Facebook would really like the lawsuit by former wood pellet salesman Paul Ceglia -- who claims he has evidence that he owns 50% of CEO Mark Zuckerberg's stake in the social networking giant -- to go away before its upcoming initial public offering. But unless a federal judge accedes to Facebook's request on Monday to dismiss Ceglia's "extortionate" lawsuit, the case may not be disposed of by IPO time, which could come in May. It's hard not be skeptical of Ceglia and his motives; to put it charitably, the guy has a sketchy past. According to the Buffalo News, "is widely known around (his hometown of) Wellsville (N.Y.) 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." Facebook's motion filed in a federal court in New York details numerous instances of Ceglia allegedly forging evidence to support his contention that he and Zuckerberg, then a student at Harvard, signed a contract in 2003 that gave the former wood pellet salesman half-ownership of Facebook in return for a $2,000 investment. Company attorney Orin Snyder told Judge Richard Arcara in a written request for dismissal that the hard drive on Ceglia's computer showed that the contract and e-mails purportedly between the plaintiff and Zuckerberg were falsified. “Ceglia’s lawsuit was nothing more than an attempted shakedown,” Snyder wrote. You certainly have to wonder why Ceglia, who presumably would be eager to move his case through the court system in order to collect his big 50%, had to be ordered by Judge Arcara last August to hand over electronic documents relevant to his claims. Maybe it has something to do with this (from the Wall Street Journal):
The emails produced by Ceglia were not in native email format, but rather in Microsoft Word, according to Facebook’s motion. (Ceglia attorney Sandford) Dumain said Sunday it was Ceglia’s practice at the time to copy and paste his emails into a Word document, since the email program he had would automatically delete old emails.
I don't recall retaining old emails to be such a challenge back in 2003. And wouldn't the emails be on a server somewhere? Not according to Facebook attorney Snyder, who argues -- fairly convincingly, if you ask me -- that if the emails can't be produced in their original form, they're bogus. "The so-called 'emails' were actually phony text that Ceglia had typed into backdated Microsoft Word documents," the motion states. But Facebook says the real smoking gun that explodes Ceglia's case is a work for hire document. Ceglia claims the document he presented is a contract between him and Zuck for Facebook, but Zuck says he only ever signed a contract to work on a site Ceglia wanted built called StreetFax. From the court filing (thanks, Wired):
This Court ordered Ceglia to make his computers available for inspection, and when Defendants’ experts examined his hard drives, they made a case-ending discovery: they found the authentic StreetFax Contract. ...Exactly as Zuckerberg had attested, the authentic StreetFax Contract concerned only StreetFax — it said nothing about Facebook. The discovery of the StreetFax Contract left no doubt about the nature and extent of Ceglia’s crime. He had created the forged Work for Hire Document by doctoring the text of page 1 of the StreetFax Contract, adding in provisions purportedly giving him ownership of Facebook, then appended the doctored page 1 to the authentic page 2 of the StreetFax Contract (or a close facsimile thereof) — the page that contained Zuckerberg’s signature.
Given how slowly the case has progressed in nearly two years, it's probably unrealistic to expect it to be wrapped up by the time Facebook makes its ticker debut. But even if lasts through the IPO, I wouldn't expect Ceglia's lawsuit to be a big topic during Facebook's road show. It poses no real threat to Facebook or Zuckerberg. And I can't imagine Facebook offering a settlement -- even a paltry one -- just to get the suit behind it. It would set a terrible precedent and pave the way for the return of these guys. And none of us wants to face that.
Now read this: