Facebook CEO sued for fraud in Palo Alto real estate deal

Developer claims Zuckerberg failed to deliver on promise of business referrals

A Palo Alto real estate developer is suing Facebook CEO Mark Zuckerberg for fraud in a deal that allegedly included promises for business introductions in exchange for buying out a contract to purchase a property adjacent to Mr. Zuckerberg's home at a deep discount, according to a lawsuit filed in Santa Clara County Superior Court.

Developer Mircea Voskerician claims he purchased the property at 1457 Hamilton Ave. in November 2012, after learning it abuts Mr. Zuckerberg's back yard. He planned to build a large home on the site that would have been only 31 feet away from Mr. Zuckerberg's house, according to the lawsuit, which was filed on May 2.

He approached Mr. Zuckerberg with an offer to sell approximately 2,600 square feet of the property to increase a buffer zone between the two structures. Through his real estate agent, Mr. Zuckerberg wanted instead to purchase the entire property. He offered $250,000 plus the amount Mr. Voskerician had advanced as a down payment according to the lawsuit.

Mr. Voskerician wanted $4.3 million for the property, which he claims was the highest offer he received from other interested developers. On Dec. 4, 2012, he met with Mr. Zuckerberg and his financial adviser at Facebook headquarters. Mr. Zuckerberg offered to buy out the property contract for $500,000. Mr. Voskerician rejected the offer, according to the lawsuit.

The financial adviser allegedly told Mr. Voskerician in front of Mr. Zuckerberg that the Facebook CEO gave his company business and introductions to new clients in return for discounted services. The agent asked if Mr. Voskerician would give Mr. Zuckerberg a discount. Mr. Voskerician asked Mr. Zuckerberg if he wanted a discount on the property. Mr. Zuckerberg allegedly said "yes," and that he could not pay $4.3 million for the property, according to the lawsuit.

Mr. Zuckerberg allegedly stated that he built Facebook on relationships and connections. In exchange for a discount he would introduce Mr. Voskerician to his friends, clients and associates and promote Mr. Voskerician's business by giving him referrals for new business and written references.

The lawsuit alleges that Mr. Zuckerberg told Mr. Voskerician that he did not want construction in his back yard for 14 months and he would refer him to business introductions if Mr. Voskerician would help him secure his privacy. He supposedly offered to help Mr. Voskerician build the home he intended for the site at a different location, and he was willing to meet with Mr. Voskerician whenever necessary to forward the references and promote the developer's business, according to the court papers.

Mr. Voskerician accepted a $1.7 million payment on Dec. 5, 2012, in exchange for the promises of personal references and business promotions from Mr. Zuckerberg. His representatives allegedly told Mr. Voskerician the details could be worked out later.

But after the property transferred to Mr. Zuckerberg, Mr. Voskerician tried to set up protocol for the business referrals. Mr. Zuckerberg was unresponsive, despite multiple attempts to contact him, according to court papers.

In October 2013, Mr. Zuckerberg purchased three other properties neighboring his Crescent Park neighborhood home and said that he had done so after discovering that a developer was going to build a huge house directly behind his property and use Mr. Zuckerberg as a selling point to increase the sales price for the new home. Mr. Zuckerberg had wanted to thwart the use of his name and preserve his privacy, media reports at the time stated.

Mr. Voskerician sent Mr. Zuckerberg a letter on Oct. 27, 2013, outlining their agreement. Mr. Zuckerberg had one of his financial advisers meet with Mr. Voskerician. But at the Dec. 27, 2013, meeting, the advisers said Mr. Voskerician's proposal, which did not involve real estate or development, was far below their minimum investment level and only Mr. Zuckerberg could decide whether he wanted to invest in Mr. Voskerician's proposal, according to the lawsuit. No further contact took place with Mr. Zuckerberg or his advisers.

On April 27, Mr. Voskerician sent Mr. Zuckerberg a letter rescinding the deal and offered to return the $1.7 million and other escrow costs, but he did not receive a response, the court papers state.

He is suing for the balance of the $4.3 million he said he would have made had he sold to the highest bidder plus unspecified punitive and other damages. He alleges promissory fraud, intentional misrepresentation, concealment, rescission, breach of contract.

Mr. Zuckerberg's attorneys vigorously deny the allegations:

"The facts stated in your letter and draft complaint are so distorted as to be unrecognizable to our clients. They reject them and dispute that Mr. Voskerician is entitled to any compensation or relief whatsoever.

Mr. Voskerician was in contract on the Hamilton property for a matter of weeks before he assigned his interest to SFRP LLC (the company set up for Mr. Zuckerberg for the properties). He realized $1.7 million from that assignment, a sum that can only be described as a windfall. It is disappointing to say the least, that he has chosen to distort the facts so grossly to manufacture a claim for even more money," Patrick Gunn, one of Mr. Zuckerberg's attorneys wrote in a May 1 letter to Mr. Voskerician's attorney, D.D. Hughmanick.

Mr. Zuckerberg purchased his 5,617-square-foot house for $7 million on March 16, 2011.

Mr. Voskerician and business partner Sam Sinnott recently settled a lawsuit with Menlo Park neighbors to add a driveway from the back of their Santa Cruz Avenue property that will exit onto Louise Street.


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Posted by Sean
a resident of Menlo Park: Central Menlo Park
on May 13, 2014 at 3:05 pm

not surprising. Mr. Z. is not our savior. (but we can delete this comment to appease him!)

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Posted by Menlo Voter
a resident of Menlo Park: other
on May 13, 2014 at 5:16 pm

Voskerician of all people should understand if it doesn't make it to paper it doesn't mean diddly. He's used that to his advantage numerous times. Now that the shoe is on the other foot he cries "foul." What a piece of work.

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Posted by mb
a resident of Woodside: other
on May 15, 2014 at 4:44 pm

are you kidding me -bad more on the part od mr. V to trust Mr. Z...LOL

"Mr. Voskerician accepted a $1.7 million payment on Dec. 5, 2012, in exchange for the promises of personal references and business promotions from Mr. Zuckerberg. His representatives allegedly told Mr. Voskerician the details could be worked out later"

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Posted by RB
a resident of Atherton: West Atherton
on Aug 5, 2014 at 2:05 pm

Menlo Voter...Jumping too soon...Looks like oral verbal promisses with witnesses count...

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Let the games begin...This developer could actually win.

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Posted by Ouch
a resident of Menlo Park: Central Menlo Park
on Feb 9, 2015 at 12:55 pm

Lesson to Zuck: If you play with snakes you'll eventually get bit...

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Posted by Ouch
a resident of Menlo Park: Central Menlo Park
on Mar 13, 2015 at 3:18 pm

Gotta hand it to Zuck for not settling...

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Posted by Ouch
a resident of Menlo Park: Central Menlo Park
on Mar 15, 2016 at 3:46 pm

It's over, and Zuck didn't settle:

Sorry, but further commenting on this topic has been closed.

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