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Facebook and Fraud: New Federal Charges Grow Out of Lawsuit

Although Paul Ceglia's lawsuit against Mark Zuckerburg has consistently made headlines for awhile, a new wrinkle developed last week when federal authorities launched a new criminal case. A federal prosecutor claims that Ceglia's lawsuit violated several fraud statutes - providing an interesting look at what can count as a federal fraud crime.

While Florida and the other states deal with fraud in their own criminal codes, several statutes deal with some fraudulent behavior at the federal level. These federal crimes include wire fraud and mail fraud. When criminal allegations involve using mail or electronic media to communicate across state lines, these charges might apply in Florida and throughout the country.

This new Facebook case provides a good illustration of what authorities might consider under these federal statutes.

Ceglia's lawsuit alleges that he made a contract with Zuckerburg in the early days of Facebook. In exchange for some unrelated programming work, Ceglia claims that Zuckerburg promised him a large stake in Facebook. There are some indications that Ceglia altered a real contract to make it look as if it included this provision. The government also claims that Ceglia tampered with evidence to support his claim - both by destroying some information and manufacturing emails.

The interesting part is that the government now claims that filing and pursuing the lawsuit constituted fraud. These allegations argue that Ceglia committed fraud by using the postal services to file the lawsuit and serve copies of documents on Zuckerburg. The same conduct allegedly counted as wire fraud when Ceglia used interstate communication lines like telephone services and the Internet, again to support his lawsuit.

Essentially, the government believes that the lawsuit is fraudulent and that Ceglia's efforts to collect damages by using a materially deceitful claim are enough to justify a federal case against him.

For his part, Ceglia pleaded not guilty to these charges and this case may present more interesting issues in the near future.

Source: Los Angeles Times, "Man suing Facebook pleads not guilty to criminal fraud charges," Jessica Guynn, Nov. 28, 2012

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