
U.S. Arrests Paul Ceglia for Multi-Billion Dollar Scheme to Defraud Facebook - iProject
http://betabeat.com/2012/10/dont-mess-with-the-postal-service-u-s-attorney-arrests-paul-ceglia-for-multi-billion-dollar-scheme-to-defraud-facebook/
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grellas
A few thoughts:

1\. When Ceglia first filed his claims, I called it a "lawsuit full of holes
[that was] built up by sensationalist reporting into a supposed major threat
to Facebook and to Mr. Zuckerberg" and concluded that, "in the courts, this
thing is going nowhere." (<http://news.ycombinator.com/item?id=1537158>) My
sense of this had nothing to do with any fraudulent tampering with evidence as
alleged now in the criminal prosecution but instead with the whole smell of
the thing: a flaky 2-page contract with basically incoherent terms used as a
basis for a lawsuit brought by a backwater lawyer who drafted a complaint that
would have been an embarrassment to a first-year law student. It looked like a
joke on the face of it, notwithstanding that a small-town judge had initially
entered a TRO based on the filing.

2\. Then, in April, 2011, this case looked like it had taken a major turn:
Ceglia had dumped his original lawyer and retained the prestigious firm of DLA
Piper; he also produced a mountain of emails "documenting" that he and Mr.
Zuckerberg had, in effect, entered into a legal partnership giving him a major
ownership piece in the FB venture; he also (via the lawyers) put together a
compelling story in his complaint making it appear that FB and Mr. Zuckerberg
were in deep legal trouble concerning his claims. (Here is my comment at the
time: <http://news.ycombinator.com/item?id=2438063>) Once again, there was a
sensationalist wave of reporting across the web rejoicing about how Mark
Zuckerberg was about to get his comeuppance.

3\. Since that time, through the work of very able lawyers for Facebook, the
Ceglia case has been progressively torn to shreds in the federal court to
which it had been removed and, as the case has disintegrated, it has drawn
progressively less interest (the DLA firm withdrew at the first sign of
serious trouble). Indeed, without the dramatic turn of a federal criminal
indictment, I doubt that it would done more than draw a few yawns as it
eventually headed to the judicial graveyard where most flaky cases ultimately
find their rest.

4\. The lesson here is how prejudice and crowd-think can dramatically affect
and distort perceptions. When someone takes on the role of villain (as Mr.
Zuckerberg has in some circles), there are those who so desperately want to
see him torn down that they will suspend their better judgment just to see it
happen, whether he was right or wrong in what he had done. This is not to
excuse him in things he may have done wrong in other contexts, but _he had
done nothing wrong here_ and it is just amazing to me how many people were
willing to take it as a given that he had even with little or no evidence to
back it up.

5\. The other (major) lesson here is that there are serious limits to playing
fast and loose with the courts. It is true that there is much abusive
litigation but there is obviously a line that cannot be crossed without
inviting horrific consequences. It doesn't happen often enough that abusive
litigants get what they deserve but, when it does occasionally happen, it is
very nice to see. At least it sets an outer bound on what people can do to
abuse one another in the courts.

~~~
domainregistry
"and retained the prestigious firm of DLA Piper"

What are your thoughts on the pox on DLA Piper's house as a result of taking
him on as a client? Doesn't it speak to their naiveté after reviewing the
materials he was able to present? Or?

~~~
anigbrowl
I wonder about that too. As a firm with a reputation to guard, I assumed they
had vetted their client to some degree, and relied heavily on what I assumed
was their good judgment in trying to guess the future progress of the case. I
wonder if they simply got $ signs in their eyes?

~~~
onetwothreefour
If he's presenting them with what looks to be evidence, then what's the
problem? Hindsight is 20/20.

~~~
anigbrowl
Lawyers aren't paid to be credulous. Allowing oneself to be enlisted in a
fraud is a severe failure of professional judgment.

------
nostromo
I was struck when we incorporated our company and raised financing how much we
still use ink and paper to keep track of things like corporate ownership. When
signing so many documents I wanted to seal them with paraffin wax and send
them to our lawyers via carrier pigeon.

In the case of Facebook, a multi-billion dollar company, it seems amazing that
someone can come out of the woodwork and with a little effort in document
tampering cause such a hullabaloo. It seems like too important of an issue to
be inpart determined by "spacing, columns, and margins of page one of the
Alleged Contract."

Of course, I don't know of a better system, just that the current system seems
archaic. (You probably couldn't create a centralized "contract bureau" in the
federal government, because many contracts are private, until someone sues.)

~~~
joezydeco
I always wondered if there was a need for a cheaper, worldwide document
certification system.

Of course you can get a notary to stamp a document or file it with the county
clerk in your jurisdiction. But what about taking an MD5 of a PDF and printing
it in the newspaper? Would that work?

~~~
danielweber
A long time ago I posed md5's to usenet test groups when I wanted to prove I
wrote something.

You have to worry about people breaking things. Raw MD5 is considered useless
today, since there are tools that make two documents with the same MD5.

This would not necessarily invalidate all prior MD5s; if you published like
that 10 years before people starting breaking MD5, that would be pretty good
evidence you really did do it, unless your idea is so amazingly valuable that
it was more worthwhile to try to forge documents instead of publicizing your
research.

Using a few different HMACs in parallel would probably give you good proof.

~~~
Evbn
Spoofed MD5s are a vulnerability when you execute software blindly, but the
padding is obvious if you examine the source data.

~~~
dllthomas
That's no reason not to use a better algorithm. Weaknesses in MD5 are already
well enough understood to make it useless for many applications, and weak
crypto algorithms only get weaker, as new attacks are discovered and as
technology progresses to make a broader range of things feasible.

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kfury
I'm disappointed by all the folks calling mail fraud a 'loophole'. Mail and
wire fraud are the ways people prosecute domestic 419 (Nigerian prince) scams
and other confidence games.

This case shouldn't be given a free pass just because the party intended to be
deceived is the judicial system rather than the mail recipient.

~~~
shasta
Legality of fraud should have nothing to do with whether the mail was used.

~~~
tptacek
It doesn't, really. The only difference is the venue where it's prosecuted.

~~~
shasta
It at least affects maximum sentence, right?

~~~
tptacek
Fraud terms vary between states, but you're already looking at 10-15 years for
commercial fraud before aggravating factors, from what I can tell (I'm not a
lawyer).

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leoh
Did this line strike anyone else as pathetic?

In today’s press release, USPIS Inspector-in-Charge Randall C. Till added:
“When Mr. Ceglia allegedly decided to take advantage of Mark Zuckerberg and
Facebook, he underestimated the resolve of the Postal Inspection Service to
bring him to justice for illegal use of the U.S. Mail.”

Ceglia is probably in the wrong and unethical. But the self-righteousness and
pompadour of the USPS? Really?

~~~
jallmann
The Postal Inspection Service is a useful tool. Mail fraud brings down a lot
of sleazeballs that would otherwise have gotten away. Maybe because that's the
last thing they would think to cover up.

~~~
koenigdavidmj
You make it sound like one of those grab-bag offenses like resisting arrest
that effectively amount to `you pissed off the government and now we're going
to punish you for it'.

~~~
tptacek
He may have made it sound like that, but it is not. It's a federal felony, and
it's generally used to foreclose on large-scale scam operations.

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unreal37
I wonder what will happen to his lawyers. And I wonder what the judge thinks.

Ceglia has had a couple of lawyers (Argentieri and Boland) who have been
filing discovery motions, and really aggressively going after Facebook and
Zuckerberg. If you read only a couple of their filings, it seems really
personal for them. They are absolutely offended at Facebook's lawyers
behavior, really aggressive in the wording of their filings, and going so far
as to call out FB lawyers by name and complain about them.

And now it turns out the US Govt found the real contract from email archives
and it doesn't match at all.

I'd like to see the lawyers punished somehow (reprimanded) for pushing this
obvious fraud through the court system so hard and for so long.

And if I were the judge, wasting 2 years of his life on a sham case like this,
I'd be furious. They were still submitting filings even as of yesterday!

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defen
Perhaps a stupid question, but if this guy had hand-delivered all the
documents to the court, he'd be totally in the clear with regard to criminal
activity? Why isn't he being charged with providing fabricated evidence to a
federal court?

~~~
tptacek
Presumably because it was easier for the DoJ to make the same case using mail
fraud as the vector, just like it was easier to take out Capone with tax
fraud. The heart of the actual case will still be the deceptions Ceglia used
to attempt to scam a billion dollars out of Facebook.

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redthrowaway
Can anyone give a reasonable argument for why mail fraud carries a maximum
sentence of 20 years? That seems ludicrous in the extreme. Why does mail fraud
incur a greater penalty than rape, kidnapping, and most forms of murder?

~~~
tptacek
Because mail fraud cases address a very large spectrum of actual crimes. The
typical sentence for a mail fraud case is 21 months; there exists a very large
number of aggravating factors that increase mail fraud sentences, including
the scale of the operation (if you mass-mail to perpetrate fraud, you'll do
more time), the sophistication of the victims (if you try to defraud fixed-
income seniors, you'll do more time), sophisticated attempts to conceal your
activities to avoid investigators, if you react to investigation by trying to
move your whole operation out of US jurisdiction, if you damage the solvency
of a bank, things like that.

People fixate on the maximum sentences when they should focus instead on the
minimums (here, 10 months). Just by nature of what "mail fraud" investigations
represent, you're bound to get wild swings from case to case.

~~~
seacond
Maybe they fixate on maximums because those are what are used plea bargaining?
Would you leave the possibility of 20 years in a federal prison (no matter how
remote) to chance?

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fleitz
Mail fraud... looks like some AG spent too much time watching "The Firm"

~~~
mtgx
They can arrest people whenever they want with "loopholes" like these, and yet
they can't seem to do a damn thing about any of the bankers who helped bring
down the economy. Yeah, I just don't buy that.

~~~
alexqgb
Elliot Spitzer - who knows all about books been suddenly thrown in cases that
routinely go unpunished - has some choice words about this in "Inside Job".
Having been on both sides of the table, he is entirely credible when saying
that the dearth of prosecutions reflected a lack of will, not an absence of
ways.

<http://www.youtube.com/watch?v=FzrBurlJUNk>

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taylorbuley
I had dug up his arrest record ~day one -- Not pretty. Interestingly, I had
surprised a previous lawyer, who apparently did not do the same before taking
on the case.

[http://www.forbes.com/sites/velocity/2010/07/28/facebooks-
ma...](http://www.forbes.com/sites/velocity/2010/07/28/facebooks-magic-
mushroom-ride/)

------
seivan
Is it me, or does it seem like his combined stupidity and incompetence (two
different things) is what caused him to not realise the shit he pulled of
leaves a trace?

Take it from a non developer scumbag thief "wannatrepenur" to not have the God
damn decency to read up on how email works before trying a stunt like this.

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timpeterson
But Zuckerberg did meet with this Ceglia guy, right?

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kennethcwilbur
If only tl;dr were in Latin, lawyers would understand it

~~~
dschleef
nimius illectus - "the excessive amount that is unread"

