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Paul Ceglia: The Man Who Would Have Facebook

Is Paul Ceglia a sleazy grifter, Mark Zuckerberg's long-lost angel investor, or both?
ceglia Paul Ceglia: The Man Who Would Have Facebook

Illustration by David Saracino.

PAUL CEGLIA IS A PUDGY 38-YEAR-OLD, with greasy black hair and creases around his light brown eyes, a serial small-time entrepreneur who could sell you the Brooklyn Bridge. “He’s got tremendous confidence,” said Bill Castle, an upstate hotelier and one of Mr. Ceglia’s many bilious former business partners. “Smiles all the time, got this award-winning smile. Even when under pressure, he continues to smile.”

Mr. Ceglia piqued the nation’s curiosity when he filed a lawsuit last year in the Supreme Court of New York’s Allegany County claiming 84 percent ownership of Facebook; he piqued Betabeat’s when we read that he had been arrested for felony possession of magic mushrooms in Texas, claimed to have founded a natural burial cemetery in Ithaca and once operated an ice cream shop.

He also ran a video rental store, flipped real estate on eBay and owns a wood pellets company that was shut down by the Attorney General due to allegations of fraud. He’s currently working on a prototype of a “refrigerator/cookstove for use in developing nations,” he told the Wellsville Daily Reporter.

While none of his schemes have been especially lucrative so far, one failed venture may yet make him rich: StreetFax.com, a database of street photographs that Mr. Ceglia intended to license to insurance companies for use in evaluating claims, was built in part with code written by a young for-hire developer named Mark Zuckerberg. A 2003 contract with the programmer, now better known as the founder of Facebook, is the basis of Mr. Ceglia’s claim that he is entitled to half of the company.

Mr. Ceglia has so far been less of a nuisance for Facebook and its legal staff than the Winklevoss twins, Tyler and Cameron, whose claim that Mr. Zuckerberg stole the idea for Facebook from them during his Harvard days formed the basis for the Oscar-winning film The Social Network and netted them a settlement of $65 million.

Mr. Ceglia’s much simpler assertion is essentially that he helped to fund Mr. Zuckerberg’s work on Facebook in the early days of its development, and is therefore entitled to a share of  the company. Mr. Zuckerberg affirms he signed a contract concerning StreetFax after answering Mr. Ceglia’s Craigslist ad. But according to Mr. Ceglia, Mr. Zuckerberg also approached him seeking funding for another project he was working on: “The Facebook,” as the site was originally called. Mr. Ceglia says he gave Mr. Zuckerberg at least $1,000 for the project. (“He actually felt bad because Mark was making him so much money [on StreetFax],” a friend said.) According to Mr. Ceglia, the two men drew up a contract giving Mr. Ceglia half of “The Facebook,” and more if the project was not completed by January 1, 2004.

Mr. Ceglia’s filings with the court include a copy of a paper contract that refers to Facebook and excerpts from emails Mr. Ceglia claimed he’d saved by copying and pasting the text into Microsoft Word. In the purported emails, Mr. Zuckerberg and Mr. Ceglia renegotiated for an even 50-50 partnership before Mr. Zuckerberg called The Facebook a flop and said he wanted to refund Mr. Ceglia’s money. Mr. Ceglia claims he did not take the money back, electing to write off the affair as a loss.

Facebook says the contract and emails are forged. The company filed what it says is the authentic contract, which it found on Mr. Ceglia’s computer and on a computer at the law firm Sidley Austin. That contract only mentions StreetFax.

Mr. Ceglia has taken a thrashing in the media and run through three law firms, all of which declined to say why they’d dropped him as a client. But a year and more than 100 filings later, his case is still ongoing.

Orin Snyder, attorney for Mark Zuckerberg and Facebook, does not sound like someone looking to negotiate a settlement. “Irrefutable forensic evidence confirms that this case is a fraud,” he told Betabeat. “Ceglia continues to abuse the judicial process by refusing to comply with multiple court orders.  We will ask the court to dismiss this case and impose sanctions after Ceglia produces the emails and other evidence that he has been concealing.”

Meanwhile, Mr. Ceglia is already hatching plans for taking Facebook to the next level. “I’m starting to have all sorts of opinions as to what I’ll do when I’m at the helm,” he wrote in an email to Emil Protalinski of the tech blog ZDNet, one of a handful of press interviews he’s given in the past year (the others were to the Wellsville Daily Reporter and the Irish local paper The Connacht Sentinel). He also told reporters he’d be willing to hire Mr. Zuckerberg.

Elsewhere in the 1,147-word email, he wrote, “You won’t go public Mark, you won’t IPO, you won’t pass go. I won’t let you sell this company out from under me, not while I have the power to stop you.”

Mr. Ceglia is supposedly holed up somewhere in Galway, Ireland, where he says he and his family fled to escape harassment by Facebook’s investigators.

Through an attorney, Mr. Ceglia declined to speak with Betabeat, and many of his acquaintances refused to speak for attribution. The reasons given were that his hometown of Wellsville, New York, is “a small town,” or that that they feared retribution from Mr. Ceglia or his father, Carmine Ceglia, a local landlord. One source called Mr. Ceglia “dangerous.” A local realtor of Mr. Ceglia’s acquaintance abruptly hung up on Betabeat without explanation. He seemed distressed.

Others may have been reluctant to alienate a future billionaire who might be inclined to share the wealth.

“I love the town,” Mr. Ceglia told the Wellsville Daily Reporter in an email in August. “I plan to do a lot for Wellsville. At the top of my list right now is a Boys and Girls Club of America.”

Wellsville (pop. 8,200) is a rural town sitting eight miles from the Pennsylvania border. It was best known for two things before Paul Ceglia: the Great Wellsville Balloon Rally and the town’s patron John Rigas, who founded Adelphia Communications Corporation in 1952 and grew it into the fifth-largest cable company in the country—before it collapsed in 2002. Mr. Rigas later went to prison for bank, wire and securities fraud.

When Mr. Ceglia was in second grade, his family moved from Wellsville to his mother’s native Ireland for six years. His first homecoming was in the summer before high school, when he showed up unexpectedly at football camp. He ended up not joining the team; he was not athletic, a serious social detriment in Wellsville, classmates said. Instead he developed a reputation as an artsy delinquent who stayed out late, bar-hopping and hustling at pool with older friends. At one point, he ran a poker game out of one of his parents’ vacant rentals, making enough money to pay for concerts and hotel rooms for himself and his friends. He was always trying to get away with just a little bit more, his hometown peers said. In eleventh grade, Mr. Ceglia and his best friend at the time broke into a fruit stand somewhere between Portville and Olean. They were arrested when they tried to use the cash to rent a car.

In time, Mr. Ceglia’s crew gave itself a name: the Carcheones, an inspired fabrication that was more of a brand than the criminal gang some peers imagined it to be. The crew spent most nights playing cards in the garage or playing music out of parked cars and drinking beer. Soon, even the good kids were jostling to join up. But after the fruit stand heist, many parents told their kids to stay away from Paul Ceglia.

Mr. Ceglia embarked on a series of fortune-seeking expeditions, but always ended up back in Wellsville. After high school, he moved to an environmentalist artist colony in Taos, New Mexico, with a girlfriend, returning a few years later with Kristin Van Huysen, a massage therapist and landlord from Washington state. The pair operated a cluster of rental homes under a 501 c(3) corporation called the Wellsville Veterans Project. Ira Warboys, a high school classmate of Mr. Ceglia’s, rented one of the homes and did maintenance work for Ms. Van Huysen. She gave him the impression she and Mr. Ceglia were married.

“I remember they were living in one of the houses down on South Broad Street,” Mr. Warboys said, referring to a suburban side street of single family homes assessed at values between $20,000 and $40,000. “It was a wreck. Roof was fallen right in. They had a tent set up in the living room downstairs. They were living in a tent inside the house. The house didn’t have any power hooked up to it, any gas or anything. I remember it being in the paper that they were arrested in unlivable habitats.” They got caught because neighbors glimpsed them burning lanterns from the street, he said.

In 1995, Ms. Van Huysen won a $5,807 judgment against Mr. Ceglia for a real estate related case, the Buffalo News reported. Apparently they reconciled, because they were arrested together two years later in 1995 in Panola County, Texas, for felony possession of 400 grams of psilocybin mushrooms seized in a highway stop. “That’s a lot of dope,” said county prosecutor Danny Davidson, who processed the case but couldn’t remember it specifically. “I bet you almost anything they were in Houston. Good place to get dope.”

Mr. Ceglia wasn’t into drugs, friends and associates said. It sounded more like a scheme to make a quick buck, they speculated, by pushing the envelope again.

Around 1998, Mr. Ceglia married a Wellsville girl six years his junior, sources recalled; they now have two sons. Iasia McCarthy Ceglia left faint impressions on her husband’s associates, who described her as “nice;” one called her “kind of the flower child type.” The pair had an open relationship, associates told Betabeat, and Mr. Ceglia continued to have girlfriends after his marriage.

A year or two before his wife became pregnant, Mr. Ceglia stumbled into some good contract work: taking pictures for a Massachussetts-based startup called StreetDelivery.com, a database of street photographs for use by insurance companies. StreetDelivery’s founder, Andrew Logan, described him as gracious, competent and “not overly bright.” Mr. Ceglia would bring “cookies, or a little gift” when he came into the office, he said. “Nice guy to deal with,” Mr. Logan said. “But he was a hippie.” He offered as evidence the fact that Mr. Ceglia preferred patterned stationery.

Mr. Ceglia and his boss ended up in a legal dispute over the ownership of the photographs Mr. Ceglia had taken, but the argument was settled in a relatively non-confrontational mediation, Mr. Logan said. Within a year, Mr. Ceglia asked to come work for StreetDelivery again, and Mr. Logan agreed—until he learned that Mr. Ceglia was plotting to launch a competitor called StreetFax. “When we found out, we just stopped paying him and got an attorney,” Mr. Logan recalled. “We might have owed him $10,000 or 20,000, and we just said, ‘the hell with you.’” Mr. Ceglia and Iasia, who was by then pregnant, protested in front of Mr. Logan’s office. “They came to where I work, she with her big belly, with a sign that said I didn’t pay my bills, walking back and forth,” he said. They left after a few hours.

About seven years later, a private investigator turned up at Mr. Logan’s office, asking about Paul Ceglia. “Kroll Associates was up here investigating on behalf of Facebook,” Mr. Logan said. “Showed up one day and scared everyone half to death. At some point there were supposedly some emails, supposedly Paul yelling at Zuckerberg and swearing at him. ‘Grow a set’ or something like that. All I can tell you is, Paul was a pacifist … when he started his company he put out an advertisement about how he didn’t have sickness days, he had wellness days. He didn’t swear. He was very non-confrontational. He was real earthy, crunchy granola guy.”

Mr. Logan believes his contract with Mr. Ceglia for StreetDelivery might entitle him to a share of Facebook as well. “I have the contract buried somewhere in my work shop,” he said.

Dave Wilson, a contract photographer for StreetDelivery at the same time as Mr. Ceglia, said Mr. Ceglia’s work was sloppy at best. “He was making claims for work that he had done, that he had not done,” Mr. Wilson said. Mr. Ceglia tried to convince his former coworker to join StreetFax, but Mr. Wilson declined. At StreetDelivery, Mr. Wilson recalled not being able to find half the photos Mr. Ceglia claimed to have taken. “It was left to me to clean up the mess he had created,” he said. “Either he was just lying or he was spacey.”

Instead, Mr. Wilson started his own StreetDelivery competitor, StreetsOfCanada.com, which he ran for six years.

“I clearly remember having a conversation with Paul when he was trying to get me interested in his project,” Mr. Wilson said. “He claimed he had a Harvard grad doing the programming for StreetFax. And why I clearly remember that was, I remember that Paul was a nice guy, but prone to exaggeration. And I remember rolling my eyes at that.” This would have been in early 2003, after Mr. Ceglia and Mr. Zuckerberg signed an agreement for contract work in the lobby of a Boston Radisson.

As the StreetFax saga played itself out, the resourceful Mr. Ceglia had already found a new outlet: real estate. “Ceglia’s sale of land in New York and Florida appears to have been a wide-ranging land scam involving misrepresentation, ‘shill bidding’ on eBay, falsification of government documents, and, in some cases, outright theft,” wrote an investigator for Kroll Associates, the high-profile New York-based consulting firm—“corporate spies,” the New York Post called them—hired by Facebook to do a background check.

(Mr. Ceglia has said he left Wellsville because investigators were stalking him. “From waking up to discover people hiding in [a] back field with binoculars, to being followed day-in and day-out by these guys, to coming home and finding a back window open that I know I personally locked,” he wrote to the Wellsville Daily Reporter.)

According to the Kroll report, Mr. Ceglia would buy unbuildable properties for dirt cheap, then advertise them on eBay as buildable. In a typical story, one buyer paid $10,300 and $17,600 for two tracts in Polk County, Florida, which were advertised as “zoned as residential.” They weren’t. “Polk County officials informed Victim-1 that the land was essentially worthless,” the Kroll report stated.

Mr. Ceglia was also arrested for trespassing in Miami while “trying to sell property in a private orange grove to an elderly couple,” in May 2005, according to one of Facebook’s filings, and “falsely told the arresting officer that he had an easement along the grove.” The rightful owner pressed charges; Mr. Ceglia pleaded no contest to first-degree misdemeanor trespass and was fined.

Mr. Ceglia also sold property in New York to people like Gary Conklin, a local businessman who later found out the land wasn’t paid off and had outstanding taxes. “He was kind of a braggert,” Mr. Conklin said, recalling a stroll he and Mr. Ceglia took in the woods on their first meeting. “He talked about other things he had going on. He owned property in Florida, supposedly. He talked about StreetFax … it was a computerized camera thing to monitor street intersections and stoplights. I told my wife, this guy’s really sharp, you know? He seemed like a real go-getter.”

Mr. Conklin won a judgment against Mr. Ceglia in court in 2008. But it wasn’t until the Facebook case that he got reimbursed in full, he said. “His attorney called me and they wanted to settle up what they owed me. So he did and pretty much that’s the last I ever heard of the guy,” he said. “He’s a conniver.”

In 2006, Mr. Ceglia started corresponding by email with Bill Castle, a woodsman, winemaker and strict environmentalist who “looks like a hippie Walt Whitman,” according to The Guardian. Mr. Castle was the proprietor of Pollywogg Hollër, an eco-friendly bed and breakfast in Belmont, New York. Mr. Ceglia wanted the hotelier’s advice on an eco-friendly resort he wanted to build in the Bahamas. After about a year, Mr. Ceglia convinced Mr. Castle to join him on Great Exuma Island and help the venture get off its feet. Mr. Castle did him one better, bringing along his wife and a business partner. “We thought we were going to be down there for a long time, maybe the rest of our lives,” Mr. Castle said.

Mr. Ceglia had promised him a house, a car, a $1,000 per month stipend and groceries, none of which panned out. “The house didn’t exist,” Mr. Castle said. “The vehicle didn’t exist. We had to move in with Paul, his wife and his girlfriend.” It was a big house on the beach, he recalled, and Mr. Ceglia didn’t seem to be struggling, although he slept in the same bed as his girlfriend, his wife and their young sons. “He was spending money on the island,” Mr. Castle said. “He’d rent a car. One night he’d take his girlfriend out to supper, then the next night he’d take his wife out to supper.”

Mr. Ceglia was trying to get some land from the government, said Mr. Castle, who believes he was brought in to lend legitimacy to the project. “I was there more or less as a decoy,” Mr. Castle said. But he became suspicious when Mr. Ceglia started talking about using termite-resistant pressure-treated wood to build houses. “I’m thinking, wait a minute now, he’s supposed to be working with the island community to develop this as an eco-resort and I haven’t got an explanation for how man can live in harmony with nature and use this pressure-treated wood. Within 10 days it was obvious that the whole thing was a scam.”

Mr. Castle and his crew packed up and flew home. He later asked Mr. Ceglia to reimburse him for the trip; he says Mr. Ceglia responded by threatening to sue him for abandoning the project. “The guy is incredibly intelligent,” Mr. Castle said. “He has an incredible charisma about him. I’ve always said, if he would have taken all his talent and directed them in an honest direction, he would be making money.”

But it was actually the fraud charges concerning Mr. Ceglia’s company, Allegany Pellets LLC, that led to the rediscovery of the contract with Mark Zuckerberg, Mr. Ceglia told Bloomberg last year. Attorney General Andrew Cuomo charged the Ceglias in 2009 with defrauding customers who preordered wood pellets and never got them. According to court documents, the Ceglias blamed the failure on flooding, mechanical failures, flaky suppliers, and obstacles such as “not enough pellets to fill truck.” “I feel terrible,” Mrs. Ceglia told Bloomberg. “We had many sleepless nights.”

Kenneth Dewert, who gave Mr. Ceglia a down payment of $2,280 for a “tractor-trailer load” of pellets that never came, decided to confront him in person. “He kept on putting me off and putting me off, so me and my wife drove up there,” he said. “All there was, was a little pile of sawdust, and he said he didn’t have no money cause his machines were all broke down.” Mr. Ceglia showed them around the property, which was nothing like the red barn, wide fields and tall stacks pictured on the website. “He just had a rundown house, rundown little garage. He kept on apologizing—‘I’m sorry, sorry, yours is the first order to go out. But he was telling everyone that,’” Mr. Dewert said. The Attorney General ordered the Ceglias to pay restitution and fines last year, and they complied.

The investigation inspired Mr. Ceglia to look through old files to pay back customers, he said, otherwise “no way I would have ever started looking through these ancient folders. That contract would just be sitting in there gathering dust.”

Mr. Ceglia denied our a Facebook friend request in addition to our requests for an interview, so we had to content ourselves with his publicly available profile, which features photos of his two boys on a boat in Nova Scotia and pictures of Mr. Ceglia in front of a palm tree, with his wife, and at home in Wellsville, always smiling. Mr. Ceglia’s list of favorite quotations, along with stand-bys from Gandhi, Einstein and Margaret Mead, includes a line from Willy Wonka: “Invention, my dear friends, is 93 percent perspiration, six percent electricity, four percent evaporation, and two percent butterscotch ripple.”

This article appeared in The New York Observer on Wednesday, Sept. 21, 2011.

Follow Adrianne Jeffries on Twitter or via RSS. ajeffries@observer.com

Comments

  1. Best first sentence ever.

  2. Matt says:

    Even if every negative thing about Ceglia were true, it does not mean that Zuck didn’t sign a legitimate contract.

  3. Vague_rant says:

    This is probably not terribly relevant, but as someone from the “small town” of Wellsville, I would like to point out that Ceglia’s sons are not twins–there is not much of an age gap there, but there is a gap. If that fact is misreported here, what else might be?

    1. Anonymous says:

      That fact and others were submitted to Mr. Ceglia and his lawyer for fact-checking. But it could have been an oversight.

      1. Anonymous says:

        (This has been fixed, thank you for pointing it out.)

  4. a grandma says:

    any one who knows mr. ceglia  is aware he is a 100% fraud just like his wood pellet business any clams he makes are laughable what about the people who ordered wood pellets for heat and got nothing. thats why he smile all the time he knows he can steal someone elses money get away with it and do it again in some other scam  you could be next and he would smile say what ever you wanted to hear while he was doing it

    1. Anonymous says:

      A CORP was organized by THE WINKLEVOSS + EDUARDO SAVERIN + CHRIS + NARENDRA and DAVID to over throw MARK ZUCERBERG
      from facebook ; The idea facebook was not zuckerberg IDEA; and the winklevoss
      did a double-cross and went with zuck . and zuckerberg fuck over the
      winklevvoss;
      And the winklevoss used the information to extort money out of
      zuckerberg by extortion . but the idea facebook was not the winklevoss idea and
      was not mark zuckerberg idea and you now it

      Michale McKibben said several
      years ago Facebook founder Mark Zuckerberg ripped off the programming code his
      company developed,
      this is true zuck stole the programming code. and then
      stole the idea facebook.

      LISA SIMPSON GOT A COURT-ORDER TO SEE TWO video
      disk
      lisa simpson was made
      a were of the fact that ZUCKERBERG had sign a contract to PAUL CEGLIA years a go
      ‘and was a where that on a VIDEO DISK ZUCKERBERG openly admitted ;saying that
      facebook was not his idea

  5. Grandma Mimi says:

    If you knew Ceglia and his way of doing things, you would not even think him innocent. He is sleezy and dishonest…I am sure it is true that he has not one stake in facebook at all. He is a dirtbag

  6. Ira Warboys says:

    Paul Ceglia’s picture and name should be printed on the front page of every newspaper and billboard on earth along with the list of scam’s he has pulled. Evryone should know who he is so they know what to expect from him. He need’s to be held accountable for the bs he does! Maybe if he had been punished to the full extent instead of just paying restituition, he could have made his money in a legit way. Or at least made him understand the pain and suffering he has put people through. Knowing the way he is, I’m sure there are more people out there that he has giving false hopes and stolen money from them and they haven’t gotten anything back.