customers. In a complaint filed by Mr. Cuomo’s office, Mr. Ceglia is accused of taking in more than US$200,000 from customers, but failing to deliver the pellets. Mr. Cuomo obtained a court order preventing Mr. Ceglia from operating the business.” The couple was charged with 12 counts each of fourth-degree
grand larceny and one count each of first-degree scheme to defraud. The allegations had not been resolved at the time of the couple’s disappearance. These blots on his background didn’t deter Ceglia from alleg-
ing in 2010 that years earlier, in 2003, he had worked with Zuckerberg on several projects. According to Ceglia, he placed an advertisement on Craigslist that year looking for a program- mer for a business he was trying to start up called StreetFax. He said Zuckerberg answered the ad and agreed to do the work for US$1,000. The pair signed a contract, a fact not disputed by the Facebook founder. “Aſter that, the accounts diverge,” the Times reported. “Mr. Ceglia claims the contract shows that he also paid Mr.
If there’s a lesson, it’s the critical importance of keeping clear and accurate documentation from the start
Zuckerberg an additional US$1,000 for a 50% stake in a project called ‘The Face Book,’ in one place, and ‘The Page Book,’ in another.” In his lawsuit, Ceglia produced emails that he said clearly demonstrated negotiations between him and Zuckerberg con- cerning the creation of the social media site. “At one point, Mr. Zuckerberg asks Mr. Ceglia for an additional US$1,000 to move forward with the project. And twice, Mr. Zuckerberg appears to plead with Mr. Ceglia to rescind a clause that gives Mr. Ceglia 1% additional ownership for every day that Mr. Zuckerberg is late with the project,” the newspaper said. “I’d like to suggest that you drop the penalty completely and that we officially return to 50/50 ownership,” Mr. Zuckerberg is shown to have written. Zuckerberg denied any such communications about Face-
book, claiming that Ceglia had fabricated the emails. In 2012, lawyers for the Palo Alto, Calif.-based company produced forensic evidence supporting Zuckerberg’s contention, aſter US District Judge Richard Arcara had ordered the testing to take place. An examination of Ceglia’s hard drive, Facebook’s lawyers said, proved that Ceglia had forged the emails and the contract.
“The results — including allegations that Ceglia employed
a hex editor [a type of computer program that allows changing of computer file data] to manipulate the text of the disputed contract in order to make the date stamps look accurate — were submitted [in court],” Wired magazine reported in March 2012. “The documents also say Ceglia employed a method called ‘baking’ by which he allegedly exposed a forged contract to light, which produced tan lines ‘where Ceglia appears to have used clothespins or binder clips to suspend the document and expose it to sunlight.’ ” Facebook also told the court it had discovered the original
Work for Hire contract on Ceglia’s computer and one emailed in 2004 to Ceglia’s lawyer, neither of which mentioned Facebook. As a result of these findings, the charges Ceglia faced on May
4 were eventually laid. The Ceglia case was by no means the only challenge
Zuckerberg faced with his creation of Facebook. As depicted in The Social Network, Olympic rowing twins Cameron and Tyler Winklevoss claimed Zuckerberg stole their idea for Facebook, which they had called HarvardConnection (later called ConnectU), when all three attended Harvard. The twins eventually accepted a US$65-million cash-and-
stock settlement from Facebook but later tried to reopen their claim, charging that the settlement “was fraudulent because Facebook hid information from them, and that they deserved more money,” Reuters reported. In 2011, however, they decided against taking their case to the Supreme Court, as they had threatened, and took the deal. In a less contentious dispute, Facebook negotiated an out-of-
court settlement with one of its genuine cofounders, Brazilian- born Eduardo Saverin, for an undisclosed amount. It is public knowledge, however, that Saverin’s worth exceeds US$2 billion. It is hardly surprising that when a business enterprise such as
Facebook skyrockets from a brainstorming idea on a college campus to become a multibillion-dollar international empire, that allegations and lawsuits would emerge. If there’s a lesson for entrepreneurs, accountants and others
who might be engaged in, or advising, fledgling business ven- tures, it’s the critical importance of keeping clear and accurate documentation from the very outset. Although most seemingly wild ideas never achieve the success of Facebook, some do. And in this age of ever-changing technological advances, it’s inevi- table more success stories will emerge. Oſten they begin with an exchange of ideas among colleagues
and friends. Untold wealth, however, can result in some un- friending very quickly, and a battle over ownership that can lead to a loss of face as well as claims of stolen fortunes.
DAVID MALAMED, CPA, CA•IFA, CPA (ILL.), CCF, CFE, CFI, is a partner in forensic accounting at Grant Thornton LLP in Toronto
JUNE/JULY 2015 | CPA MAGAZINE | 61
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