Paul Ceglia: The Man Who Would Have Facebook

Is Paul Ceglia a sleazy grifter, Mark Zuckerberg's long-lost angel investor, or both?

As the StreetFax saga played itself out, the resourceful Mr. Ceglia had already found a new outlet: real estate. “Ceglia’s sale of land in New York and Florida appears to have been a wide-ranging land scam involving misrepresentation, ‘shill bidding’ on eBay, falsification of government documents, and, in some cases, outright theft,” wrote an investigator for Kroll Associates, the high-profile New York-based consulting firm—“corporate spies,” the New York Post called them—hired by Facebook to do a background check.

(Mr. Ceglia has said he left Wellsville because investigators were stalking him. “From waking up to discover people hiding in [a] back field with binoculars, to being followed day-in and day-out by these guys, to coming home and finding a back window open that I know I personally locked,” he wrote to the Wellsville Daily Reporter.)

According to the Kroll report, Mr. Ceglia would buy unbuildable properties for dirt cheap, then advertise them on eBay as buildable. In a typical story, one buyer paid $10,300 and $17,600 for two tracts in Polk County, Florida, which were advertised as “zoned as residential.” They weren’t. “Polk County officials informed Victim-1 that the land was essentially worthless,” the Kroll report stated.

Mr. Ceglia was also arrested for trespassing in Miami while “trying to sell property in a private orange grove to an elderly couple,” in May 2005, according to one of Facebook’s filings, and “falsely told the arresting officer that he had an easement along the grove.” The rightful owner pressed charges; Mr. Ceglia pleaded no contest to first-degree misdemeanor trespass and was fined.

Mr. Ceglia also sold property in New York to people like Gary Conklin, a local businessman who later found out the land wasn’t paid off and had outstanding taxes. “He was kind of a braggert,” Mr. Conklin said, recalling a stroll he and Mr. Ceglia took in the woods on their first meeting. “He talked about other things he had going on. He owned property in Florida, supposedly. He talked about StreetFax … it was a computerized camera thing to monitor street intersections and stoplights. I told my wife, this guy’s really sharp, you know? He seemed like a real go-getter.”

Mr. Conklin won a judgment against Mr. Ceglia in court in 2008. But it wasn’t until the Facebook case that he got reimbursed in full, he said. “His attorney called me and they wanted to settle up what they owed me. So he did and pretty much that’s the last I ever heard of the guy,” he said. “He’s a conniver.”

In 2006, Mr. Ceglia started corresponding by email with Bill Castle, a woodsman, winemaker and strict environmentalist who “looks like a hippie Walt Whitman,” according to The Guardian. Mr. Castle was the proprietor of Pollywogg Hollër, an eco-friendly bed and breakfast in Belmont, New York. Mr. Ceglia wanted the hotelier’s advice on an eco-friendly resort he wanted to build in the Bahamas. After about a year, Mr. Ceglia convinced Mr. Castle to join him on Great Exuma Island and help the venture get off its feet. Mr. Castle did him one better, bringing along his wife and a business partner. “We thought we were going to be down there for a long time, maybe the rest of our lives,” Mr. Castle said.

Mr. Ceglia had promised him a house, a car, a $1,000 per month stipend and groceries, none of which panned out. “The house didn’t exist,” Mr. Castle said. “The vehicle didn’t exist. We had to move in with Paul, his wife and his girlfriend.” It was a big house on the beach, he recalled, and Mr. Ceglia didn’t seem to be struggling, although he slept in the same bed as his girlfriend, his wife and their young sons. “He was spending money on the island,” Mr. Castle said. “He’d rent a car. One night he’d take his girlfriend out to supper, then the next night he’d take his wife out to supper.”

Mr. Ceglia was trying to get some land from the government, said Mr. Castle, who believes he was brought in to lend legitimacy to the project. “I was there more or less as a decoy,” Mr. Castle said. But he became suspicious when Mr. Ceglia started talking about using termite-resistant pressure-treated wood to build houses. “I’m thinking, wait a minute now, he’s supposed to be working with the island community to develop this as an eco-resort and I haven’t got an explanation for how man can live in harmony with nature and use this pressure-treated wood. Within 10 days it was obvious that the whole thing was a scam.”

Mr. Castle and his crew packed up and flew home. He later asked Mr. Ceglia to reimburse him for the trip; he says Mr. Ceglia responded by threatening to sue him for abandoning the project. “The guy is incredibly intelligent,” Mr. Castle said. “He has an incredible charisma about him. I’ve always said, if he would have taken all his talent and directed them in an honest direction, he would be making money.”

But it was actually the fraud charges concerning Mr. Ceglia’s company, Allegany Pellets LLC, that led to the rediscovery of the contract with Mark Zuckerberg, Mr. Ceglia told Bloomberg last year. Attorney General Andrew Cuomo charged the Ceglias in 2009 with defrauding customers who preordered wood pellets and never got them. According to court documents, the Ceglias blamed the failure on flooding, mechanical failures, flaky suppliers, and obstacles such as “not enough pellets to fill truck.” “I feel terrible,” Mrs. Ceglia told Bloomberg. “We had many sleepless nights.”

Kenneth Dewert, who gave Mr. Ceglia a down payment of $2,280 for a “tractor-trailer load” of pellets that never came, decided to confront him in person. “He kept on putting me off and putting me off, so me and my wife drove up there,” he said. “All there was, was a little pile of sawdust, and he said he didn’t have no money cause his machines were all broke down.” Mr. Ceglia showed them around the property, which was nothing like the red barn, wide fields and tall stacks pictured on the website. “He just had a rundown house, rundown little garage. He kept on apologizing—‘I’m sorry, sorry, yours is the first order to go out. But he was telling everyone that,’” Mr. Dewert said. The Attorney General ordered the Ceglias to pay restitution and fines last year, and they complied.

The investigation inspired Mr. Ceglia to look through old files to pay back customers, he said, otherwise “no way I would have ever started looking through these ancient folders. That contract would just be sitting in there gathering dust.”

Mr. Ceglia denied our a Facebook friend request in addition to our requests for an interview, so we had to content ourselves with his publicly available profile, which features photos of his two boys on a boat in Nova Scotia and pictures of Mr. Ceglia in front of a palm tree, with his wife, and at home in Wellsville, always smiling. Mr. Ceglia’s list of favorite quotations, along with stand-bys from Gandhi, Einstein and Margaret Mead, includes a line from Willy Wonka: “Invention, my dear friends, is 93 percent perspiration, six percent electricity, four percent evaporation, and two percent butterscotch ripple.”

This article appeared in The New York Observer on Wednesday, Sept. 21, 2011.

Paul Ceglia: The Man Who Would Have Facebook