Mr. Ceglia. (facebook.com)

You've got to hand it to Paul Ceglia, the man who would own Facebook. Most people, when charged with criminal fraud by the U.S. government, would abandon the civil lawsuit that got them into trouble in the first place. Not Mr. Ceglia. This onetime wood-pellet salesman is continuing his quixotic quest to claim a slice of the social network.

The Wall Street Journal reports that he's now suing to stop the criminal proceedings against him, accusing U.S. Attorney General Eric Holder and New York U.S. Attorney Preet Bharara of violating his constitutional rights.

This is starting to sound less Law and Order, more junior varsity mock trial. 

Yesterday, Mr. Ceglia's representatives filed a complaint alleging that Misters Holder and Bharara are violating his first amendment rights, claiming they "intentionally, willfully and maliciously interfered with Plaintiff's enumerated protected right by commencing a federal criminal prosecution." He's well within his rights to file a lawsuit, the complaint argues, and the federal government has no right to prosecute him for doing so. (This of course ignores the fact that the case against him revolves around documents that the federal government says are false.)

As the complaint puts it:

Acting in their official capacities and under color of legal authority, with malice aforethought, Defendants commenced a federal criminal proceeding arising out of the proper and good faith filing of Plaintiff's civil lawsuit against a United States Citizen.

Mr. Ceglia and his representatives take their accusations a step further, playing up the fact that Mr. Bharara previously worked at Gibson Dunn, the firm representing Facebook in Mr. Ceglia's civil suit.

It's all in the service of attempting to get the criminal case tossed or, to put it in fancy lawyer talk, Mr. Ceglia "brings the instant action to restrain and enjoin the Government from continuing to violate Plaintiff's First Amendment rights."

Say what you will about Mr. Ceglia--the man sure knows how to stick to his story.

Mr. Ceglia, photogs scurrying along beside.

Earlier today, (alleged!) Facebook fraudster Paul Ceglia appeared at the Daniel Patrick Moynihan Federal Courthouse downtown and pleaded not guilty to federal criminal charges of wire and mail fraud. It was his first appearance in the wake of yesterday's indictment.

Always something of a riddle, Mr. Ceglia has become even more ghostly of late. Despite his ongoing case against Facebook, he's kept a low profile. He spent a fair bit of time in Ireland. But there he was this afternoon, in the flesh, in a mahogany-paneled courtroom. He even put on a suit! (The prospect of decades in federal prison will inspire even the sloppiest of dressers to don a tie.) The effect was only somewhat spoiled by the anorak draped over the back of his chair.

Out of "an abundance of caution," Judge Arthur Carter opened by walking Mr. Ceglia through the accusations against him, pausing each time to make sure the defendant followed. It was nothing new, but the word "fraud" really hits with a thud when you're actually sitting in an IRL courtroom.

Facebook has long held that Mr. Ceglia's claims were, not to put to fine a point on it, so much upcountry bullshit. With the decision to arrest Mr. Ceglia, the federal government seems to have sided with Team Facebook. The U.S. Attorney's office alleges that the upstate entrepreneur both doctored an old contract with Mr. Zuckerberg and tampered with email to bolster his case.

Mr. Ceglia, for his part, denies it all and continues to press forward with his civil suit.

Not present: Dean Boland, the attorney who just petitioned to be removed from Mr. Ceglia's lawsuit against Facebook. Also absent: The numerous other lawyers who've done a stint on the civil case. Seated by Mr. Ceglia's side was David Patton, the executive director and attorney-in-chief of the Federal Defenders of New York.

Mr. Ceglia on his way out.

After a formal back and forth, it was onto the discussion of discovery--i.e., the fine points of how to handle the transfer of evidence, which is the kind of thing that usually gets cut from Law & Order. There seemed to be a fair bit of concern over the proper handling of the original, disputed contract, which the judge in the civil suit has yet to actually rule a fake. (Sam Waterston, call your office.) Mr. Patton also noted that he'd be requesting a change of venue, though he didn't elaborate on his reasons and wouldn't respond to a question afterward about where he wanted the trial relocated.

When the hearing concluded, Mr. Ceglia zipped up his North Face and was ushered to the elevators by Mr. Patton, a line of notebook-clutching reporters trailing behind like ducklings.

As our motley crew waited for the elevators, a Bloomberg News reporter who'd previously interviewed Mr. Ceglia stepped up to say hi, but Mr. Patton quickly shut down any attempts to solicit a statement or answers to any of this case's many, many questions.

"I just wanted to say hi!" the reporter parried. "Hi is okay," Mr. Patton allowed, sounding only slightly grudging.

We all piled into elevator, Betabeat standing next to Mr. Ceglia, who gives off a distinct vibe of harmlessness. After a moment, he looked up at the reporter and told him he almost hadn't recognized him. "You look more distinguished," he said, with a smile that only seemed sly if you really thought about it.

Mr. Ceglia. (facebook.com)

Paul Ceglia, the penny-ante hustler who once attempted to convince the world he was part owner of Facebook, has been indicted on counts of wire and mail fraud. Bloomberg reports that, after hearing the charges and evidence against Mr. Ceglia, a grand jury has deemed the U.S. attorney's case strong enough to go to trial.

Things aren't looking too good for Mr. Ceglia, who stands accused of faking both a contract with the wunderkind coder and emails to support his case. Turns out the federal government will not abide by (allegedly!) bullshit lawsuits (allegedly!) meant to wrest billion-dollar companies from their owners.

Nor has the man's luck exactly taken a turn for the better since his arrest. His lawyer wants to withdraw from the case for "personal reasons," and he might end up on the hook for Facebook's legal fees.

The indictment means that, unless Mr. Ceglia strikes some sort of a plea bargain, this case will go to trial. Presumably that means Zuck--a key figure in this drama--will have to testify. Presumably such an occasion is on the brief list of circumstances in which Zuck puts on a suit.

Mr. Seglia (Photo: SMH.au)

Paul Ceglia, a notorious entrepreneur who has been making claims for years that he's entitled to half of Facebook, was recently arrested by the U.S. Attorney's office on charges that he has attempted to defraud Facebook. Now, Mr. Ceglia's lawyer Dean Boland has filed to withdraw from representing him.

According to a filing obtained by TechCrunch, Mr. Boland requested to be removed as attorney from the case based on "personal reasons," but emphasized that this did not have to do with any evidence of fraud uncovered in regards to Mr. Seglia.

The filing reads:

As this court knows, this case and its pleadings are widely followed in themedia. Therefore, the undersigned feels it is important to emphasize in thestrongest terms possible, that the reasons underlying this request, provided to thecourt for its review, have nothing to do with any belief by the undersigned that Plaintiff is engaged in now or has been engaged in during the past, fraud regarding this case.The personal reasons for this request are contained in the in camera communication provided to this court and will be served by regularU.S. mail upon Mr. Ceglia once the mailing address for his current detention location is determined.

This is not the first time lawyers have withdrawn from representing Mr. Seglia. Including Mr. Boland, eight different firms have ditched him.

Mr. Ceglia. (facebook.com)

Paul Ceglia's lawsuit claiming partial ownership of Facebook is based, in part, on a purported contract between Mr. Ceglia and Mark Zuckerberg. Facebook's lawyers have said time and again that Mr. Ceglia's evidence was little more than forgery, and it seems the federal government concurs. In his complaint,  Postal Inspector Douglas Veatch suggests that Mr. Ceglia took an unrelated contract with Mr. Zuckerberg and simply replaced the first page with the supposed smoking gun.

But what surprised us was just how (allegedly!) sloppy his cut-and-paste job was.

Here's what Inspector Veatch had to say:

"There are significant difference between the widths of the columns, margins, and the space between columns on pages one and two of the Alleged Contract. Specifically, the column widths are wider on page one than on page two, while the widths of the margins and the space between columns are narrower on page one than on page two."

That's right: If the complaint is accurate, Mr. Ceglia couldn't be bothered to do the kind of basic margin tweaking that's practically a national art among America's teenagers. The paragraph spacing was similarly mismatched. And then there's this, the crowning insult to the intelligence of every single lawyer involved in this sorry case:

On page one of the Alleged Contract, there is a reference to "Street Fax LLC." Based on my review of certain records maintained by the New York Department of State, I have learned that Street Fax, LLC" was formed on or about August 26, 2003, approximately four months after the Alleged Contract appears to have been signed by "Mark Zuckerberg" and "Paul Ceglia."

Has any set of scare quotes ever dripped more heavily with contempt? Nor can we blame Inspector Veatch. If you're going to go after the hottest tech startup since Google, try to show a little professionalism in your execution.

Illustration by David Saracino.

For years, Facebook's lawyers have been arguing that Paul Ceglia's claim to at least half of Facebook was baseless. Even federal judges have been moved to strong language by Mr. Ceglia's lawsuit, which offered up a Microsoft Word document of cut-and-pasted emails between him and Mark Zuckerberg as proof that he helped fund Mr. Zuckerberg's work in the early days of development and was therefore entitled to a share of Facebook.

Today, Manhattan U.S. Attorney Preet Bharara has come out with a surprising complaint that screams "Team Zuck." In the complaint, the U.S. Attorney's office has charged Mr. Ceglia with an attempt to con Facebook to the tune of several billion dollars. Mr. Ceglia, 39, was arrested in Wellsville, N.Y., this morning on one count of mail fraud and one count of wire fraud. Each count carries a maximum sentence of 20 years in prison.

This isn't Mr. Ceglia's first brush with the law. In our profile of Mr. Ceglia, we covered his 2009 arrests on grand larceny charges related to his wood pellets company, which was shut down by the attorney general. In the Facebook case, the involvement of the U.S. Attorney's office appears to be triggered by what Mr. Bharara calls "an attempted corruption of our legal system through the manufacture of false evidence." The mail fraud charge comes from his sending those forged documents via the post office, and the wire fraud charge relates to his accused email fakery.

On the count of wire fraud, the complaint claims that Mr. Ceglia, having devised his scheme, "did transmit and cause to be transmitted by means of wire communication in interstate and foreign commerce, writings, signs, signals, pictures, and sounds for the purposes of executing such scheme and artifice." On the count of mail fraud, it also says Mr. Ceglia "would and did place and cause to be placed in a post office and authorized depository for mail matter, matters and things to be sent and delivered by the Postal Service" that were, in short, total bunk.

In today's press release, U.S. Postal Inspection Service Inspector-in-Charge Randall C. Till added: “When Mr. Ceglia allegedly decided to take advantage of Mark Zuckerberg and Facebook, he underestimated the resolve of the Postal Inspection Service to bring him to justice for illegal use of the U.S. Mail.”

Facebook also offered a statement to Betabeat through its attorney, Orin Snyder, a partner at Gibson Dunn: "We commend the United States Attorney for charging Ceglia with federal crimes in connection with his fraudulent lawsuit against Facebook. Ceglia used the federal court system to perpetuate his fraud and will now be held accountable for his criminal scheme."

This is breaking news, and we'll update as we learn more details. For now, here's the the press release from Mr. Bharara's office, and the complaint is below:

Years later, in April 2011, following an initial lawsuit in New York State court, CEGLIA, through counsel, filed a 25-page amended complaint in federal court in the Western District of New York claiming that Zuckerberg, in the April 2003 contract, had promised him at least a 50% interest in “The Face Book” project that ultimately became Facebook, Inc. In support of his claim, CEGLIA attached a copy of what he alleged to be the two-page April 28, 2003 contract between himself and Zuckerberg (“Alleged Contract”). The first page of the Alleged Contract contained language giving CEGLIA “a half interest (50%) in the software, programming language and business interests” derived from the expansion of “The Face Book” or “The Page Book.” The second page of the Alleged Contract contained the signatures of CEGLIA and Zuckerberg. Also in support of his claim, CEGLIA described emails he alleged to have exchanged with Zuckerberg beween July 2003 and July 2004 via Zuckerberg’s Harvard email account (“Purported Emails”). The Purported Emails reflected conversations between CEGLIA and Zuckerberg about the design and functionality of “The Face Book” website, as well as ways to generate income from its expansion. The Purported Emails also reflected conversations in which Zuckerberg offered CEGLIA money to “repair [their] business relationship.”

As alleged in the Complaint, however, CEGLIA’s claim to having a contractual right to 50% of Facebook was entirely false. CEGLIA simply replaced page one of the real contract with a new page one doctored to make it appear as though Zuckerberg had agreed to provide CEGLIA with an interest in Facebook. And CEGLIA doctored, fabricated and destroyed evidence to support his false claim. The evidence demonstrating CEGLIA’s lawsuit is a fraud included the following:

• A search of one of CEGLIA’s hard drives uncovered a copy of the real April 28, 2003 contract, which CEGLIA had emailed to an attorney in March 2004, years before his lawsuit against Facebook and Zuckerberg (“Real Contract”). Page one of the Real Contract does not refer to Facebook in any fashion, let alone give CEGLIA a 50% interest in it.
• The spacing, columns, and margins of page one of the Alleged Contract are different from the spacing, columns, and margins of page two of the Alleged Contract. No such differences exist as between the pages of the Real Contract.
• A review of Harvard University’s email servers reveals that none of the Purported Emails appears in Zuckerberg’s email account as of February 2012. Further, none of the Purported Emails appears in Harvard’s backup tapes for Zuckerberg’s emails as they existed in October 2010, nor do any of the Purported Emails appear in Harvard’s backup tapes for Zuckerberg’s emails as they existed in November 2003. The emails between Zuckerberg and CEGLIA that do exist in Zuckerberg’s email account do not show any discussion of Facebook and, contrary to Ceglia’s claim, show that Zuckerberg was asking CEGLIA for money he was owed in 2004, not offering to give CEGLIA money.
• A forensic expert examined CEGLIA’s hard drives and other electronic media and found evidence that in February 2011, CEGLIA deleted files relating to the April 2003 contract with Zuckerberg and replaced them with new files that supported his lawsuit but that were backdated to make it appear as if those the files had in fact been created in 2003 and 2004. Further, a CD Rom revealed that CEGLIA had done test runs on fabricating some of the documents, including the Purported Emails, upon which his lawsuit relied.

Mr. Ceglia. (facebook.com)

Paul Ceglia sure has a talent for pissing people off. The latest: Federal Magistrate Leslie G. Foschio, who CNET says "sometimes used strong language" to explain why he dismissed five motions filed by Mr. Ceglia's ever-evolving legal team.

The judge also gave Mr. Ceglia 10 days to convince him that Mr. Ceglia's attempts to delay proceeding wouldn't require further sanctions. (Mr. Ceglia was already ordered to reimburse Facebook more than $75,000 in legal fees back in February.)

One of the five motions dismissed included Mr. Ceglia's attempt to strike a report from an expert forensic document examiner:

In dismissing the motion, the judge said "the construction urged by plaintiff of [the expert's] testimony in the omitted cases is, at best, strained, and, more correctly, a gross misrepresentation which would be detected by even the marginally literate."

Indeed, the judge cited lack of evidence supporting the dismissed claims as his reason for suspecting that Mr. Ceglia was attempting to stall the suit:

Foschio said the "complete dearth of any evidence" supporting the motions that were dismissed, as well as the "requests to stay discovery pending resolution of such motions, gives rise to more than suspicion that such motions were filed solely to unreasonably and vexatiously multiply the proceedings, and especially to derail the schedule for the limited discovery of experts" as ordered in April.

Vexatiously! My, that is strong language.

Mr. Ceglia. (facebook.com)

Paul Ceglia's side won a small legal victory in court yesterday when a judge ruled that the former wood pellet salesman and Internet entrepreneur has the right to limited discovery against Facebook in the context of a motion to dismiss. Mr. Ceglia filed a lawsuit against Facebook a year and eight months ago, claiming ownership of half the company. Facebook filed the motion to dismiss at long last, supposedly waiting until it was an absolute slam dunk (and probably hoping to exhaust Mr. Ceglia's resources).

But after burning through a series of legal teams, Mr. Ceglia just picked up some legit lawyers with a track record of winning victories against corporations: Milberg LLP, which took on the case in a fairly transparent attempt to shake down the social network for a payoff before its imminent public offering.

Mr. Ceglia's lawyers, who mention the words "jury" and "day in court" at every possible juncture, are aggressively fighting the motion to dismiss. Mr. Ceglia did have a contract for some work with Mark Zuckerberg prior to the founding of Facebook. While evidence suggests he's making a bunch of shit up, there still may be enough of a doubt to drag Facebook and Zuck into court.

Yesterday's ruling says that Mr. Ceglia can continue, with limitations, to seek evidence and compel information from Facebook.

“The court recognized that Mr. Ceglia is entitled to certain discovery necessary to respond to the pending motions to dismiss," Mr. Ceglia's lawyers said in a statement. "Specifically, Mr. Ceglia will obtain discovery of experts hired by the defendants and the opportunity to challenge their conclusions, some of which have already been contradicted by Mr. Ceglia’s own experts. We are pleased that the judge has ruled that this discovery should proceed, and we are hopeful that once we have obtained and presented this information, the court will deny the defendants’ motions to dismiss and allow the case to proceed to full discovery and an eventual trial.”

Mr. Ceglia's aggressive new legal team has already succeeded in getting Zuck to release about 200 emails from his days at Harvard.

Illustration by David Saracino.

A hearing is scheduled for today in the case of Paul Ceglia vs. Mark Elliot Zuckerberg and Facebook Inc., in which the deck seemed stacked against the hapless schemer who claims to own half the company based on an old contract. Mr. Ceglia's profesh new legal team, which came on in the eleventh hour of a year-long case after several legal teams had departed, has asked the judge to let Mr. Ceglia continue with discovery while the court decides on Facebook's motion to dismiss.

Mr. Ceglia's legal team is particularly fond of the word "jury."

“We have made a preliminary review of Facebook's Motion, which attempts to have this matter ended before Facebook has to provide any discovery and before going to a jury," Mr. Ceglia's lawyers said in a statement. "Mr. Ceglia deserves his day in court, where the jury will resolve this dispute over the ownership of Facebook."

Facebook was allowed to do a ton of discovery, including snatching Mr. Ceglia's old computer from his parents' house. It wasn't until last week that Facebook released 200 emails from Mr. Zuckerberg's Harvard days. The social network also hired "corporate spies" at Kroll Associates to investigate Mr. Ceglia.

"Defendants have filed two dispositive motions that present a myriad of disputed fact issues regarding elements that go to the core of this case," Mr. Ceglia's lawyers argue. "They have conducted broad, one-sided discovery over the course of months, consulted numerous experts, and have offered the Court an extensive record of facts and expert reports that go far beyond the scope of the pleadings. Defendants now hope to require that Plaintiff respond to their dispositive Motions – which cite an undoubtedly biased record as support – without obtaining any discovery at all."

Mr. Ceglia's side asks the court to deny Facebook's motion for a "stay of discovery," meaning that the plaintiff could continue to dig up dirt on the company and its founder in advance of Facebook's highly anticipated IPO. "Ceglia's lawsuit was nothing more than an attempted shakedown,” Facebook lawyer Orin Snyder said in court.

Mr. Ceglia. (facebook.com)

Like many, we'd written off Paul Ceglia, the upstate New Yorker suing Mark Zuckerberg for a 50 percent ownership stake in Facebook.

He's burned through so many legal teams that we've lost count. He made off for Ireland more than six months ago, shirking his court appearances. And, as one source put it, he may be "a nice guy, but prone to exaggeration."

But now a reputable law firm with a track record of wins against major corporations has given Mr. Ceglia its vote of confidence—confidence that there is at least enough evidence to shake down Facebook for a tidy settlement as the company prepares for its IPO.

For a while it seemed like Judge Leslie Foschio, who presided over the case filed in the Western District of New York, issued ruling after ruling in favor of Facebook. On July 1, Judge Foschio granted Facebook’s motion for expedited discovery, giving the social networking giant access to Mr. Ceglia's email while denying the plaintiff's team's requests for access to Mr. Zuckerberg's personal records. When Mr. Ceglia dallied in turning over the requested data, the judge slapped him with $80,777 in fines.

"The defense got a lot of access. The plaintiffs had no access," a source from Mr. Ceglia's side with knowledge of the case told Betabeat. "The defense had an advantage and after all this time have not filed a motion to dismiss."

Facebook says it plans to file for dismissal, but has yet to do so since the case started in June 2010. The social network's legal team has said it wants to be absolutely sure of a favorable ruling. The most likely outcome is dismissal or, if Milberg's good enough, a settlement nowhere near what 50 percent of the company would be worth.

But the scary-sounding and longrunning lawsuit still has the potential to spook investors, not to mention the dirt that could come out of Mr. Zuckerberg's emails while at Harvard. Which may be part of the reason why a legit law firm has stepped forward now!

And needless to say, it would not be ideal for a company about to go public if Facebook tried to get the case dismissed and... the judge said no.

The case is certainly looking brighter for Mr. Ceglia than it has in a long time. (Will the Saga of Paul Ceglia, Man Who Claims to Own Half of Facebook, End in January? this blog wrote in December. Now we know the answer.) The judge's latest decision, which moves the case on to the next phase, discovery, is much more favorable. At least one expert's testimony, Larry Stewart, a "Chief Forensic Scientist," found evidence that the contract with Mr. Zuckerberg produced by Mr. Ceglia was authentic. (Facebook had claimed Mr. Ceglia took page 2 of the original contract and stapled it to a forged page 1.)

Facebook's attorneys were not available for comment.

With the addition of Milberg LLP, it seems Mr. Ceglia may have himself a case yet. The law firm is certainly aggressive; it recently participated in a case against Sirius XM that ended in a settlement that awarded no damages to the plaintiffs but won $13 million in attorney's fees.

The next court date is on April 4th, when both sides must present a plan for discovery.

"We took a good hard look at all of the information available, including evidence in Mr. Ceglia’s favor, and we believe he deserves to have his day in court,” Mr. Dumain said in a statement. “We look forward to examining  records from computers that Mr. Zuckerberg used when he was a freshman at Harvard and other records that will help answer questions about the ownership of Facebook.  We hope that the court will rule that the time has come for that process to begin."

"Defense counsel previously told the court and media that Facebook would move to dismiss this case, so we are pleased that the judge has scheduled a conference to address the deadlines for the commencement and completion of discovery," Mr. Dumain continued. "It should be up to a jury to weigh the contradictory claims, including evidence that supports Mr. Ceglia’s case, such as his e-mail correspondence with Mr. Zuckerberg and experts’ testimony about the authenticity of the contract."

Mr. Ceglia hired Mr. Zuckerberg off Craigslist in 2003 to work on his project StreetFax.com. The plaintiff alleges that the contract said Mr. Ceglia would pay Mr. Zuckerberg $1,000 for “the software, program and for the purchase and design of a suitable website for the project [Mr. Zuckerberg] has already initiated that is designed to offer the students of Harvard University access to a website similar to a functioning yearbook with the working title of 'The Face Book.'” The contract further provided that in exchange, Mr. Ceglia “will own a half interest (50%) in the software, programming language and business interests derived from the expansion of that service to a larger audience,” the complaint alleges.

Even if he loses, at least the middling entrepreneur now has his own Wikipedia entry.