Belfast Telegraph

Thursday 24 July 2014

Oldest trick in The Book?

Facebook founder Mark Zuckerberg is set to sell some 30.2m of his shares

Facebook’s Mark Zuckerberg is a prime target for scams but a man who allegedly sold half the firm for $1,000 says he can prove his claims, reports Stephen Foley

It is possible that David Fincher and Aaron Sorkin made the wrong movie. Their Oscar-winning portrayal of the early years of Facebook, The Social Network, focused on claims that nerdy Harvard undergraduate Mark Zuckerberg pinched the idea from a couple of strapping rowers called the Winklevoss twins, and dramatised the pair's long court fight to get a piece of the company.

However, what if the biggest legal threat from Zuckerberg's past turns out not to be Tyler and Cameron Winklevoss but a character that was never written into Sorkin's screenplay? Can it be true that Zuckerberg stole half of Facebook from a small-time New York businessman called Paul Ceglia?

When Ceglia made his sensational claim last year, few people took him seriously. But now — just as Zuckerberg is celebrating an apparently final victory over the Winklevoss twins — he has emerged with a treasure trove of emails that he says prove his case: that Zuckerberg signed away a 50% interest in his idea for an online “face book” for students at Harvard and beyond, in return for $1,000 cash.

Facebook does not dispute that Zuckerberg did some work for a firm Ceglia was trying to start up in 2003, a website called StreetFax, which wanted to build a photo library of all the accident blackspots in the US for sale to car insurance loss-adjusters. The 18-year-old Zuckerberg answered a Craigslist ad appealing for web developers, according to the lawsuit. Ceglia, though, says that the pair's business relationship went much deeper than just employer-contractor, and that Ceglia agreed at the same time to invest in a project the young student was calling “The Face Book”.

Liar, says Facebook. On paper, Ceglia doesn't win any awards for Person Most Likely to Persuade a Jury He Should be a Billionaire. Before he sued

Facebook, he was best known (and then only in his local area) for being accused of defrauding customers of his wood-pellet fuel business. He has a conviction for possession of hallucinogenic mushrooms. And he claims to have forgotten a contract that handed him half of the world's fastest-growing company for seven years, with Zuckerberg's rise to world domination apparently not being enough to jog his memory.

Facebook, meanwhile, has kept on growing in size. Its latest valuation, based on private market share sales, is $55bn, but even last summer it was worth well into the billions and looked a plum target for scammers, particularly since it was clear The Social Network was going to paint a less-than-holy picture of Zuckerberg.

The media noted Ceglia's purported contract for work on StreetFax and The Face Book, in which “it is agreed that Purchaser will own a half-interest (50%) in the software, programming language and business interests derived from the expansion of that services to a larger audience”. It noted, too,

Facebook's rebuttal about the size of the margins looking suspiciously different from one page to the next. And then it focused back on the twins.

The Winklevii — as the film’s fictional Zuckerberg derisively calls them — settled their claim in 2008, for $65m; $45m of that in Facebook shares. But they wanted to back out of the settlement, saying Facebook misled them at the time about its finances.

Alex Kozinski, the judge, said no. “The Winklevosses are not the first parties bested by a competitor who then seek to gain through litigation what they were unable to achieve in the marketplace,” he wrote. “At some point, litigation must come to an end. That point has now been reached.”

The twins beg to differ. They vowed yesterday to try to get the ruling overturned, but Zuckerberg suddenly has much bigger worries. Ceglia is claiming the Facebook founder should hand over half his wealth — plus damages.

On Monday, Ceglia's powerful new lawyers, the international legal firm DLA Piper, filed a new lawsuit stuffed full of quotes that appear to corroborate the disputed contract. Facebook says that these emails, too, are faked. Orin Snyder, Zuckerberg's lawyer, said: “This is a fraudulent lawsuit brought by a convicted felon, and we look forward to defending it in court.”

The email trail begins in July 2003, in which Zuckerberg asks to use his development work on both StreetFax and “the Harvard site”, and continues over to January 1, 2004, which the disputed contract states is the deadline for launching The Face Book.

The purported contract says Ceglia will get an extra 1% ownership stake for every day it is late. It was more than a month late launching, which is why Ceglia last year claimed to own 84% of the company, and in the emails he accuses Zuckerberg of frittering away the investment on “women and beer, or whatever you do up there in Harvard”. In a February 3, 2004, email, Ceglia says: “OK, fine Mark, 50/50, just as long as we start making some money from this thing.”

The most potentially explosive purported emails are the latest ones from April and July in 2004, in which Zuckerberg says Facebook is going so poorly he is thinking of shutting it down, and offers to hand back $2,000 to Ceglia. At the time, Facebook was enjoying explosive growth, Zuckerberg was headed to Silicon Valley to work on it, and he shortly afterwards incorporated it as a formal company.

Ceglia says Zuckerberg plotted to relieve him of his rights over half of the company.

If the emails are proven to be fake, the full force of the criminal law could be used against Ceglia for fraud and extortion, particularly now that his case has been elevated from the New York state courts to a federal level. If they turn out to be true, then the movie about Facebook and Mark Zuckerberg might have to be reshot.

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