The wannabe $19-billion Facebook man

The social networking site Facebook login
webpage is seen on a computer screen in Ottawa in this August 27, 2009
file photo. (THE CANADIAN PRESS/Adrian Wyld)

SAN FRANCISCO — Paul Ceglia is trying to gain
control of the biggest website on the planet. He's sued Facebook founder
and Chief Executive Mark Zuckerberg for an 84 per cent stake in
Facebook, which now counts 500 million users. He's claiming to have
played an early and crucial role in the site's development and now wants
his piece of the multibillion-dollar Web company.

Ceglia and his lawyers will have to answer many questions before it's
all over. If Ceglia wins -- which at this point looks like a very long
shot -- it could make him one of the wealthiest people alive. But if he
loses, it could spell big trouble for a man already in hot water in his
home state of New York.

Zuckerberg's stake in Facebook was worth an estimated $4 billion as
of Forbes' 2010 Billionaires list in March. According to recent
transactions, Forbes estimates that Facebook is now valued at $23
billion. Even if Ceglia got 84 per cent of Facebook, Zuckerberg's much
smaller slice of the company would likely keep him on the Forbes 400
list of richest Americans -- with a $1 billion valuation. And Ceglia
would also join the ranks of the Forbes 400 -- with a rich net worth of
$19.3 billion.

Ceglia is not the first person to step forward and claim ownership in
Facebook. In 2009 Cameron and Tyler Winklevoss and Divya Narendr --
founders of an early Facebook competitor called ConnectU -- received a
settlement of $20 million in cash plus stock valued at the time at $45
million, according to court documents. The proceeding, whose uncensored
version was first discovered by the AP, showed that Facebook valued
itself at $3.7 billion.

A recent investment in Facebook by Elevation Capital, a private
equity firm that is also an investor in Forbes, now pegs the company's
worth $23 billion. An 84 per cent chunk of that--the amount Ceglia
claims is his -- is $19.3 billion. If the suit settles and Ceglia is
paid at the same valuation percentage as the ConnectU founders, he would
likely get $403 million.

That's if Ceglia settles, however. Forbes has learned that his
intentions are not to settle. The only media outlet that so far has
spoken directly with Ceglia is the Wellsville Daily, Ceglia's hometown
newspaper in New York and the publication that first broke the story.
John Anderson, editor of the Daily, met with Ceglia at his home and
asked him about his goals in suing Zuckerberg.

"For me personally, I think justice is like my main interest. I see
now, through the evidence, I had a hand in starting this amazing
business and I should get what is rightfully mine," he told Anderson.

"I will be happy once we get to a verdict. It's a lot of money, but
at the same time, I'm not just going to bug off if they throw a
settlement at me like the other two kids. This was not talking in a dorm
room. I paid [Zuckerberg] to write code."

Ceglia's lawyer told Forbes the lawsuit could be interpreted in two
ways: Ceglia could be suing for an outright 84 per cent stake in the
company, or he could be suing for 84 per cent of Zuckerberg's current
(much smaller) stake in Facebook.

A win in court is a very long shot for Ceglia. If he loses and
Facebook finds evidence that his purported contract with Zuckerberg is a
phony, it could mean his next legal battle with Zuckerberg will make
him poorer, not richer.

In a statement to Forbes, Facebook communications chief Elliot
Schrage said: "From the outset we've stated that Ceglia's claims are
absurd and his lawsuit is frivolous, if not outright fraudulent. As of
the date of the purported ‘contract' (April 2003), Mr. Zuckerberg had
not even conceived of the idea of Facebook, much less created the
company, so he could not have given anyone an interest in it at that
time. Ceglia has refused to produce the original contract and the copy
we've seen is a forgery, with inconsistent margin sizes, inconsistent
font sizes, and other glaring discrepancies. We will continue to defend
this baseless lawsuit vigorously."

As has been reported, Ceglia already stands accused of a separate
fraud and is under investigation in New York for lying to and "scamming"
customers. A source close to Facebook told Forbes that if it turns out
Ceglia has forged the contract with Zuckerberg and submitted that in a
court filing, state and federal prosecutors would be most likely be
quite interested.

Last December New York Attorney General Andrew Cuomo obtained a
temporary restraining order against Ceglia preventing his wood-pellet
fuel company from taking anything but cash orders. The
entrepreneur-turned-farmer was "sued for taking more than $200,000 from
consumers and then failing to deliver any products or refunds,"
according to a press release. Business Insider, citing the Wellsville
Daily, reports that Ceglia was charged with four counts of grand
larceny.

Facebook does not have a reputation for letting its aggressors off
lightly. Last October the company won $711 million in damages from
Nevada resident Sanford Wallace after a U.S. District Court judge ruled
that Wallace violated federal spam and state anti-phishing laws. In a
separate suit against someone accused of sending sleazy messages,
Facebook obtained an $837 million judgment.