Could 7-year-old emails halve Zuckerberg's Facebook stake?
In amended lawsuit, a N.Y. man says saved emails prove he's entitled to a half-ownership stake in Facebook
Computerworld - Could a few 7-year-old emails slice off as much as half of Mark Zuckerberg's stake in Facebook -- and the fortune he has earned from that stake?
That will be up to a federal court to decide.
Earlier this week, Paul D. Ceglia of Wellsville, N.Y., amended his lawsuit against Facebook, now claiming that he's owed a full 50% of Zuckerberg's stake in the social networking company.
Ceglia initially filed a lawsuit against Zuckerberg last year and then amended it this week by adding what he says is email evidence showing that Zuckerberg gave him 50% ownership in Facebook for an investment in the then-startup company. According to court documents, Ceglia claims he had a written agreement with Zuckerberg to design and build the site that eventually turned into the wildly successful social network.
The initial suit alleged that Ceglia received a 50% stake in the company under the written agreement to work on the site. Ceglia contended that that agreement added 1% to his stake for every extra day of work. That, according to Ceglia's initial suit, added up to an 84% ownership share in Facebook, which now has more than 500 million users.
In an email to Computerworld, Orin Snyder, a litigation partner with Gibson, Dunn & Crutcher LLP who represents both Facebook and and Zuckerberg i the suit, said the case holds no merit.
"This is a fraudulent lawsuit brought by a convicted felon, and we look forward to defending it in court," said Snyder. "From the outset, we've said that this scam artist's claims are ridiculous and this newest complaint is no better."
Facebook also previously went so far as to contend that any contracts Ceglia produced for the courts would be forged documents.
This isn't Ceglia's first dealings with the courts.
Late in 2009 New York Attorney General Andrew Cuomo obtained a temporary restraining order against a western New York wood-pellet fuel company, Allegany Pellets LLC. Ceglia and his wife, Iasia, own the company, alleging that it took more than $200,000 from consumers and then failed to deliver products or refunds.
In the Facebook-related emails, which are quoted in the amended court document, which was filed on Monday in U.S. District Court in the Western District Of New York, Zuckerberg allegedly refers to Ceglia's investment in the startup several times.
In an email Ceglia says was sent on Jan. 1, 2004, Zuckerberg is said to have written: "The extra $1000 really helped get us further ahead and if there is any way you can send some additional funding I believe we will be online in a few weeks."
And in an alleged email dated Feb. 2, 2004, Zuckerberg is said to have written about his ownership agreement with Ceglia.
"Paul, I have a rather serious issue to discuss with you, according to our contract I owe you over 30% more of the business in late penalties which would give you over 80% of the company," the alleged email says. "Mostly, though, I just won't even bother putting the site live if you are going to insist on such a large percentage. I'd like to suggest that you drop the penalty completely and that we officially return to 50/50 ownership."
If the emails that Ceglia cites are legitimate, they could cause a lot of legal and financial woes for Zuckerberg, who just this week fended off a separate case challenging his ownership stake in what has become the world's largest social networking site.
"This [the amended Ceglia lawsuit] could be serious trouble for Facebook," said Dan Olds, an analyst at Gabriel Consulting Group. "The attorneys representing Ceglia aren't small-town lawyers. They're a big-time firm that has a lot of experience with tech companies. I would assume ... they've done their due diligence and are confident that sufficient evidence exists to give them a reasonable chance to win."
Olds added that if Ceglia was to win this court case, it not only could give him a huge chunk of Zuckerberg's immense fortune -- estimated at $13.5 billion by Forbes Magazine -- but could also give Ceglia significant control over how the company is run.
However, both Olds and Yankee Group analyst Zeus Kerravala said it's likely that Zuckerberg would pay big bucks to make sure that never happens.
"If Ceglia's claims are true, he owns half of the company," noted Olds. "This would entitle him to a say in decisions and the same level of control as Zuckerberg."
Kerravala said he suspects that Zuckerberg would pay out a big settlement to retain control of his company.
"If [Ceglia] is looking for money, he will likely take a settlement," Kerravala added. "So the impact is likely to be bigger to Zuckerberg than to Facebook."
Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, or subscribe to Sharon's RSS feed . Her email address is email@example.com.
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