Facebook CEO Hired Man Suing For Ownership - InformationWeek

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7/21/2010
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Facebook CEO Hired Man Suing For Ownership

Mark Zuckerberg says he had a contract with Paul Ceglia seven years ago, but the web designer's claim of 84% ownership in Facebook is incorrect.

In federal court yesterday, the lawyer for Mark Zuckerberg admitted the Facebook founder hired New York wood salesman and web designer Paul Ceglia seven years ago, but questioned the authenticity of the documentation used to support Ceglia's lawsuit.

"Mr. Zuckerberg did have a contract with Mr. Ceglia," Facebook lawyer Lisa Simpson told the court yesterday, according to Bloomberg reports. "Whether [Zuckerberg] signed this piece of paper, we're unsure at this moment. What the contract asserts is there is a relationship about Facebook and there isn't one."

Ceglia filed suit against Zuckerberg, claiming an 84% stake in Facebook. Zuckerberg hired Ceglia to develop and maintain the "StreetFax Database," according to papers Ceglia filed with the court.

In addition, court papers show Zuckerberg hired Ceglia to continue working on a project "designed to offer the students of Harvard university access to a wesite [sic] similar to a live functioning yearbook with the working title of 'The Face Book.'"

Under the contract, dated April 2003 and apparently signed by Zuckerberg and Ceglia, the designer received $1,000 and a 50% stake in the site which eventually became Thefacebook.com, according to the suit. The lawsuit also says Ceglia is entitled to "an additional 1% interest in the business for every day after Jan. 1, 2004, until it was completed."

On July 9, an Allegany, N.Y., court judge continued a temporary restraining order that prevented Facebook from transferring assets while the case continues. On the request of Facebook's attorneys, the case was transferred to federal court. Yesterday, both parties agreed to let the injunction lapse, according to published reports.

Facebook is expected to try to have the case thrown out.

Claims over successful high-tech startups are hardly new. And Facebook itself has already been the target of at least one lawsuit. In 2007, the cofounders of ConnectU -- Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra -- took on their former Harvard classmate, claiming Zuckerberg took Facebook's software code and business plan from them. The parties reached a confidential agreement in 2008, although after a subsequent series of legal actions based on questions regarding the value of Facebook, a new agreement was reached, granting ConnectU $65 million in Facebook stock and cash.

Ceglia himself has also been involved with the court system. Last year, New York attorney general Andrew Cuomo obtained a temporary restraining order against Ceglia and his wife Iasia, and accused them of defrauding customers of Allegany Pellets, their wood-pellet fuel company, according to the attorney general's office. The company took more than $200,000 from customers but failed to deliver products or refunds, the state said in a statement. That case is still ongoing.

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