Facebook's ownership is becoming murkier by the minute. During a court hearing Tuesday, the company's attorney said she was "unsure" whether founder Mark Zuckerberg signed a contract that could potentially give an 84% stake in the company to a New York businessman.
If the signature on the contract is in fact that of Facebook's Zuckerberg, the ramifications could be enormous. Not only will his fortune, estimated to be in the billions, be at stake, but also that of the thousands of Facebook employees who hold stock options, venture capitalists who've poured millions into the company and Microsoft (MSFT), a large investor.
Paul Ceglia, a New York businessman, filed a lawsuit last month against Facebook and Zuckerberg, over allegations that he's owed an 84% stake in the privately held company following a business deal he struck with Zuckerberg in April 2003.
Under a work-for-hire contract that involved two separate business ventures, Ceglia hired Zuckerberg, a Harvard freshman at the time, to develop and maintain a StreetFax Database for $1,000. The second agreement called for the continued development of an existing project "that's designed to offer the students of Harvard university access to a website similar to a live functioning yearbook with the working title of 'The Face Book."'
Ceglia was to pay Zuckerberg $1,000 for a 50% stake in the project. But for every day the project went unfinished beyond the agreed Jan. 1, 2004, completion date, the contract called for an additional 1% stake to be given to Ceglia, according to the court documents. Ceglia claims that, as of February 2004, he never received his Facebook shares.
A signature appears under the name Mark Zuckerberg in the alleged contract, dated Sept. 28, 2003.
But perhaps even more bizarre is what's happening in the courtroom. When the judge asked the basic question of whether the signature was in fact Zuckerberg's, Facebook's attorney Lisa Simpson said: "whether he signed this piece of paper, we're unsure at this moment," according to a Bloomberg report.
According to a statement by Facebook:
Our intention was to indicate that plaintiff has not produced the original of the alleged agreement for anyone, including the court. We have serious questions about the authenticity of the document and, assuming an original exists, we look forward to expressing our opinion about it once we see it.
Ceglia's attorney, Paul Argentieri, says bring it on. He says he offered to show Facebook's attorneys the original contract if they were willing to visit his offices in Hornell, N.Y. "They didn't take me up on my offer," Argentieri told DailyFinance. "They had three weeks to get ready to answer this very basic question. I was surprised by their hesitation."
In addition, Simpson, who obviously has seen a copy of the alleged contract, said in court documents:
Accordingly, by its own terms, the purported contract proffered as the sole basis for Plaintiff's claim - even assuming it is authentic - does not even provide for consideration for work done on what is inconsistently and contradictorily referred to elsewhere in the document as "The Facebook."
The contradictory terms Simpson refers to in the alleged contract relates to the $1,000 Ceglia is to pay Zuckerberg for work on "Page Book," yet further down in the contract it refers to the project as "The Face Book."
Facebook argues in its court documents that should the contract ultimately appear authentic, Ceglia's case is by no means a grand slam win for the plaintiff.
Attorneys for the social networking giant argue in court papers that Ceglia took six-and-a-half years to file a lawsuit and that this time exceeds the two-year period the courts have previously ruled in other unrelated cases for filing a lawsuit. The attorneys also argue that the plaintiff has a receipt for $1,000 but not the full $2,000 that a copy of the alleged contract calls for, which they claims results in all property rights reverting back to Zuckerberg.
Ceglia's attorney Argentieri says he will gladly explain why his client waited six- and-a-half years to file his lawsuit when the parties go to trial. He added that his client has plenty of other documents and canceled checks with Zuckerberg's signature.
Says Argentieri: "I have all the confidence in the world we can beat their legal arguments."