By Bob Van Voris - Apr 11, 2012 11:00 AM GMT+0700
Facebook Inc. (FB) cofounder Mark Zuckerberg threatened in 2004 to disable part of the website he was working on for Paul Ceglia, the New York man now suing him for part-ownership of the multibillion-dollar company, according to copies of e-mails filed by Facebook in federal court.
Zuckerberg worked for Ceglia in 2003 and 2004, while he was attending Harvard University and building the website that would become the world’s biggest social network. In an e-mail to Ceglia, Zuckerberg demanded payment for work on Ceglia's website, StreetFax.com, warning that if he didn’t get the money that was coming to him, he would take down part of the site.
Mark Zuckerberg, chief executive officer of Facebook Inc., listens to a question at the Web 2.0 Summit in San Francisco. Photographer: Tony Avelar/Bloomberg
Facebook Inc. cofounder Mark Zuckerberg threatened in 2004 to disable part of the website he was working on for Paul Ceglia, the New York man now suing him for part-ownership of the multibillion-dollar company, according to copies of e-mails filed by Facebook in federal court. Photographer: Bob Van Voris/Bloomberg
“I must receive $5,000 by next Saturday at midnight, or the scroll search functionality will be removed from the site,” Zuckerberg wrote in a message to Ceglia on Feb. 21, 2004, about two weeks after he put “Thefacebook.com” online. Zuckerberg told Ceglia he owed him $10,500 of the $19,500 he’d been promised, according to the e-mails, filed by Facebook as part of the lawsuit in Buffalo, New York.
Facebook last month asked the judge to throw out the lawsuit. The incident supports Zuckerberg’s defense that the contract on which Ceglia bases his claim to half of the CEO’s Facebook holdings is a fake, defense attorney Orin Snyder of Gibson Dunn & Crutcher LLP said in an e-mail April 9. A different contract Facebook claims is the actual agreement between the men shows Ceglia hired Zuckerberg for the StreetFax work alone, the lawyer said. Zuckerberg never acted on the threat to disable Ceglia’s website, according to Snyder.
‘Cyber-Briber’
Zuckerberg’s 2004 e-mail to Ceglia prompted a lawyer connected to StreetFax at the time to refer to him as the “brat programmer” and “cyber-briber,” according to messages included in Facebook’s court papers. The company said it found the e-mails in Ceglia’s electronic files.
The contract Facebook claims is genuine would have permitted Zuckerberg “to offline the site Streetfax.com and remove his program” for non-payment. The contract Ceglia claims Zuckerberg signed gives him no such right. In its court papers seeking dismissal of the suit, Facebook said Ceglia never paid Zuckerberg the remaining $10,500. The two last communicated in May 2004, according to Facebook.
Facebook has disclosed in court papers 15 of about 300 e-mails the company said it recovered from Zuckerberg’s Harvard e-mail account, consisting of communications with Ceglia and others working for StreetFax at the time.
Frequently Demands Money
In the e-mails, Zuckerberg frequently demands money he claims Ceglia owes him, while Ceglia asks for more time to pay. The 15 messages span almost nine months, from Aug. 15, 2003, to May 7, 2004, shortly before Zuckerberg left Harvard for Palo Alto, California, where he ran Facebook until moving it last year.
Ceglia’s lawyer, Dean Boland, said his client’s computer experts aren’t able to determine whether the Harvard e-mails are genuine or complete because they haven’t had access to the Harvard e-mail server. Facebook, now based in Menlo Park, California, has also had exclusive access to computers Zuckerberg used in 2003 and 2004, and evidence from suits filed against the company by Facebook co-founder Eduardo Saverin, and by Tyler and Cameron Winklevoss and Divya Nirendra, Boland said.
The plaintiffs in the two cases, former Harvard students who claimed a role in founding Facebook, eventually settled.
Ceglia, 38, sued Zuckerberg, 27, and Facebook in 2010, claiming he signed a contract with Zuckerberg in April 2003 that made them partners in exchange for an investment in the project. Zuckerberg said in court papers that the contract he signed related only to his StreetFax work and had nothing to do with Facebook.
Traffic Intersections
StreetFax, which Ceglia started to sell pictures of traffic intersections to insurance companies, is no longer in business. Facebook, which in February filed for an initial public offering to raise $5 billion, is worth an estimated $95.8 billion, according to SharesPost.com, which tracks nonpublic companies.
Facebook said in its request to dismiss Ceglia’s suit that the complaint is a fraud on the court. Facebook claimed Ceglia hopes to use the litigation to “leverage his fraud by disrupting Facebook’s highly publicized initial public offering.”
After Zuckerberg sent the 2004 message threatening to disable the StreetFax site, Ceglia contacted Jim Kole, a lawyer Facebook described in court papers as “an initial member of StreetFax,” for advice on what to do, according to a separate e-mail exchange made public by Facebook in the case.
Written Assurance
In messages dated March 4 and 5, Kole called Zuckerberg “the brat programmer,” suggesting that Ceglia offer to pay him some money, to be held in escrow until Zuckerberg “provides his written assurance that he will not access or disable any portion of the site.” Kole, formerly with Sidley Austin LLP, didn’t return a call and e-mail seeking comment on the case.
“Mabe I am a littel to emotionally charged about this but I think that after him illegally removing functionality from the site that I dont want to pay this kid another dime,” Ceglia wrote in an e-mailed response filed in court papers.
“I think I’ll just make a veiled reference to payments that could be made if he settles the matter as a businessman rather than a cyber-briber,” Kole answered in a handwritten note, according to the Facebook court filings. “PLEASE, PLEASE fax me the contract.”
Facebook’s forensic computer experts, from the firm Stroz Friedberg LLC, said they discovered an image of the Ceglia e-mails, with the handwritten note, in one of Ceglia's e-mail accounts, which they were permitted to access by order of the judge. The e-mail exchange was included in a report by Stroz Friedberg filed by Facebook with the court.
‘Smoking Gun’
Facebook said Ceglia responded to Kole’s fax request by sending him a copy of what the company says is the real StreetFax contract, with no mention of a stake in the social network. The company claims those e-mails and the attached contract provide “smoking gun” proof in its defense.
In a March 8, 2004, e-mail, about two weeks after the threat to disable StreetFax, Zuckerberg told Ceglia “The need for my immediate payment has been resolved for now, and so I guess it is to my advantage to allow you to continue to use the site, as long as you can make monthly payments.”
“I really appreciate you not doing anything rash,” Ceglia answered, according to the e-mails.
Later that month, Ceglia proposed giving Zuckerberg 1 percent of StreetFax as security for the money he owed him.
‘Giving Myself Ulcers’
“I am giving myself ulcers trying to get your money to you before you take aggressive action against the site again,” Ceglia said, according to the e-mail provided by Facebook.
In a hearing last week, U.S. Magistrate Judge Leslie Foschio ruled that Ceglia’s lawyers may question Facebook’s expert-witnesses in computer forensics, documents, paper and ink, who have said Ceglia’s contract and the e-mails he produced in the case are fake.
Foschio barred Ceglia from seeking more evidence from Facebook, including Zuckerberg’s Harvard computers. The judge has yet to rule on Facebook’s motion to dismiss the case.
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 U.S. District Court for the Western District of New York in Buffalo at rvanvoris@bloomberg.net.
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.
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