Ceglia’s Facebook Claim Should Be Thrown Out, Judge Says

A judge said Paul Ceglia’s claim that he owns a multibillion-dollar share of Facebook Inc. (FB) should be thrown out of court because the contract on which he bases his lawsuit is fraudulent.

U.S. Magistrate Judge Leslie G. Foschio in Buffalo, New York, yesterday issued a 151-page report finding “clear and convincing evidence” that Ceglia, 39, forged the contract, destroyed evidence and created phony e-mails between himself and Mark Zuckerberg, Facebook’s chief executive officer and one of its founders.

Foschio rejected Ceglia’s arguments that a jury should consider the case and characterized Ceglia’s claim that Zuckerberg hacked into his computer to plant evidence as “beyond absurd.”

Ceglia claims a contract he and Zuckerberg signed in 2003 gave them equal shares in Facebook, which now operates the world’s biggest online social network. Facebook claims Zuckerberg, who was a student at Harvard University at the time, was hired to do some computer coding for Ceglia’s Internet business, StreetFax. The two signed a contract that made no mention of Facebook, according to the company.

Ceglia has 14 days to file objections to Foschio’s conclusions. U.S. District Judge Richard Arcara, who has routinely approved rulings by Foschio in the case, will then decide whether to follow his recommendation to dismiss the suit.

Mail Fraud

Ceglia was arrested in October and charged criminally in New York with one count each of mail fraud and wire fraud for allegedly fabricating evidence in the case. Each of the charges carries a maximum of 20 years in prison. Ceglia, who pleaded not guilty to the criminal charges, is free on bail and subject to electronic monitoring at his home in Wellsville, New York.

Ceglia’s lawyers in the contract case, Paul Argentieri and Dean Boland, didn’t respond to voice-mail messages seeking comment.

“Today’s federal court decision confirms what we have said from day one: this lawsuit is an inexcusable fraud based on forged documents,” Colin Stretch, Facebook’s deputy general counsel, said in a statement yesterday. “We are pleased the court agrees.”

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

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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