Exclusive: Facebook’s Smoking Gun in the Ceglia Case? The Authentic Contract

On Friday, Facebook’s lawyers made news when they told a court hearing a lawsuit brought by the alleged initial investor in Facebook, Paul Ceglia, that they’d found the “smoking gun” proving the alleged investment contract was a fraud.

But the document filed to the court that contained the “smoking gun” allegations didn’t specify what the smoking gun was.

The answer?

Facebook says they’ve found the “authentic contract” between Ceglia and Zuckerberg. Facebook is also charging that Ceglia, who they say is now living in Ireland, is holding back electronic storage devices he intentionally tried to hide from them.

Both parties agree that in 2003 Ceglia hired Zuckerberg, then a Harvard undergrad, to do work for his StreetFax company. But Ceglia filed suit in 2010, saying the contract also included $1,000 initial funding for Facebook, and that he’s entitled to more than half of the social networking giant.

Facebook argues the contract Ceglia produced electronically is a forgery and that Ceglia is a known con artist.

And now Facebook says that in the course of discovery — where Ceglia’s lawyers turned over to Facebook a number of computers and hard drives — that it has found the original “authentic contract” and proof that there are other “storage devices” that Ceglia is intentionally hiding from them in violation of a court order.

But the problem is Ceglia is claiming the “authentic contract” is shielded from use in the suit by designating them as “confidential” under the rules of an agreement between the two parties. Facebook is asking the federal judge overseeing the case in New York State to overrule that designation, in a detailed Friday filing where many of the documents were completely redacted due to the claims of confidentiality.

If indeed Facebook has a copy of the “authentic contract” and it does not include any investment in Facebook, the social networking giant could be close to finally putting aside the legal dramas over the site’s founding in 2004. Earlier this year, the Winkelvoss twins, who was made famous by the movie “The Social Network,” declined to ask the Supreme Court to let them re-litigate their settlement with Facebook over Zuckerberg’s alleged theft of their idea.

These newly revealed details were also filed on Friday in court, alongside the document that led to a flurry of stories about Facebook finding an unspecified “smoking gun” in the case.

But the press, including Wired.com, missed the details by focusing on the strongly worded memo supporting the proposed motion, rather than looking at the proposed motion itself — which Facebook’s lawyers failed to redact.

On Saturday, Facebook’s lawyers brought attention to the original memo by asking the court to remove that document from its electronic system, due to improper redaction, and instead substitute a redacted version. The court complied and the original proposed order is no longer available through the court’s electronic document system, known as PACER.

But Wired.com has both versions.

Here are the two key passages from the new redacted version of the proposed order that Facebook is asking the judge to agree to:

Here are the same passages from Friday’s unredacted filing:

In the court filing, Facebook says that after it combed through the digital archives provided to it, it found 120 documents that were relevant to the case. It provided that list to Ceglia’s lawyers, who said that all of them were confidential and couldn’t be used. The lawyers argued back and forth with each other, but Ceglia’s lawyers refused to budge.

Facebook is now asking the judge in the case to allow all 120 documents to be used..

For their part, Ceglia’s lawyers say the confidentiality designations are correct and that they’ve provided all the material relevant to the case. Now Ceglia’s lawyers say, it’s time Zuckerberg provide all his e-mails to Ceglia and provide numerous hand-writing samples. (The staggered timing was intended to prevent Ceglia from using the Zuckerberg e-mails and handwriting to be used to create evidence, according to Facebook’s lawyers.)

An oral argument in the case before Oral Argument Judge Leslie G. Foschio of the U.S. District Court Western District of New York is scheduled on August 17.

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Accused Facebook Spammer Sanford Wallace Has a History of Spamming

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Wallace has a history of spamming. Back in 1990, he gained fame as one of spam’s most vocal defenders. In the 1990s, he headed a company called Cyber Promotions that used to send about 30 million junk e-mails a day, CBCNews reported.

Because of his activities, Wallace faced a number of civil actions that include court cases from social networking site MySpace in 2008 and U.S. Federal Trade Commission in 2006.

In the 2008 lawsuit, MySpace won a $230 million judgment against Wallace and his partner, Walter Rines over junk messages sent to its members. Moreover, a fine of $4 million was imposed on Wallace in 2006 as the Federal Trade Commission accused him of running an operation that tainted computers with spyware.

In 2009, Facebook sued Wallace under federal anti-spam laws known as CAN-SPAM and won a $711 million civil judgement against him. As par the judgement, Wallace was banned from using the social networking site, but he had violated the judgement within a month.

According to the criminal indictment, Wallace allegedly logged into Facebook during an April 2009 Virgin Airlines flight from Las Vegas to New York. In January this year, he also allegedly created a Facebook profile under the user name David Sinful-Saturdays Fredericks.

“Now Wallace also faces serious jail time for this illegal conduct. We will continue to pursue and support both civil and criminal consequences for spammers or others who attempt to harm Facebook or the people who use our service,” Chris Sonderby, Facebook’s lead security and investigations counsel, said in a statement.

Wallace was released on Thursday after he posted a $100,000 unsecured bond. His next court appearance is scheduled for Aug. 22 at the U.S. District Court for the Northern District of California in San Jose, Calif. Wallace was ordered not to access social networking sites like Facebook and MySpace. 

Must Read: Facebook Uncovers ‘Smoking Gun’ Evidence in Paul Ceglia Case 

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