NY Man Faces Charges in Facebook Scam

Paul Ceglia, a wood-pellet salesman from Wellsville, New York, was charged with mail fraud and wire fraud over what the U.S. Attorney's Office in Manhattan said was fabricated evidence to support his claim of a large ownership stake in Facebook. His lawyer could not immediately be reached for comment.

The businessman sued Facebook and its CEO in 2010 claiming a 2003 contract he signed with Mark Zuckerberg, then a Harvard University student, entitled him to a stake in the social media company. This past March, as part of that case, Facebook released emails sent by Mark  Zuckerberg around the time of the contract to show Paul Ceglia's claims were false.

"Ceglia used the federal court system to perpetuate his fraud and will now be held accountable for his criminal scheme," Orin Snyder, a partner at law firm Gibson Dunn representing Facebook and Mark  Zuckerberg in the civil case, said in a statement.

Paul Ceglia, 39, was arrested at his home Friday morning and was to appear in federal court in Buffalo later in the day, authorities said.

Investigators for the U.S. Postal Inspection Service, which is conducting the probe, made the arrest following Paul Ceglia's return this week after spending time out of the country, according to a source familiar with the matter who was not authorized to speak publicly on the case.

The case is USA v. Paul Ceglia, U.S. District Court, Southern District of New York.

Lobbyist Pleads Guilty to Role in Illegal Campaign Contribution Scheme

Paul Magliocchetti, the founder and president of PMA Group Inc., a lobbying firm, plead guilty Friday in federal court in Arlington, Va., to making hundreds of thousands of dollars in illegal campaign contributions and making false statements to a federal agency, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Neil H. MacBride of the Eastern District of Virginia.

Magliocchetti was charged in an indictment unsealed on Aug. 5, 2010. According to the indictment, Magliocchetti orchestrated a scheme to make illegal conduit and corporate federal campaign contributions in an effort to enrich himself and PMA by increasing the firm’s influence, power and prestige among the firm’s current and potential clients as well as among the elected public officials to whom PMA and its lobbyists sought access. The federal campaigns that received these funds were unaware of Magliocchetti’s scheme.

Magliocchetti admitted that, from 2005 through 2008, he used members of his family, friends and PMA lobbyists to make unlawful campaign contributions. Aware of the strict limits on individual federal campaign contributions – and the outright ban on corporate contributions – Magliocchetti admitted that he instructed the conduits to write checks out of their personal checking accounts to specific candidates for federal office and that, for the purpose of making these contributions, Magliocchetti advanced funds to or reimbursed these individuals using personal and corporate monies. Magliocchetti also admitted that, through this scheme, he caused various federal campaign committees to unknowingly create and file false reports with the Federal Election Commission (FEC) regarding the contributions they had received. These reports, which the FEC made available to the public, falsely stated that the conduits had made contributions, when in fact the contributions were made by Magliocchetti or PMA.

"For years, Mr. Magliocchetti, by using conduit contributors, hid the fact that he and his company were donating significant funds to campaigns in violation of the federal election laws. Mr. Magliocchetti, in an effort to cover his tracks, used family, friends and business associates to secretly funnel hundreds of thousands of dollars to political campaigns, all in an effort to enrich himself and increase his power and prestige," said Assistant Attorney General Lanny A. Breuer. "This case is an important reminder to all who seek to evade the federal campaign finance laws that they will be prosecuted to the full extent of the law."

"Mr. Magliocchetti is answering for his brazen disregard for the law to achieve political influence and enrich himself," said U.S. Attorney MacBride. "Campaign finance laws give transparency to political contributions, and protect the public’s ability to see who’s really funding a campaign."

"Americans should be confident that elections are not being influenced by illegal campaign contributions. Those who undermine this process and use it to gain power and influence should be punished" said Shawn Henry, Assistant Director in Charge of the FBI’s Washington Field Office. "I’m proud of the diligent efforts put forth by special agents from the Defense Criminal Investigative Service and FBI who investigated this matter."

Magliocchetti pleaded guilty to one count each of making false statements, making illegal conduit contributions and making illegal corporate contributions. The maximum penalty for making false statements to a federal agency and making illegal campaign contributions from a corporation is five years in prison, and a $250,000 fine, to be followed by a term of up to three years of supervised release. The maximum penalty for making illegal campaign contributions in the name of another is five years in prison, a fine of not less than 300 percent of the amount involved in the violation and not more than the greater of $50,000 or 1,000 percent of the amount involved in the violation, and a three year term of supervised release. Magliocchetti is scheduled to be sentenced on Dec. 17, 2010.

This case is being prosecuted by Deputy Chief Justin V. Shur and Trial Attorneys M. Kendall Day and Kevin O. Driscoll of the Criminal Division’s Public Integrity Section, and by Assistant U.S. Attorney Mark D. Lytle of the U.S. Attorney’s Office for the Eastern District of Virginia. The case is being investigated by the FBI and the Defense Criminal Investigative Service.