claim it is the original. Oh brother...it just keeps getting weirder and weirder."
In his e-mail to Ars, Ceglia said he was tired, too, of being the government's and the media's whipping boy. "It is clear that I have a right to petition and that I have every belief that a jury, faced not with media spin and half truths but the reality of the evidence will vindicate me and the constant slander I have endured and find the contract is authentic."
Alioto, Ceglia's current attorney, said Judge Arcara dismissed Ceglia's case despite Zuckerberg never submitting to a deposition, meaning the Facebook founder never faced live questioning from an opposing attorney.
"This guy goes to court and then they put him in jail for going to court. That is truly offensive," Alioto said of Ceglia's plight. "I believe if I have the opportunity to cross-examine Zuckerberg, his credibility will be in substantial doubt."
Alioto claimed the criminal case against Ceglia is based, in part, over the past of the US attorney, Bharara. Alioto claims Bharara brought the charges as a favor to his former law firm—Gibson, Dunn & Crutcher—the same firm that represents Facebook. Alioto points out that Orin Snyder, Facebook's lead attorney from Gibson Dunn who defended Facebook in Ceglia's lawsuit, was a former prosecutor in the Southern District of New York, which is now headed by Bharara.
"This is really a very bad situation," Alioto said.
Bharara's office declined comment for this report other than to confirm that Zuckerberg would be called to the witness stand. Snyder did not reply for comment.
If past is prologue
As it turns out, there appears to be little rallying behind Ceglia in his hometown of Wellsville, New York.A 2011 Buffalo News profile said he was known around town as a "grifter:"
It's easy to generate a reputation in a community of about 5,000 people, and Ceglia is widely known around Wellsville as a grifter. His checkered history includes a felony drug conviction in Texas, a trespassing conviction in Florida, real-estate swindles, and a slew of affidavits from jilted customers.In an e-mail, Ceglia described the newspaper article—which noted the now-41-year-old father of two sons was arrested in 1997 for possessing hallucinogenic mushrooms—as a "hatchet job."
I made a mistake in my early twenties and it set me straight... I got my shit together as is proven I think by the fact that Zuckerberg admits that I hired him as a part of my company... I think it is pretty clear that I was working my ass off to build a dot com to provide photographs of street intersections... Not a move "career criminals" usually make. I've worked hard for what I have and the facts are the facts... I traveled across the North East and then Florida building a database of street intersections, long before there was Google street view.Ceglia's checkered past, however, strangely gave rise to his claim to Facebook and his latest legal troubles. He said he forgot about his alleged Facebook fortunes until he began rummaging through his files as part of an unrelated run-in with the law.
I've built homes in the Bahamas from the ground up and each and every bolt and machine in a wood pellet factory. I've built toilets in Kibera on my own dime and designed and built a refrigerator that runs directly off of wood or charcoal for use in developing nations... Before that was a prototype for a generator that runs from wave energy. I could continue but hopefully in trying to demonstrate that I don't just fit easily in your box I haven't given you so much that now you fit me in the one labeled "braggard" since that is far from who I am. I am a father and a husband, I have a close happy supportive family that I cherish above all else.
He and wife, Iasia, were arrested in 2009 and eventually sued by then-New York Attorney General Andrew Cuomo. They allegedly stiffed customers from his Allegany Pellets company out of about $200,000 for 1,900 tons of home-heating pellets. The Ceglias blamed the backlog on mechanical failures and said they never intended to cheat anybody.
“If this thing hadn’t happened the way it happened, no way I would have ever started looking through these ancient folders,” Ceglia told Bloomberg News in 2010. “That contract would just be sitting in there gathering dust.”
But Ceglia found the contract—allegedly fake or real depending on the side presenting—and now he awaits his day in court this November. And unless something unforeseen happens beforehand, Mark Zuckerberg will be there to see him, too.
"I have no interest in a plea deal of any sort. The very idea of it suggests that I have done something wrong," Ceglia told Ars. "Of course I intend to go to trial."
No comments:
Post a Comment