Facebook Judge Dismisses N.Y. Man’s 50% Ownership Claim

Paul Ceglia’s suit claiming he’s entitled to a multibillion-dollar share of Facebook Inc. (FB) was thrown out by a federal judge in Buffalo, New York, who called the document meant to back the claim “a fabrication.”

U.S. District Judge Richard Arcara today dismissed the case, rejecting the contract Ceglia said he signed with Facebook co-founder Mark Zuckerberg in 2003.

Arcara, in a two-page order, endorsed the report of a magistrate judge who last year said he had found “clear and convincing evidence” that Ceglia, 40, of western New York, had forged the contract, destroyed evidence and created phony e-mails between himself and Zuckerberg, now the chief executive officer of the world’s biggest social network.

Ceglia this month lost a bid to have a judge in Manhattan dismiss criminal fraud charges against him in connection with his Facebook claim. Arcara today also dismissed a suit by Ceglia against U.S. Attorney General Eric Holder, Manhattan U.S. Attorney Preet Bharara and two assistant U.S. attorneys, in which he sought to block the criminal prosecution.

Joseph Alioto, who represents Ceglia in the two suits dismissed today, said he plans to appeal. Alioto said his side has hired “the best experts in the country,” who agree that Ceglia’s contract is genuine.

Photographer: Peter Foley/Bloomberg

Paul Ceglia. Close

Paul Ceglia.

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Photographer: Peter Foley/Bloomberg

Paul Ceglia.

Orin Snyder, a lawyer for Facebook, didn’t immediately return a phone message seeking comment on today’s rulings.

‘Beyond Absurd’

Arcara accepted the 151-page report and recommendations issued almost a year ago by U.S. Magistrate Judge Leslie G. Foschio. 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 sued Facebook and Zuckerberg in 2010, claiming he was due 84 percent of the company. He later reduced the demand to half.

From the start of the case, Facebook, based in Menlo Park, California, argued that the claim was fraudulent. Facebook said 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 for the StreetFax work that made no mention of Facebook, according to the company.

Mail Fraud

U.S. District Judge Andrew L. Carter Jr. in Manhattan on March 7 rejected Ceglia’s argument that he can’t be prosecuted on mail fraud and wire fraud charges for using allegedly phony evidence in the civil litigation.

Facebook rose 1.2 percent to $64.89 today in New York trading. The shares have gained 19 percent this year.

The contract case is Ceglia v. Zuckerberg, 10-cv-00569, U.S. District Court, Western District of New York (Buffalo). The case against Holder is Ceglia v. Holder, 13-cv-00256, 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 federal court in Manhattan at rvanvoris@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Andrew Dunn, Fred Strasser

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