Ceglia v. Zuckerberg et al

Filing 49

DECLARATION signed by Donald R. Henne re 44 MOTION to Expedite - Notice of Motion for Expedited Discovery filed by Mark Elliot Zuckerberg, Facebook, Inc. filed by Mark Elliot Zuckerberg, Facebook, Inc.. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F, # 7 Exhibit G, # 8 Exhibit H, # 9 Exhibit I)(Snyder, Orin)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
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:
PAUL D. CEGLIA,
:
:
Plaintiff,
:
:
v.
:
:
MARK ELLIOT ZUCKERBERG and
:
FACEBOOK, INC.,
:
:
Defendants.
------------------------------------ x

Civil Action No. 1:10-cv-00569-RJA
DECLARATION OF DONALD R.
HENNE IN SUPPORT OF
DEFENDANTS’ MOTION FOR
EXPEDITED DISCOVERY

I, DONALD R. HENNE, declare and state as follows:
1.

I respectfully submit this declaration in support of Defendants’ Motion for

Expedited Discovery.
2.

I am currently employed by Kroll Associates, Inc. (“Kroll”) as an Associate

Managing Director. Kroll offers premier business intelligence and investigation services. I have
been employed by Kroll since July 2005. Prior to being employed by Kroll, I was a Lieutenant
Commander and officer in the New York City Police Department for 20 years.
3.

In September 2010, Kroll was engaged to conduct a background investigation of

the plaintiff in this litigation, Paul D. Ceglia (“Ceglia”). The objective of the investigation was
to identify material legal proceedings, significant business or personal controversies, and other
issues that might reflect on Ceglia’s reputation, character and credibility. I have been a member
of the team conducting the investigation since its inception and have personal knowledge of the
matters stated in this Declaration.
4.

As is standard practice, we first reviewed a variety of public records in relevant

jurisdictions. Kroll conducted on-site research of public-record sources in various locations. In

addition, Kroll conducted nationwide online searches of public records using commercial
databases.
Consumer Fraud Related to Allegany Pellets, LLC
5.

I have reviewed public records, which were identified by another Kroll

investigator, pertaining to the New York State Attorney General’s lawsuit against Ceglia, his
wife Iasia, and their business Allegany Pellets, LLC. True and correct copies of those records
are attached hereto as Exhibit A.
6.

According to the records attached as Exhibit A, on December 29, 2009, the

Attorney General obtained a temporary restraining order against the Ceglias and Allegany
Pellets, LLC, for defrauding dozens of consumers out of approximately $200,000. The parties
resolved this matter pursuant to a Consent Order and Judgment, dated October 22, 2010,
pursuant to which the Ceglias and Allegany Pellets, LLC, agreed to make restitution of
$106,421.14 and to pay costs, fees, and penalties of $25,000.00.
7.

In a press release announcing that his office had obtained a temporary restraining

order, then-Attorney General Andrew Cuomo stated that “[t]his company and its owners
repeatedly lied to consumers and continued to solicit new orders despite an inability to deliver
wood pellets that were bought and paid for months before the winter heating season began.” A
true and correct copy of this press release is attached hereto as Exhibit B.
8.

Given this information, at my direction, another Kroll investigator determined that

Ceglia had been arrested and charged criminally in connection with this matter. Ceglia was
arrested on October 30, 2009, and subsequently charged by the Allegany County District
Attorney’s Office with one count of first-degree scheme to defraud and 12 counts of fourth-

degree grand larceny. Ceglia received an adjournment in contemplation of dismissal on one
count of grand larceny, which was reduced to petit larceny, a Class A misdemeanor.
Felony Drug Conviction in Texas
9.

I have also reviewed public records, which were identified by another Kroll

investigator, pertaining to Ceglia’s arrest and conviction in Panola County, Texas. True and
correct certified copies of those records are attached hereto as Exhibit C.
10.

According to the records attached as Exhibit C, Ceglia was arrested on March 26,

1997, and subsequently pled guilty to aggravated possession of a controlled substance, a firstdegree felony. Ceglia was in possession of more than 400 grams of psilocybin, including
dilutents. Psilocybin is a hallucinogenic compound found in certain mushrooms. Ceglia was
sentenced to ten years of probation and paid $15,000 of a $25,000 fine, $10,000 of which was
suspended.
Misdemeanor Trespass Conviction in Florida
11.

I have reviewed public records, which were identified by another Kroll

investigator, pertaining to Ceglia’s arrest and conviction in Polk County, Florida. True and
correct certified, partially redacted copies of those records are attached hereto as Exhibit D.
12.

According to the records attached as Exhibit D, Ceglia was arrested on May 1,

2005, and subsequently pled nolo contendere to Trespassing on Cultivated Land, a first-degree
misdemeanor. Ceglia was stopped in a private orange grove by a deputy sheriff who had been
advised of a trespassing problem in the area. Ceglia misinformed the officer that he had an
easement along the grove and was showing the property to two potential buyers from Miami.
The deputy sheriff’s field investigation confirmed that Ceglia did not have any easement, and the
property owner elected to press charges. Ceglia was ordered to pay a fine.

Ceglia’s Land Sales
13.

As a result of this finding, Kroll investigators conducted a detailed search of

property records connected to Ceglia. I and other Kroll investigators learned that between 2005
and 2008, Ceglia sold a significant number of properties in New York and Florida.
14.

Kroll investigators then identified and interviewed several of the individuals who

contracted to purchase land from Ceglia. Many interviewees provided documentation regarding
their interactions with Ceglia, including sales agreements, property deeds, eBay advertisements,
and e-mail with Ceglia and his associates.
15.

Through my review of this information, I learned that 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.
Misrepresentation
16.

In October 2010, I was informed by another Kroll investigator who spoke to a

victim who lives in Margate, Florida (“Victim-1”), that Victim-1 provided the following
information:
a.

In March and April 2005, Victim-1 purchased two tracts of land located in

Polk County, Florida from Ceglia via an internet auction on eBay. The first property—which
was purchased in March 2005 with a winning bid of $10,300—was listed as “zoned as
residential” and “cleared and ready to build.” The second property—which was purchased in
April 2005 with a winning bid of $17,600—was advertised as “zoned as residential,” “close to
Disney,” and “roads not developed as of yet.” Ceglia also informed Victim-1 that he and his
attorneys were obtaining an easement and road access for the properties. True and correct copies

of these eBay advertisements are attached hereto as Exhibit E, which are partially redacted to
protect the privacy of Victim-1.
b.

In or around 2006, Victim-1 received the tax bills for these properties and

realized he had been defrauded. In late 2006, Victim-1 contacted Polk County officials and
learned that each parcel was, in fact, unbuildable land not zoned for residential use. Although
Ceglia had told Victim-1 that his attorneys were working on obtaining an easement and road
access for the Florida properties, Polk County officials informed Victim-1 that the land was
essentially worthless, and the County was not considering providing an easement or road access
in the future.
17.

In October 2010, I was informed by another Kroll investigator who spoke to a

victim who lives in Orlando, Florida (“Victim-2”), that Victim-2 provided the following
information:
a.

In December 2005, Victim-2 purchased a tract of land located in Polk

County, Florida, advertised as “buildable” through an internet auction on eBay. The winning bid
for the tract was $17,100. Victim-2 paid Ceglia the purchase price in full. True and correct
copies of these eBay advertisements are attached hereto as Exhibit F, which are partially
redacted to protect the privacy of Victim-2.
b.

After receiving the tax bill for the property, Victim-2 was alerted that the

value of the land was significantly less than the purchase price. As a result, Victim-2 contacted
Polk County officials and learned that the property was not zoned for residential use and
therefore was not buildable.

c.

After learning of the property’s zoning restrictions, Victim-2 attempted to

dispute the sale with Ceglia; however, Ceglia once again represented that the property was
buildable, so long as Victim-2 obtained a “right of way.”
d.

Victim-2 received subsequent documentation from County officials

reconfirming that this property could not be used for residential purposes.
Apparent “Shill Bidding” on eBay
18.

In October 2010, I was informed by another Kroll investigator who spoke to a

victim who lives in Naples, Florida (“Victim-3”), that Victim-3 provided the following
information:
a.

Victim-3 became aware of a tract of land located in Polk County, Florida

when she attempted to place a bid for it on eBay, but was not the high bidder in the auction. The
property was listed on eBay as “buildable”; the description even stated that “one could drive an
RV onto it.” In addition, the property was described as having an entranceway, and the listing
included a picture of the purported property and its supposed entranceway.
b.

In or around May 2006, Victim-3 purchased the property from Ceglia for

$6,000 through a private sale. Victim-3 first attempted—and failed—to win the property on
eBay. Ceglia contacted Victim-3 to inform her that the high bidder backed out, and offered her
the opportunity to purchase the property in the amount of Victim-3’s last bid of $6,000, which
she accepted. Indeed, the winning bid was approximately $2,000 higher than Victim-3’s final
bid of $6,000.
c.

After closing, Victim-3 learned from Polk County representatives that the

property was inaccessible because it had no public easement. Nor was the property buildable.

19.

In October 2010, I was informed by another Kroll investigator who spoke to a

victim who lives in Spring Hill, Florida (“Victim-4”), that Victim-4 provided the following
information:
a.

Victim-4 became aware of a tract of land located in Polk County, Florida

when he attempted to place a bid for it on eBay, but was not the high bidder in the auction.
Victim-4 was contacted by Ceglia after the auction closed. Ceglia informed Victim-4 that the
winning bidder had decided to back out of the transaction and offered Victim-4 the opportunity
to purchase the property according to his last bid price.
b.

Victim-4, who was still interested in the property, decided to accept

Ceglia’s offer and purchased the land for his final bidding price of $12,500, in or around August
2006.
c.

Prior to the sale’s closing, Victim-4 specifically asked Ceglia whether the

tract of land was buildable, to which Ceglia responded that if it was not, he would fully refund
the purchase price. Ceglia also advertised the property as measuring one full acre.
d.

Subsequent to the sale, Victim-4 learned from Polk County officials that

he was not permitted to build on the land. He also was informed that the tract of land only
measures 0.75 acres, contrary to Ceglia’s representation.
Falsification of Government Documents
20.

In October 2010, I was informed by another Kroll investigator who spoke to a

victim who lives in Miami, Florida (“Victim-5”), that Victim-5 provided the following
information:
a.

In December 2005, Victim-5 purchased a parcel of land located in Polk

County, Florida from Ceglia via an internet auction on eBay. Ceglia advertised the land by

stating that an RV could be driven on it, a house could be built on it, electric could be installed
either by overhead or underground wiring, and a water well could also be installed on the land.
b.

Victim-5 purchased the land with a winning auction bid of $47,000, and in

December 2005 made a $5,000 down payment via PayPal, with the remaining balance paid at
closing.
c.

After the sale, Victim-5 met with Ceglia for dinner, where Ceglia

informed him that the property he purchased would increase in value once additional roads were
built and more houses were constructed in the area. Ceglia also stated that he would be moving
to the area himself.
d.

In December 2006, Ceglia sent Victim-5 a Polk County document

representing that a building permit for the land could be obtained. The County document,
however, did not identify the tract at issue. A true and correct copy of the purported County
document obtained from Victim-5 is attached hereto as Exhibit G.
e.

Approximately one year later, Victim-5 contacted Polk County

representatives, and learned that the property sold to him by Ceglia was virtually uninhabitable
due to zoning restrictions.
21.

In October 2010, I was informed by another Kroll investigator who spoke to a

victim who lives in Miami, Florida (“Victim-6”), that Victim-6 provided the following
information:
a.

In February 2005, Victim-6 purchased property from Ceglia via an online

internet auction on eBay, with a winning bid of $7,000. According to Victim-6, the property—
located in Polk County, Florida—was advertised by Ceglia as “buildable.”

b.

Victim-6 met personally with Ceglia to transact the deal. At the time of

the closing in February 2005, Ceglia provided Victim-6 a Polk County document representing
that a building permit for a home could be obtained. The County document, however, did not
identify the tract at issue. This document was identical to the document that Ceglia provided to
Victim-5. A true and correct copy of the purported County document obtained from Victim-6 is
attached hereto as Exhibit H.
c.

Subsequent to the sale and closing, Polk County officials informed

Victim-6 that his property was not buildable.
22.

In October 2010, I was informed by another Kroll investigator who spoke to the

Director of the Polk County Land Development Division in Bartow, Florida (“Director”), who
provided the following information after inspecting a copy of the Polk County document that
Ceglia provided to Victim-5 and Victim-6:
a.

The Director stated that the form is used for land verification purposes,

and can be obtained by calling the County Land Development Division. In fact, the Director
stated that people “call by the hundreds” to request this form, particularly to confirm the zoning
requirements for a specific parcel of land prior to buying the property.
b.

In order to obtain the County document that Ceglia provided to Victim-5

and Victim-6, an individual would need to provide the parcel ID number along with the section,
township and range relating to the parcel.
c.

Upon inspection of the document, the Director confirmed that the parcel

ID number was not reflected on the form. The Director stated that under no circumstances could
the form be issued without the parcel ID number, as the County official would not be able to
look up the requested parcel information without it.

d.

The Director stated that without the parcel ID number, these designations

could apply to any parcel of land among hundreds of parcels in the area. Moreover, the Director
stated that the missing parcel number had to have been “whited out.”
e.

Finally, the Director noted that the line at the bottom of Exhibits G and H,

which reads “A building permit for a home can be obtained” with no period, was likely doctored:
typically, that sentence reads “A building permit for a home can be obtained if,” followed by a
list of the requirements that would have to be met in order for a building permit to be obtained.
Outright Theft
23.

I learned from another Kroll investigator that Victim-1 also provided the

following information about his purchase of land located in Allegany County, New York:
a.

In October 2005, Ceglia purported to sell Victim-1 two tracts of land in

Allegany County, New York for $16,300 each. After making a $5,000 down payment for each
tract, Victim-1 agreed to pay the remaining balance on each tract through monthly payments that
were personally financed by Ceglia. Victim-1 made routine monthly mortgage payments to
Ceglia through August 2006.
b.

At the time of the sale, Ceglia provided Victim-1 with an Agreement for

Deed for one of the lots. The Agreement, dated October 5, 2005, identified Victim-1 as the
buyer and Ceglia as the seller. Victim-1 also submitted to Ceglia signed documentation relating
to the second parcel, but Ceglia never returned it.
c.

Victim-1 made monthly mortgage payments totaling $1,754.46 to Ceglia

on the two New York properties through August 2006.
d.

Sometime in late 2006 or early 2007, Victim-1 still had not received a tax

bill for either Allegany County parcel. He contacted Allegany County officials, who informed

him that he was not listed as the owner of either parcel. Indeed, Victim-1 was not listed as the
owner of any land in the State of New York
e.

In fact, on March 10, 2006, five months after Ceglia purported to sell these

tracts to Victim-1, Ceglia split one of the tracts purportedly already sold—the one in which
Victim-1 believed he held a valid Agreement for Deed—in two. As a result, that tract became
two separate parcels. Furthermore, Ceglia sold one of these two newly-created subdivided
parcels to another purchaser for approximately $30,000. Ceglia remains the documented owner
of the second subdivided parcel.
24.

In October 2010, I was informed by another Kroll investigator who spoke to

victims who live in Hunt, New York (“Victims-7 and 8”), that Victims-7 and 8 provided the
following information:
a.

In January 2007, Victims-7 and 8 identified land in Livingston County,

New York, offered for sale by Ceglia. The land was advertised publicly as “For Sale.”
b.

Victims-7 and 8 purchased the land for $21,251.00, financing the purchase

price with Ceglia. The parties entered into a written Agreement for Deed for the property.
c.

Victims-7 and 8 paid monthly installments of $257.82 to Ceglia for over a

year, totaling approximately $4,125.00.
d.

In late 2007, Victims-7 and 8 were advised by the Livingston Country

Treasurer that taxes had not been paid on the parcel, which led Victims-7 and 8 to learn that
Ceglia had never been listed with the County as the owner.
e.

Victim-7 reported the fraud to the Allegany County District Attorney’s

Office and the Allegany County Sheriff’s Office, but criminal charges were not brought. Victim-