April 13, 2011 -- Could seven-year-old emails cut Facebook founder Mark Zuckerberg's billions in half? Paul Ceglia, the New York man who last year claimed he owns a large stake in Facebook, thinks so.
On the same day that a federal appeals court sided with Zuckerberg in a separate Facebook ownership suit brought by Harvard classmates Tyler and Cameron Winklevoss, Ceglia filed an amended complaint in his case with new evidence he says proves that 50 percent of Zuckerberg's interest in Facebook belongs to him.
Filed Monday with a U.S. district court in New York, the updated complaint (submitted by a new legal team) includes a series of emails it says Zuckerberg and Ceglia exchanged in 2003 and 2004.
According to the complaint, Ceglia claims the messages show that Zuckerberg agreed to give Ceglia a 50 percent share in the website that became Facebook, but later "embarked on a secret scheme" to cut Ceglia out of the company.
Included in the complaint was a 2004 e-mail allegedly sent by Ceglia to Zuckerberg accusing Zuckerberg of stealing his programming code to create Facebook: "You've got some nerve talking about me owing you with the CRIMINAL stunts you've pulled (sic) Reasonable people go to court to resolve their differences they don't go stealing things dude, you stole code, not once, not twice but THREE TIMES! Do you have any idea the damage you've done??? Grow up, take a f***ing ethics class, choke yourself with that silver spoon of yours," Ceglia allegedly wrote.
Facebook: 'Scam Artist's Claims Are Ridiculous'
Facebook has acknowledged that Zuckerberg did do some computer programming for Ceglia, but has called Ceglia's ownership claims "absurd" and "frivolous."
"This is a fraudulent lawsuit brought by a convicted felon, and we look forward to defending it in court. From the outset, we've said that this scam artist's claims are ridiculous and this newest complaint is no better," Orin Snyder, an attorney representing Facebook from the firm of Gibson, Dunn & Crutcher LLP, said in a statement about the amended complaint.
Ceglia, who filed his first complaint last July, has acknowledged that his record with the law isn't exactly spotless. In 1997, he pleaded guilty to felony possession of so-called magic mushrooms. He's also said that it was a separate legal skirmish that led to his campaign against Facebook in the first place.
In an interview with Bloomberg News last summer, he said he wouldn't have found the old contract supporting his Facebook ownership claim had he not been sued in civil court by New York Attorney General Andrew Cuomo over his wood-pellet fuel company.
In 2009, Cuomo sued Ceglia, his wife and Allegany Pellets, the couple's Wellsville, N.Y., wood-pellet fuel company, for taking more than $200,000 from customers but failing to deliver any products or refunds. The Ceglias and Allegany Pellets settled the case in Oct. 2010, after paying more than $125,000 in restitution and fees.
Facebook Lawsuit: Paul Ceglia Claims Half Mark Zuckerberg's Firm Is His
Now that Facebook is a multi-billion-dollar enterprise (a recent valuation puts the figure at $65 billion), it's not surprising that other people claiming ownership are coming out of the woodwork.
But Ceglia's lawyers said they spent weeks conducting due diligence on his case, including forensic analyses of the documentation supporting his ownership claim.
"We did a lot of internal analysis of the legal claims," said Robert Brownlie, Ceglia's attorney and a partner at DLA Piper, adding that his firm conducted analysis of the contract and their co-counsel, Paul Argentieri, set up the analysis of the emails. "We examined the documents, both in hard copy and electronic form."
In addition to the electronic analysis, which provides information about a document's creation, print and alteration history, he said his team spent considerable time cross-examining Ceglia.
When asked why Ceglia waited until 2010 to file his first complaint when the contract was allegedly signed in 2003, he said, "We can't lose sight of the fact that Facebook exploded onto the scene just a few years ago."
Zuckerberg's final correspondence with Ceglia was a "brush-off" in which Zuckerberg claimed that "The Face Book" project wasn't working out, Brownlie said.
Ceglia's decision to file the suit in 2010, after its global success, is "well within any applicable statute of limitations," he said.
As for the omitting the emails from Ceglia's first complaint, Brownlie said he didn't know if it was Ceglia's decision or his previous lawyer's decision.
While he said he didn't have enough information at this stage to put a dollar figure on it, Brownlie said Ceglia claims he is owed half of whatever equity position Zuckerberg received or was promised when Facebook incorporated in 2004.
"He wants to be treated just like any other founder," he said.
The emails included in the complaint, Ceglia's lawyers claim, begin in June 2003, when Zuckerberg was working on Facebook, and a project for Ceglia called StreetFax.com, from his Harvard dorm room. They end in July 2004, a month after Facebook says its base of operations moved to Palo Office, Calif.
Take a look below at a few more excerpts from the alleged emails detailed in Ceglia's complaint.
Sept. 2, 2003 -- Zuckerberg apparently sends an email to Ceglia suggesting that "The Face Book" charge alumni to use the service. (Facebook has never charged users and in a 2010 interview with ABC News' Diane Sawyer, Zuckerberg said that a free service is part of its commitment to users.)
"I have been away for a few days without internet, during that time I revised the business plan for the Harvard site. I would like to talk to you on the phone about it in detail. As you mentioned last week, the issue we must resolve is how to produce a revenue stream from the users. My conclusion this past week is to charge Alumni $29.95 a month. With this in mind, considering just 300 people, and the projection of a $9000 monthly revenue, we could, as you suggested, rapidly expand to other colleges."
Sept. 2, 2003 -- Ceglia purportedly responds, saying he is opposed to charging users.
"I like your thinking about funding expansion, I'm not sure a monthly fee is the way to go though, we are having a hard time getting adjusters to pay it and it's their business. I'd be concerned that we wouldnt (sic) get enough people on there to keep anyone interested. Maybe we could make it free until it was popular and then start charging?"
Nov. 22, 2003 -- In an e-mail with the subject line "Urgent! Let's Talk," Zuckerberg allegedly sends an email that seems to refer to the Winklevoss twins.
"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 would 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."
Jan. 6, 2004 -- According to the alleged agreement, "The Face Book" was supposed to launch Jan. 1, 2004. In emails allegedly sent to Zuckerberg about the site's delay, Ceglia threatens to contact Zuckerberg's parents.
"You know perfectly well that you can't just take a persons (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 perhaps your parents in Dobbs Ferry and let them know whats (sic) been going on.
Jan. 6, 2004 -- Zuckerberg's purported response:
"Threats to call my parents are uncalled for and unprofessional and you would be seriously violating our trust by doing so, I have done what I can with the small amount of money you have invested and I will have something live for you to view soon. Again I want to state that under no circumstances do you have my permission to contact my parents as they have nothing to do with my business and just because I am young doesnt (sic) mean I'm afraid of my parents (sic) response. Please do not contact them about this issue, they would probably just laugh you off anyway."
Emails Show Business Relationship Between Zuckerberg and Ceglia, Complaint Says
Feb. 3, 2004 -- According to the contract Ceglia claims Zuckerberg signed, he initially gave Zuckerberg $1,000 for 50 percent of the company, but was entitled to one percent more for each day the site launched after its Jan. 1, 2004 target date. In Ceglia's initial suit, he said he was owed 84 percent of the company. But in the new emails, Ceglia appears to waive this penalty and return to the 50/50 partnership (which is reflected in the amended suit).
"OK fine Mark 50/50 just as long as we start making some money from this thing."
Feb. 4, 2004 -- After Zuckerberg tells him the site is live, Ceglia allegedly suggests that he remove the "the" from the title of the site, making it simply "facebook.com." (According to Facebook's official timeline, the company didn't change its name from "thefacebook.com" to "Facebook" until August 2005. In the movie "The Social Network," this suggestion came from Sean Parker, the founding president of Facebook and co-founder of Napster.)
"Congrats Mark! The site looks great, Just wondering if we might think of another title for it without the the, but plenty of time for that, I'll try and think of some names, I looked for weeks to finally find streetfax.com and that is how I named it, backwards from the availability, (sic) I'm sure you checked to see if just facebook.com was available?"
April 6, 2004 -- Zuckerberg apparently claims students are not interested in the site. (According to Facebook's official timeline, the social network spread to Stanford, Columbia and Yale in March 2004.)
"Paul, I have become too busy to deal with the site and no one wants to pay for it, so I am thinking of just taking the server down. My parents have a fund that I can tap into for my college expenses and I would just like to give you your two thousand dollars back and call it even on the rest of the money you owe me for the extra work. At this point I won't even really be able to work on the facebook until Summer."
April 6, 2004 -- Ceglia allegedly responds to Zuckerberg:
"You've got some nerve talking about me owing you with the CRIMINAL stunts you've pulled (sic) Reasonable people go to court to resolve their differences they don't go stealing things dude, you stole code, not once, not twice but THREE TIMES! Do you have any idea the damage you've done??? Grow up, take a f***ing ethics class, choke yourself with that silver spoon of yours." (According to the complaint, "criminal" refers to what Ceglia said were Zuckerberg's attempts to sabotage the StreetFax.com website.)