Twins’ Facebook Fight Rages On
MIGUEL HELFT
December 30, 2010
SAN DIEGO — Some people go to court hoping to win millions of dollars. Tyler and Cameron Winklevoss have already won tens of millions. But six years into a legal feud with Facebook, they want to give it back — for a chance to get more.
Fred R. Conrad/The New York Times
Tyler Winklevoss, left, and his twin, Cameron. They want to undo a $65 million deal and pursue a case against Facebook.
Marcio Jose Sanchez/Associated Press
Mark Zuckerberg, Facebook’s chief executive, has said the Winklevoss brothers’ idea was specifically for a dating site, not a social network.
Richard Heathcote/Getty Images
Cameron Winklevoss, left, and Tyler Winklevoss, Olympic rowers, in action last spring in London.
The Winklevosses — identical twins and Harvard graduates — say that they, along with another Harvard student, Divya Narendra, had the original idea for Facebook, and that Mark Zuckerberg stole it. They sued Facebook and Mr. Zuckerberg in 2004, and settled four years later for $20 million in cash and $45 million in Facebook shares.
They have been trying to undo that settlement since, saying they were misled on the value of the deal. But it has not been an easy decision.
As recently as Thursday, the brothers considered dropping their effort to unwind the agreement, and went as far as drafting a statement to that effect, according to people close to the case. They decided, though, to keep fighting.
Their argument is that Facebook deceived them about the value of the shares, leaving them with far less than they had agreed. Whatever their value at the time of the deal, Facebook’s shares have soared since, putting the current worth of the settlement, by some estimates, at more than $140 million.
Next month, the twins and Mr. Narendra plan to ask a federal appeals court in San Francisco to undo the deal so they can pursue their original case against Facebook and Mr. Zuckerberg, and win a richer payday. They could, though, lose it all.
Still, they say it’s not about the money, it’s about the principle — and vindication.
“The principle is that they didn’t fight fair,” said Tyler Winklevoss during an interview at a pub here recently. “The principle is that Mark stole the idea.”
His brother, Cameron, chimed in, “What we agreed to is not what we got.”
Facebook denies it did anything improper and says the Winklevosses simply suffer from a case of “settlers remorse.”
To make matters more complicated, the twins are also at war with the lawyers who helped them win the settlement. The brothers fired them, accused them of malpractice and refused to pay them. A judge recently found for the lawyers, and ordered the twins to pay the 20 percent contingency fee, or $13 million. For now, the money and shares remain in an escrow account.
Yet their battle with Mr. Zuckerberg is what has had them riled up. When they talked about him, and told their version of the founding of Facebook, they helped finish each other’s sentences, easily reciting every last detail of a tale they have evidently told time and again.
“It shouldn’t be that Mark Zuckerberg gets away with behaving that way,” Cameron Winklevoss said.
The company declined to make Mr. Zuckerberg available for an interview, and Andrew Noyes, a spokesman, said Facebook would have no comment “beyond was is already in our appellate briefs.” In the past, Mr. Zuckerberg has denied he stole the Facebook idea from the Winklevosses, saying they planned a dating site, not a social network.
The twins, who are 29, recently told portions of their story in a “60 Minutes” interview for CBS. They grew up in affluence in Greenwich, Conn., were varsity rowers at Harvard and competed in the Summer Olympics in Beijing in 2008. They now live here in San Diego, where they are training for the 2012 London Olympics.
They are as physically striking and imposing as they appeared in the film, “The Social Network, where they were portrayed by one actor, Armie Hammer. They are 6-foot-5 , and their frames are lean and muscular, shaped by years of rowing.
For the interview, they wore hoodies and jeans, and only the variation in the hoodies — one zippered with a Ron Jon Surf Shop emblem, one a pullover with a Quicksilver logo — helped to tell them apart.
As they talked about the Facebook case, no detail was too small to omit, from where they first met Mr. Zuckerberg (the Kirkland House dining room) to the layout of Mr. Zuckerberg’s dorm room, to the content of the e-mails he had sent them after they asked him to do computer programming for a Web site called Harvard Connection. They recited arcane facts about the valuation of private companies and even quoted from the Securities Act of 1934, which they say Facebook violated when it drew up the settlement.
In addition to a bigger payday, the twins say they want a court to reconsider their original claims about Facebook’s founding, pointing to instant messages on the subject sent by Mr. Zuckerberg to various friends. The messages have come to light since the brothers signed the deal. But they say Facebook executives and board members have known about the messages since 2006, and played dirty by concealing them when they negotiated the settlement.
“If you take all those documents, it is a dramatically different picture,” Tyler Winklevoss said.
Facebook declined to comment on the messages. In prior interviews, Mr. Zuckerberg said he had regretted sending some of them.
While the Winklevosses could end up losing their settlement, the risks for Facebook are high as well. If the court unwinds the agreement, the company will have to decide whether to offer them a richer settlement or face a trial. Recent trades on a private exchange suggest that Facebook, which is not a public company, now is worth around $50 billion, and the company may not want the negative publicity associated with a trial, especially if it decides to move forward with a stock offering.
The roots of the original dispute date to 2003, when Mr. Zuckerberg, then a Harvard sophomore, said he would help the Winklevosses and Mr. Narendra program Harvard Connection, later renamed ConnectU. But Mr. Zuckerberg delayed work on Harvard Connection, and when pressed for answers, stalled, according to the Winklevosses. In February 2004 he released TheFacebook, which eventually became Facebook.
After ConnectU and its founders sued, Facebook countersued in 2005.
The settlement, which gave Facebook ownership of ConnectU, was supposed to resolve all claims.
The details of the new dispute, which erupted almost immediately, are less known, in part because the parties reached the settlement after a confidential mediation. But according to court documents, the parties agreed to settle for a sum of $65 million. The Winklevosses then asked whether they could receive part of it in Facebook shares and agreed to a price of $35.90 for each share, based on an investment Microsoft made nearly five months earlier that pegged Facebook’s total value at $15 billion. Under that valuation, they received 1.25 million shares, putting the stock portion of the agreement at $45 million.
Yet days before the settlement, Facebook’s board signed off on an expert’s valuation that put a price of $8.88 on its shares. Facebook did not disclose that valuation, which would have given the shares a worth of $11 million. The ConnectU founders contend that Facebook’s omission was deceptive and amounted to securities fraud.
They refuse to say how much they would ask for in a new negotiation, but they said that based on the lower valuation, they should have received roughly four times the number of shares. At today’s price, that would give the settlement a value of more than $500 million.
In its brief, the company says it was under no obligation to disclose the $8.88 valuation, which was available in public filings. Facebook describes it as one of many that it received and as “immaterial” to the calculations of ConnectU founders and their battery of lawyers and advisers.
“There was no chance that that one valuation would have affected the decision of these sophisticated investors and their entourage of advisers,” Facebook wrote in its brief.
In marketplaces that match buyers and sellers of the shares of privately held companies, Facebook’s shares have soared to more than $100 in recent trades, after adjusting for stock splits.
So far, Facebook’s arguments have won the day in multiple court rulings.
The brothers are hoping for better luck next month, before the United States Court of Appeals for the Ninth Circuit. Unless they decide to give up.
Last year, the Winklevoss brothers completed coursework for a masters in business administration at Oxford. Cameron helped to start Guestofaguest.com, a Web site that offers information about “people, places and parties” in New York, Los Angeles and the Hamptons.
“We are moving forward and trying to be productive individuals,” Cameron said.
When asked if they could have turned ConnectU into a site with hundreds of millions of users, like Mr. Zuckerberg did with Facebook, the twins replied in unison, “Absolutely.” They added that Mr. Zuckerberg deserved some credit for “not screwing up” and expanding Facebook into a community of 500 million users. But they believe the fame and fortune is undeserved.
Tyler Winklevoss said: “Mark is where he is because we approached him to include him in our idea.”
April 2024 March 2024 February 2024 January 2024 December 2023 November 2023 October 2023 September 2023 August 2023 July 2023 June 2023 May 2023 April 2023 March 2023 February 2023 January 2023 December 2022 November 2022 October 2022 September 2022 August 2022 July 2022 June 2022 May 2022 April 2022 March 2022 February 2022 January 2022 December 2021 November 2021 October 2021 September 2021 August 2021 July 2021 June 2021 May 2021 April 2021 March 2021 February 2021 January 2021 December 2020 November 2020 October 2020 September 2020 August 2020 July 2020 June 2020 May 2020 April 2020 March 2020 February 2020 January 2020 December 2019 November 2019 October 2019 September 2019 August 2019 July 2019 June 2019 May 2019 April 2019 March 2019 February 2019 January 2019 December 2018 November 2018 October 2018 September 2018 August 2018 July 2018 June 2018 May 2018 April 2018 March 2018 February 2018 January 2018 December 2017 November 2017 October 2017 September 2017 August 2017 July 2017 June 2017 May 2017 April 2017 March 2017 February 2017 January 2017 December 2016 November 2016 October 2016 September 2016 August 2016 July 2016 June 2016 May 2016 April 2016 March 2016 February 2016 January 2016 December 2015 November 2015 October 2015 September 2015 August 2015 July 2015 June 2015 May 2015 April 2015 March 2015 February 2015 January 2015 December 2014 November 2014 October 2014 September 2014 August 2014 July 2014 June 2014 May 2014 April 2014 March 2014 February 2014 January 2014 December 2013 November 2013 October 2013 September 2013 August 2013 July 2013 June 2013 May 2013 April 2013 March 2013 February 2013 January 2013 December 2012 November 2012 October 2012 September 2012 August 2012 July 2012 June 2012 May 2012 April 2012 March 2012 February 2012 January 2012 December 2011 November 2011 October 2011 September 2011 August 2011 July 2011 June 2011 May 2011 April 2011 March 2011 February 2011 January 2011 December 2010 November 2010 October 2010 September 2010 August 2010 July 2010 June 2010 May 2010 April 2010 March 2010 February 2010 January 2010 December 2009 November 2009 October 2009 September 2009 August 2009 July 2009 June 2009 May 2009 April 2009 March 2009 February 2009 January 2009 December 2008