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Could it possibly be that someone other than Mark Zuckerberg is the majority owner of Facebook -- the largest social network in the world with nearly 500 million members? That would be incredible, but that is exactly what Paul Ceglia claims in a civil lawsuit he filed in the Supreme Court of New York's Allegany County last month. Ceglia says he owns 84% of Facebook.According to the lawsuit, Paul Ceglia asserts he signed a contract with Mark Zuckerberg, Facebook co-founder, in 2003 to develop and design a website, which eventually was launched as thefacebook.com. The contract entitled Ceglia to a $1,000 fee and a 50% stake in the product.
A major point in the contract also stipulated that Ceglia "would acquire an additional 1 percent interest in the business, per day, until the website was completed." By February 4, 2004, Ceglia's stake in Facebook totaled 84%, according to the suit.
This should be a wild ride played out through the media and now, according to Facebook representatives, federal court. It is not a surprise that Facebook called the suit completely frivolous. The company has asked that Allegany Court Judge Thomas Brown's recent order restricting the transfer of Facebook assets be struck down.
"The order will not affect our ability to do business but we do not believe it is legally supported and we have moved to have it vacated," Facebook's Barry Schnitt told Reuters.
Facebook is privately owned so the valuation is speculative, but estimates of an initial public offering hover around $15 billion, based on investments from outside sources such as Microsoft (MSFT).
Ceglia's suit contends the contract with Zuckerberg was dated April 2003. But Zuckerberg did not come up with the idea for Facebook until later, according to Facebook's history accounts. The Internet domain name for "TheFacebook.com" was registered in January 2004, according to Network Solutions online registry of domain names.
The $1,000 contract raises a thousand questions. Why did Mr. Ceglia wait so long to file his claim? What is frivolous about the claim? Eighty-four percent, or $12.6 billion certainly is not frivolous. What has transpired between Ceglia and Zuckerberg over the last seven years, if anything? Why didn't Zuckerberg reveal in the past that he created Facebook as a contracted project in any of his umpteen interviews?
A contract is a contract. However, there have already been statements by Facebook lawyers that the statute of limitations to file such a claim is six years in New york and Ceglia exceeded it. This may or may not prove out in the end, but the end is most likely to be a settlement.
What we have not heard or read yet is that the contract is fraudulent, void, or superceded by some other agreement.
The stakes are very high, and depending on the end results of this case, there is the making of a book deal already, and of course a pile of money for the attorneys.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money..
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