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Published: Tuesday, 7/22/2014

Zuckerberg to Testify Against Man Who Sought Facebook Stake

©2014 BLOOMBERG NEWS

Facebook Inc. founder Mark Zuckerberg will testify at the criminal trial of a western New York man who allegedly tried to scam a share of the world’s biggest social network, according to a prosecutor.

Paul Ceglia is accused by the U.S. of faking evidence to support claims he had a contract in which Zuckerberg agreed to give him a share of the company in exchange for $1,000 of startup money. Facebook is now valued at $178 billion.

Ceglia, who has pleaded not guilty, is scheduled to go on trial in November in Manhattan federal court on charges he fabricated the contract, destroyed evidence and created phony e-mails. Ceglia sued Facebook and Zuckerberg in 2010, claiming he was entitled to 84 percent of the company. He later reduced the demand to half of the company. That case has been dismissed.

Ceglia last month asked U.S. District Judge Andrew Carter, who’s presiding over the criminal case, to let him subpoena Zuckerberg, Facebook and Harvard University for e-mails and other documents from 2003 and 2004, including Zuckerberg’s Harvard records while he was an undergraduate.

“The requests as drafted are nothing more than a fishing expedition which could reveal information that could be potentially embarrassing to Mr. Zuckerberg and others,” Assistant U.S. Attorney Christopher Frey said today at a hearing in which he urged the judge to reject Ceglia’s requests.

‘Unduly Harass’

“It’s the government’s view that the request has the potential to unduly harass a person the government knows it will be calling and that is Mark Zuckerberg,” Frey said.

Alexander Southwell, a lawyer for Facebook and Zuckerberg, argued that Ceglia’s request for documents should be rejected, saying the defendant had already obtained many of the documents sought during his civil suit against Zuckerberg and Facebook.

“This request only seems to harass our clients who are the victim here,” Southwell said.

Carter today denied Ceglia’s demands for documents, including Zuckerberg’s Harvard disciplinary records in connection with unauthorized computer use or student privacy violations. The judge also rejected Ceglia’s bid for copies of all cell phones, e-mail accounts, computers and other media owned or used by Zuckerberg and Facebook in 2003 and 2004.

Ceglia is accused of doctoring a legitimate 2003 contract with Zuckerberg. In that contract, Zuckerberg agreed to perform coding work for Ceglia’s website, StreetFax.com, a company he was trying to start at the time.

Facebook Stake

In his suit, Ceglia claimed the contract included a provision “in which Zuckerberg agreed to provide Ceglia with at least a 50 percent interest in Facebook,” according to the indictment.

Facebook, based in Menlo Park, California, said from the start that Ceglia’s claim was fraudulent.

As part of the lawsuit, Harvard provided more than 1,460 pages of e-mails between Ceglia and his StreetFax.com employees and Zuckerberg, with whom he was working during this time period, prosecutors said.

David Patton, a lawyer for Ceglia, argued that not getting some of the documents his client sought was “fundamentally unfair.”

If convicted of mail or wire fraud, Ceglia faces as long as 20 years in prison. He has also appealed a federal judge’s dismissal of his lawsuit against Zuckerberg.

The criminal case is U.S. v. Ceglia, 12-cr-00876, U.S. District Court, Southern District of New York (Manhattan). The contract case is Ceglia v. Zuckerberg, 10-cv-00569, U.S. District Court, Western District of New York (Buffalo).



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