DealBook: Lawyer Withdraws From Case by Man Claiming Facebook Ownership

John Anderson/Wellsville Daily ReporterPaul Ceglia, who claimed he owns half of Facebook, at home in 2010.

The lawyer representing a man claiming to own a substantial stake in Facebook withdrew from the case on Tuesday, just a day after he defended his client in an interview with The New York Times.

Federal prosecutors arrested the entrepreneur, Paul Ceglia, last week on fraud charges, accusing him of forging the e-mails and contract that supported his two-year-old claim against the social networking giant.

Dean Boland, the lawyer for Mr. Ceglia, notified the court that he was dropping out of the civil lawsuit. His reasons for withdrawing were filed under seal, but in the public portion of his filing, Mr. Boland supported his client.

“The undersigned feels it is important to emphasize in the strongest terms possible, that the reasons underlying this request, provided to the court 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,” Mr. Boland wrote.

In an interview with The Times on Monday, Mr. Boland backed his client’s claims and said he would continue to pursue the case against Facebook. He said that the government’s criminal charges would help his client’s cause because it suggested that some of Mr. Ceglia’s evidence was authentic.

Prosecutors say that Mr. Ceglia, 39, of Wellsville, N.Y., filed a spurious lawsuit claiming that Mark Zuckerberg, a co-founder of Facebook, promised him an at least 50 percent in the social network in 2003, and that he doctored, fabricated and destroyed evidence to support his claims.

“Ceglia’s alleged conduct not only constitutes a massive fraud attempt, but also an attempted corruption of our legal system through the manufacture of false evidence,” Preet Bharara, the United States attorney in Manhattan, said in a statement. “Dressing up a fraud as a lawsuit does not immunize you from prosecution.”

Mr. Ceglia has been detained since his arrest on Friday and is expected to make an appearance and enter a plea in Federal District Court in Buffalo on Wednesday. A federal public defender represents him in the criminal case.

Mr. Boland is the latest lawyer to withdraw from his civil case.

Mr. Ceglia’s lawyers have included Robert W. Brownlie of DLA Piper, the world’s largest law firm, and Dennis C. Vacco, a former New York attorney general now in private practice. Mr. Brownlie and Mr. Vacco dropped out of the case after Kasowitz Benson Friedman & Torres, another law firm that had briefly represented Mr. Ceglia, notified them that it believed Mr. Ceglia’s supposed contract with Mr. Zuckerberg was a sham.

Mr. Brownlie, who last year staunchly defended the legitimacy of his client’s claims to The Times, has not returned multiple calls and e-mails seeking comment. Mr. Vacco declined to comment, citing attorney-client privilege.

In his withdrawal filing on Tuesday, Mr. Boland, of Lakewood, Ohio, said that no one had proved that Mr. Ceglia’s claims were fraudulent.

“Myself and prior counsel all have and had a duty to bring to this court any evidence of fraud, even fraud by our own client, should we have come across it,” Mr. Boland wrote. “No prior counsel and current counsel, including the undersigned, have done so. The undersigned, at no time, has encountered evidence of fraud by plaintiff.”

Facebook’s lawyers at Gibson, Dunn & Crutcher have suggested that Facebook could pursue disciplinary claims against some of the lawyers that represented Mr. Ceglia.

“Now that Ceglia is being brought to justice for his crimes, Facebook intends to hold accountable all of those who assisted Ceglia in this outrageous fraud,” Orin Snyder, a partner at Gibson Dunn, said in a statement. “Facebook will send a strong message that it does not tolerate legal shakedowns and will take aggressive action against all those who file abusive lawsuits against the company.”

DealBook: Man Claiming Facebook Ownership Arrested on Fraud Charges

John Anderson/Wellsville Daily ReporterPaul Ceglia, who claimed he owned half of Facebook, at home in 2010.

In 2010, a New York entrepreneur made an explosive legal claim: An agreement that he had with Facebook’s founder, Mark Zuckerberg, entitled him to a major stake in the social-networking giant.

Mr. Zuckerberg staunchly denied the allegation, and his lawyers insisted that the entrepreneur, Paul Ceglia, was a scam artist.

On Friday, federal authorities sided with Mr. Zuckerberg, arresting Mr. Ceglia and charging him with a multibillion dollar scheme to defraud Facebook.

Prosecutors say that Mr. Ceglia, 39, of Wellsville, N.Y., filed a sham federal lawsuit claiming to have been promised a 50 percent share of Facebook in 2003, and then doctored, fabricated and destroyed evidence to support his allegations.

“Ceglia’s alleged conduct not only constitutes a massive fraud attempt, but also an attempted corruption of our legal system through the manufacture of false evidence,” said Preet Bharara, the United States attorney in Manhattan. “Dressing up a fraud as a lawsuit does not immunize you from prosecution.”

Gonzalo Fuentes/ReutersMark Zuckerberg, the chief executive of Facebook.

Mr. Ceglia is expected to make an appearance in federal court in Buffalo on Friday afternoon. His lawyer, Dean Boland, did not immediately return a telephone call seeking comment.

The improbable claims made by Mr. Ceglia received outsized attention in part because it came at around the same time as the release of “The Social Network,” the Academy Award-winning film that told the tale of Mr. Zuckerberg’s legal battle with his Harvard schoolmates, the Winklevoss twins, over the origins of Facebook. Mr. Zuckerberg paid the Winklevosses at least $65 million to settle their case.

Since the lawsuit was first filed, Facebook’s lawyers have raised questions about Mr. Ceglia’s credibility. In 1997, he pleaded guilty to possessing hallucinogenic mushrooms. And in 2010, the New York State attorney general criminally charged him with defrauding customers in a now-defunct wood pellet manufacturing business that he had run with his wife.

Questions are now also being raised about the lawyers that represented Mr. Ceglia in his lawsuit.

In his original complaint, filed in 2010, Mr. Ceglia was represented by Paul Argentieri, a sole practitioner in upstate New York. An amended lawsuit was filed in April 2011 by Robert W. Brownlie of DLA Piper, the world’s largest law firm, and Dennis C. Vacco, a former New York attorney general now in private practice at Lippes Mathias Wexler Friedman in Buffalo.

In 2011, Mr. Brownlie of DLA Piper declined a request by The New York Times to produce the original documents backing his client’s legal claims. “That will come out during the course of litigation,” Mr. Brownlie said. “Anyone who claims this case is fraudulent and brought by a scam artist will come to regret those claims.”

Yet court records indicate that another law firm, Kasowitz Benson Friedman & Torres, had been hired by Mr. Ceglia before DLA Piper and Lippes Mathias becoming involved. Kasowitz Benson withdrew from the case and put DLA Piper and Lippes Mathias on notice that it had determined that the purported contract was a fraud.

Mr. Brownlie and Mr. Vacco later withdrew from the case. They did not return calls and e-mails seeking comment.

Mr. Ceglia’s alleged plot dates back to 2003, when Mr. Zuckerberg was a student at Harvard University. Mr. Ceglia had placed an advertisement on Craigslist looking for a programmer for an Internet business he was trying to get off the ground. Mr. Zuckerberg responded to the ad, and Mr. Ceglia agreed to pay him $1,000 for his work.

Months later, in his college dorm room, Mr. Zuckerberg started a business called Facebook.

Mr. Zuckerberg did not hear from Mr. Ceglia again until 2010, when he was served with a complaint that claimed Mr. Ceglia was entitled to a substantial ownership stake in Facebook.

According to the lawsuit, Mr. Zuckerberg had promised him a substantial interest in either “The Face Book” or “The Page Book.” Attached to the legal papers was a contract that contained language giving Mr. Ceglia an interest in Mr. Zuckerberg’s start-up. The filing also included e-mail exchanges between Mr. Ceglia and Mr. Zuckerberg that purported to show their collaboration on ideas for the social network business.

Federal prosecutors say that Mr. Ceglia’s claims were entirely false. Government investigators searched Mr. Ceglia’s hard drive and discovered the original contract, which had no reference to Facebook. And Harvard’s e-mail servers had no record of the supposed e-mails.

Facebook’s lawyers at Gibson, Dunn & Crutcher commended the Justice Department for filing criminal charges and, in statement, indicated that it would pursue possible claims against the lawyers that represented Mr. Ceglia.

“Ceglia used the federal court system to perpetuate his fraud and will now be held accountable for his criminal scheme,” said Orin Snyder, a partner at Gibson Dunn. “Facebook also intends to hold accountable all of those who assisted Ceglia in this outrageous fraud.”