* Judge says Ceglia contract appears to have been faked
* Ceglia sought one-half stake in Facebook
By Jonathan Stempel and Nate Raymond
March 26 A federal judge on Tuesday recommended
the dismissal of a lawsuit against Facebook Inc in which
Paul Ceglia, an upstate New York wood pellet salesman, claimed a
huge ownership stake in the social media company.
U.S. Magistrate Judge Leslie Foschio said there is "clear
and convincing evidence" that an alleged 2003 contract with Mark
Zuckerberg, now Facebook's chief executive, that Ceglia claimed
entitled him to a one-half interest in the company is a
"recently created fabrication."
In October, federal prosecutors in Manhattan announced
criminal mail and wire fraud charges against Ceglia, whom U.S.
Attorney Preet Bharara accused of seeking "a quick pay day based
on a blatant forgery."
Ceglia, who has lived in Wellsville, New York, pleaded not
guilty. Each criminal charge carries a maximum sentence of 20
years in prison.
Paul Argentieri, a lawyer for Ceglia, was not immediately
available on Tuesday for comment.
In his 2010 civil lawsuit, Ceglia claimed that a 2003
contract he signed with Zuckerberg, then a Harvard University
freshman, entitled him to the Facebook stake.
Though Zuckerberg had done programming work for Ceglia's
company StreetFax.com, Facebook maintained that a separate
agreement involving that entity, which did not entitle Ceglia to
a big Facebook stake, was the real contract between the two.
"PLETHORA" OF EVIDENCE
In a 155-page recommendation, Foschio said Ceglia's
arguments largely consisted of "self-defeating inconsistencies"
that established the "fraudulent nature" of his claims.
"Plaintiff has utterly failed to rebut the plethora of
evidence establishing that it is highly probable and reasonable
the StreetFax document was the operative contract," the Buffalo,
New York-based judge wrote.
Foschio also said it is "highly probable and reasonably
certain" that the contract Ceglia said was real was "fabricated
for the express purpose of filing the instant action."
The case now goes to U.S. District Judge Richard Arcara, who
will decide whether to approve Foschio's recommendation.
Colin Stretch, deputy general counsel of Facebook, said in a
statement that Foschio's recommendation "confirms what we have
said from day one: this lawsuit is an inexcusable fraud based on
Facebook's market value is now about $60 billion.
The accusations against Facebook and Zuckerberg had been an
unusual distraction during the Menlo Park, California-based
company's march toward its May 2012 initial public offering.
Facebook's origin was also the focus of separate litigation
by Zuckerberg's twin Harvard classmates Cameron and Tyler
Winklevoss, chronicled in the 2010 movie "The Social Network."
Ceglia claimed that Zuckerberg shared his plans for a social
networking website while working at StreetFax, and contracted to
give him a stake in exchange for a $1,000 investment.
To build his case, Ceglia submitted what he said were emails
from Zuckerberg that proved the pair discussed the project that
eventually became Facebook.
But Facebook said Zuckerberg did not even conceive of the
idea for a social media company until December 2003.
Its lawyers said Ceglia had produced fraudulent documents,
citing work by forensic experts who concluded that he had typed
text into a Microsoft Word document, and declared it the text of
emails with Zuckerberg in 2004.
Ceglia went through a string of lawyers from prominent
firms, including DLA Piper and Milberg, who worked with him on
various parts of the civil case but later withdrew.
Earlier this month, Ceglia filed a separate civil lawsuit
against Bharara and U.S. Attorney General Eric Holder to halt
the criminal case.
The civil case is Ceglia v. Zuckerberg et al, U.S. District
Court, Western District of New York, No. 10-00569. The lawsuit
against Bharara and Holder is Ceglia v. Holder et al in the same
court, No. 13-00256. The criminal case is U.S. v. Ceglia, U.S.
District Court, Southern District of New York, No 12-cr-00876.