Global General

Facebook Zuckerberg say ownership suit a 'fraud'

(Agencies)
Updated: 2011-05-27 13:11

Facebook founder and Chief Executive Officer Mark Zuckerberg launches Facebook's "open compute program" at Facebook's headquarters in Palo Alto, California in this April 7, 2011. Calling the case an outrageous fraud,Zuckerberg urged a federal court to dismiss a lawsuit by a New York man claiming he owns a huge stake in the social networking website. In a filing May 26, 2011 with the US District Court in Buffalo, New York, Facebook Inc. and Zuckerberg said the lawsuit by Paul Ceglia is based on fabricated evidence." [Photo/Agencies]

CHICAGO -- Calling the case a "brazen and outrageous fraud," Facebook founder Mark Zuckerberg urged a federal court to dismiss a lawsuit by a New York man claiming he owns a huge stake in the social networking website.

In a filing Thursday with the US District Court in Buffalo, New York, Facebook Inc and Zuckerberg said the lawsuit by Paul Ceglia is based on a "doctored contract and fabricated evidence." They also called the plaintiff "an inveterate scam artist whose misconduct extends across decades and borders."

Ceglia, a wood pellet salesman from Wellsville, New York, has contended that he contracted in 2003 for 50 percent of Zuckerberg's interest in what became Facebook.

Facebook is privately held, but analysts have said it could be worth $70 billion should it go public, perhaps in 2012. Forbes magazine in March estimated Zuckerberg's net worth at $13.5 billion.

Christopher "Kip" Hall, a lawyer representing Ceglia, declined immediate comment.

Ceglia originally sued last July, saying he had contracted with Zuckerberg for an 84 percent Facebook stake. But after a setback over a jurisdictional issue, Ceglia dropped his lawyer and retained a large global law firm, DLA Piper.

The amended complaint outlined what Ceglia called emails between himself and Zuckerberg to support his case. In one, Zuckerberg appeared to resist a clause that could have given Ceglia a stake greater than 80 percent.

"I'd like to suggest that you drop the penalty completely and that we officially return to 50/50 ownership," Zuckerberg was said to have written on February 2, 2004.

In their response, Facebook and Zuckerberg said they "specifically deny any liability" to Ceglia, and called the lawsuit "a brazen and outrageous fraud on the court."

They also questioned why Ceglia waited seven years to sue, saying he had long been "utterly silent" as Facebook "grew into one of the world's best-known companies."

According to published reports, Ceglia pleaded guilty in 1997 to possession of hallucinogenic mushrooms in Texas. In 2009, he was accused of fraud and had his business shut down by Andrew Cuomo, then New York's attorney general.

In a separate case, Cameron and Tyler Winklevoss are appealing to the US Supreme Court a court ruling that upheld their $65 million cash-and-stock settlement with Facebook.

The twin brothers had accused Facebook and Zuckerberg of stealing their idea for the website. They complained that the 2008 accord was fraudulent because Facebook hid information from them, and that they deserved more Facebook stock.

The case is Ceglia v. Zuckerberg et al, US District Court, Western District of New York, No. 10-00569.