New drama unfolded last week in U.S. District Court in Buffalo, NY, in the case involving Paul Ceglia who claims he's entitled to a huge stake in Facebook.  In Case No. 10-00569, Ceglia v. Zuckerberg et al, U.S. District Court, Western District of New York, Mark Zuckerberg, Facebook founder, declared that a contract and email in Mr. Ceglia's possession are forgeries.  In his court filing, Mr. Zuckerberg declared under oath that he neither signed the alleged contract with Paul Ceglia, nor wrote or received any related emails.  He asked a federal judge to order Ceglia to immediately turn over the alleged original contract and emails, and for permission to inspect Ceglia's computers. 

"Zuckerberg and Ceglia never discussed Facebook and they never signed a contract concerning Facebook."  "The contract is a cut-and-paste job, the emails are complete fabrications, and this entire lawsuit is a fraud."

Thursday's filing escalates the stakes as Ceglia, a wood pellet salesman from Wellsville, NY, tries to show he contracted in 2003 for 50% of Zuckerberg's interest in what became Facebook, which is privately held.  Forbes magazine in March estimated Zuckerberg's net worth at $13.5 billion, while analysts place the value of Facebook as high as $70 billion, if and when it goes public in 2012.

Zuckerberg's Recollection.   In Thursday's filing, Zuckerberg acknowledged having signed an agreement with Ceglia, but that it concerned work Zuckerberg did for StreetFax.com, a website that posted photographs of traffic intersections for use in the insurance industry.  Zuckerberg hopes to use forensic testing on Ceglia's documentation. 

Ceglia's Recollection.  Ceglia sued last July, saying he made a contract with Zuckerberg for an 84% Facebook stake.  After he changed law firms, Ceglia filed a complaint that discussed the alleged contract and emails from 2003 and 2004 when Zuckerberg was a student at Harvard.  In a 2/4/04 email discussed in the complaint, Zuckerberg was said to have resisted a clause that could have given Ceglia a stake greater than 80% and instead suggested "that we officially return to 50/50 ownership."  Zuckerberg said forensic examiners reviewed his Harvard email account and found none of the alleged emails.  He also called Ceglia allegedly forgetting about the contract for 7 years "incredible on its face."

Reflecting on Ceglia's Criminal Record.   In its motion, Facebook said Ceglia “has spent the past seven years as a hustler engaged in various land swindles and wood-pellet scams.”  Facebook submitted a declaration from Donald Henne, a managing director at Kroll Associates Inc., which conducted a background investigation of Ceglia after he filed his suit.  Henne, a former NYC police lieutenant commander hired as an expert by Facebook, detailed a number of criminal arrests and fraud claims that have been made against Ceglia. 

Henne claimed Ceglia conducted a “wide-ranging land scam” from 2005 to 2008, selling worthless properties in Florida and New York on EBAY’s auction website.  Court records reviewed by Bloomberg News show that Ceglia was arrested in Texas in 1997 and pleaded guilty to possession of hallucinogenic mushrooms.  He was fined $15,000 and permitted to return to his home in New York.  In 2005, Ceglia was arrested for trespassing on land in Polk County, Florida.  He was fined $265.

Ceglia also was arrested at his home in Wellsville, NY, in 2009 after more than two dozen customers of his startup wood-pellet business claimed they paid for pellets to heat their homes and didn’t receive any.  Ceglia received an adjournment in contemplation of dismissal and the charges were later dropped.  New York’s former attorney general, Andrew Cuomo later shut down the wood-pellet business in December 2009, and the suit was resolved with Ceglia agreeing to pay $106,000 in restitution and a $25,000 fine.

Meanwhile, let's not forget the case brought by brothers Cameron and Tyler Winklevoss.  They continue to appeal their $65 million settlement with Facebook, hoping the U.S. Supreme Court will hear their case.   [CNBC.com, Bloomberg, 6/2/11]