Facebook Says Contract Shows Claims are Phony

Facebook Inc. said its discovery of an “authentic contract” between its chief executive officer, Mark Zuckerberg, and Paul Ceglia shows the western New York man’s claims to part-ownership of the company are phony.

The document, which doesn’t mention Facebook, was found on Ceglia’s computer, embedded in electronic data from 2004, according to papers filed by Facebook yesterday in federal court in Buffalo, New York. It refers only to StreetFax, a company Ceglia was trying to start at the time.

Facebook attached a blurry image of the contract to its court papers. The document, dated April 28, 2003, appears to include signatures by Zuckerberg and Ceglia and a handwritten addition to the contract’s terms.

“The court-ordered forensic testing has uncovered the authentic contract between Mark Zuckerberg and StreetFax that Ceglia attempted to conceal,” Facebook said in its filing. “This smoking-gun evidence confirms what defendants have said all along: the purported contract attached to the complaint is an outright fabrication.”

If the contract included in yesterday’s Facebook filing proves to be genuine, it would doom Ceglia’s claim to part- ownership of the world’s biggest social networking site. Facebook is valued at $69.2 billion, according to Sharespost.com, an online marketplace for shares of privately held companies.

Ownership Claim

Ceglia claims, in his suit filed last year, that Zuckerberg agreed to give him a share of Facebook in exchange for $1,000 in startup money.

“This ‘image’ they claim is the original is forged and we will prove it has no authenticating properties whatsoever,” Ceglia said in an e-mail message sent from Ireland, where he is currently living.

U.S. Magistrate Judge Leslie Foschio last month ordered Ceglia to let Facebook run forensic tests on his computers, hard drives and electronic storage media, as well as on the contract and the e-mails he says support his claim.

In court papers Aug. 5, Palo Alto, California-based Facebook said its inspection, by the computer forensics firm Stroz Friedberg LLC, had turned up “smoking gun” evidence of fraud.

Facebook said Stroz Friedberg also found evidence that Ceglia is concealing six removable storage devices containing documents with names that include “Zuckerberg Contract page1.tif” and folder named “Facebook Files.”

Facebook Allegation

“It is very likely that Ceglia used these removable devices to manipulate and store documents, including the purported ‘Facebook contract,’ in the belief that this evidence would not be discovered -- or that the devices could easily be discarded if necessary, as Ceglia has now apparently done,” Facebook said in the court filing.

Foschio has scheduled a hearing in the case Aug. 17.

The case is Ceglia v. Zuckerberg, 1:10-cv-00569, U.S. District Court, Western District of New York (Buffalo).

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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