Could 7-year-old emails halve Zuckerberg's Facebook stake?

In amended lawsuit, N.Y. man says saved emails prove he's entitled to half ownership stake in Facebook

Could a few 7-year-old emails slice off as much as half of Mark Zuckerberg 's stake in Facebook -- and the fortune he has earned from that stake?

That will be up to a federal court to decide.

Earlier this week, Paul D. Ceglia of Wellsville, N.Y., amended his lawsuit against Facebook claiming that he's owed a full 50% of Zuckerberg's stake in the social networking company.

Ceglia had initially filed a lawsuit against Zuckerberg last year and then amended it this week by adding what he says is email evidence showing that Zuckerberg gave him 50% ownership in Facebook for an investment in the then-startup company. According to court documents, Ceglia claims he had a written agreement with Zuckerberg to design and build the site that eventually turned into the wildly successful Facebook.

The initial suit alleged that Ceglia received a 50% stake in the company under the written agreement to work on the site. Ceglia contended that the agreement would add 1% to his stake for every extra day of work. That, according to Ceglia's initial suit, added up to an 84% ownership of the social network, which now has more than 500 million users .

Facebook did not respond to a request to comment today on the amended suit but had previously stated that there was no basis to the case.

"We believe this suit is completely frivolous and we will fight it vigorously," Andrew Noyes, a Facebook spokesman, said in an e-mail to Computerworld last July after the initial suit was filed.

Facebook also previously went so far as to contend that any contracts Ceglia produced for the courts would be forged .

In the amended court document, which was filed on Monday in U.S. District Court in the Western District Of New York, Ceglia lists emails in which Zuckerberg allegedly refers to Ceglia's investment in the startup several times.

In an email Ceglia says was sent on Jan. 1, 2004, Zuckerberg is said to have written: "The extra $1000 really helped get us further ahead and if there is any way you can send some additional funding I believe we will be online in a few weeks."

And in an alleged email dated Feb. 2, 2004, Zuckerberg is said to have written about his ownership agreement with Ceglia.

"Paul, I have a rather serious issue to discuss with you, according to our contract I owe you over 30% more of the business in late penalties which would give you over 80% of the company," the alleged email says. "Mostly, though, I just won't even bother putting the site live if you are going to insist on such a large percentage. I'd like to suggest that you drop the penalty completely and that we officially return to 50/50 ownership."

If the emails that Ceglia cites are legitimate, they could cause a lot of legal and financial woes for Zuckerberg, who just this week fended off a separate case challenging his ownership stake in what has become the world's largest social networking site.

"This [the amended Ceglia lawsuit] could be serious trouble for Facebook," said Dan Olds, an analyst with The Gabriel Consulting Group. "The attorneys representing Ceglia aren't small-town lawyers. They're a big-time firm that has a lot of experience with tech companies. I would assume ... they've done their due diligence and are confident that sufficient evidence exists to give them a reasonable chance to win."

Olds added that if Ceglia was to win this court case, it could not only give him a huge chunk of Zuckerberg's immense fortune -- estimated at $13.5 billion by Forbes Magazine -- but could also give Ceglia significant control over how the company is run.

It's likely though, said both Olds and Zeus Kerravala, an analyst with Yankee Grop, that Zuckerberg would pay big bucks to make sure it never happens.

"If Ceglia's claims are true, he owns half of the company," noted Olds. "This would entitle him to a say in decisions and the same level of control as Zuckerberg."

Kerravala said he suspects that Zuckerberg would pay out a big settlement to retain control of his company.

"If the guy is looking for money, [Ceglia] will likely take a settlement," he added. "So the impact is likely to be bigger to Zuckerberg than to Facebook."

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Sharon Gaudin

Sharon Gaudin

Computerworld (US)
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