Zuckerberg sued for fraud in Palo Alto land deal
Developer claims Facebook CEO failed to deliver on promise of business referrals, but Zuckerberg denies 'agreement'
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Updated: Thu, May 15, 2014, 1:41 pm
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Facebook CEO Mark Zuckerberg is being sued by a real estate developer 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 Zuckerberg's home at a deep discount. But Zuckerberg's attorneys say he never had any such agreement and the developer is just looking to extract more money and embarrass their client.
Developer Mircea Voskerician claims he made an offer on the property at 1457 Hamilton Ave. in November 2012, after learning it abuts Zuckerberg's backyard. He planned to build a large home on the site that would have been only 31 feet away from Zuckerberg's house, according to the lawsuit, which was filed on May 2 in Santa Clara County Superior Court.
He approached 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, Zuckerberg said he wanted instead to purchase the entire property.
Voskerician and Zuckerberg eventually did come to an agreement to buy out Voskerician's contract with the property owner -- for $1.7 million plus $129,000 in deposits the developer had put down on the property. But the two have very different versions about how they came to that arrangement. Voskerician says he gave Zuckerberg a discount because he had an agreement to receive business referrals from Zuckerberg, who allegedly offered to help him build his business. But Zuckerberg's attorneys say they never agreed to those terms, and the written agreement they signed makes no reference to such promises.
Voskerician said in court papers that when he offered to sell Zuckerberg a strip of the property for a buffer, Zuckerberg originally offered $250,000 for Voskerician's contract, plus the amount Voskerician had advanced as a down payment, according to the lawsuit.
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Voskerician wanted $4.3 million, which he claims was the highest offer he received from other interested developers. On Dec. 4, 2012, he met with Zuckerberg and his financial adviser at Facebook headquarters. Zuckerberg offered $500,000 for the property contract, but Voskerician rejected the offer, according to the lawsuit.
The financial adviser allegedly told Voskerician in front of Zuckerberg that the Facebook CEO gave his company business and introductions to new clients in return for discounted services. The agent asked if Voskerician would give Zuckerberg a discount. Voskerician asked Zuckerberg if he wanted a discount on the property. Zuckerberg allegedly said "yes," and that he could not pay $4.3 million for the property, according to the lawsuit.
Zuckerberg allegedly stated that he built Facebook on relationships and connections. In exchange for a discount he would introduce Voskerician to his friends, clients and associates and promote Voskerician's business by giving him referrals for new business and written references.
The lawsuit alleges that Zuckerberg also offered to help Voskerician build the home he intended for the site at a different location.
Voskerician accepted a $1.7 million contract buy-out on Dec. 5, 2012, in exchange for the promises of personal references and business promotions from Zuckerberg.
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But after the deal, Voskerician tried to set up protocol for the business referrals. Zuckerberg was unresponsive, despite multiple attempts to contact him, according to court papers.
But Patrick Gunn, an attorney for Zuckerberg, tells a different story. Voskerician approached Zuckerberg about building the huge house so close to Zuckerberg's home, and the two did meet about buying out Voskerician's contract. Zuckerberg purchased the contract for $1.7 million, plus refunded Voskerician $129,000 for his other deposits. Zuckerberg then paid the property owner $4.8 million for the property.
But there was never any oral or written agreement regarding the promised business contacts, and the written contract-assignment agreement had the input of lawyers for both sides, Gunn said.
"We think this is a manufactured claim. The meeting he describes is not the meeting that took place. It appears to be a claim that has just been invented in order to extract even more money from our client. If the plaintiff's version of events were true and these alleged promises were actually made, I would think they would've been included in writing, and they were not," Gunn said.
In October 2013, 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 Zuckerberg as a selling point to increase the sales price for the new home. Zuckerberg had wanted to thwart the use of his name and preserve his privacy, media reports at the time stated.
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Voskerician said in court papers that he sent Zuckerberg a letter on Oct. 27, 2013, outlining their agreement. Zuckerberg had one of his financial advisers meet with Voskerician. But at the Dec. 27, 2013, meeting, Voskerician was essentially rebuffed, according to the lawsuit. No further contact took place with Zuckerberg or his advisers.
On April 27, Voskerician sent 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.
Gunn sent a letter to Voskerician's attorney on May 1, prior to the lawsuit filing:
"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 (a company set up for Zuckerberg). 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 chose to distort the facts so grossly to manufacture a claim for even more money.
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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Comments
Duveneck/St. Francis
on May 13, 2014 at 11:00 am
Stanford
on May 13, 2014 at 12:10 pm
Is this person the reason MZ bought the surrounding properties and rented them back to the owners, the one who was going to make millions off of MZ's name by advertising MZ's place was nearby?
Community Center
on May 13, 2014 at 12:16 pm
Billionaire problems. Meanwhile, others in Palo Alto are wondering if they can afford to keep a roof over their heads.
Embarcadero Oaks/Leland
on May 13, 2014 at 12:48 pm
Zillow shows this property as being sold for $4.8 on 12/12/12. Not
$1.7 million. County tax records reflect the same purchase
price/assessed value.
Web Link
Palo Verde
on May 13, 2014 at 12:54 pm
So MC valued the "introductions" as worth at least $2.6 million and did not get it in the contract? Just not good business. A deal is a deal. Tough.
East Palo Alto
on May 13, 2014 at 1:00 pm
Thank you Disgusted. Palo Alto has a Homelessness problem which will
not be solved by allowing Billionaires to own adjacent properties so
they can avoid having neighbors.
Why not create a Homeless shelter right on Zuckerbergs front lawn?
Another Palo Alto neighborhood
on May 13, 2014 at 1:08 pm
Evergreen Park
on May 13, 2014 at 1:10 pm
Raymond, honestly, if you have the money to buy property you do it, its legal, Sounds to me like all you are is jealous.
Honestly I am too but c'est la vie.
College Terrace
on May 13, 2014 at 1:31 pm
Sounds like Mircea Voskerician got a dose of developer sour grapes
medicine. Props to MZ. The developer was a greedy scrooge and got what
they deserved. Buying a home near a (celebrity)just to exploit the
property for being next to said famous neighbor? What a piece of work.
Google the name Mircea Voskerician and take a look at all the bad
activities coming from this developer NAME. And the city of PA has
considered interviewing Mircea for the Planning and Transportation
Commission!!!!
Web Link
BWWAAAHAHAHAHAHHAHHA.
Down with Voskerician development.
Community Center
on May 13, 2014 at 1:34 pm
A Google search has the same developer Mircea Voskerician, as an
applicant for the Palo Alto Planning and Transportation commission, and
in driveway controversy in Menlo Park.
another community
on May 13, 2014 at 1:39 pm
He must not have made it a sale contingency. Get it in writung in the
contract, or at a minimum in a side-contract, first. Although, as a
condition of sale, perhaps it could have been considered taxable "boot",
if tgere was a 1031 Exchange involved. Hmmmm. Billionaires area weird
lot.
Martin's Beach Atherton owner, former co-founder of Sun Microsystems, Vinod Khosla : Web Link
Menlo Park
on May 13, 2014 at 1:49 pm
This is the same developer who ran into problems in Menlo Park on Santa Cruz Avenue / Louise Street with Sam Sinnott as his partner.
Registered user
East Palo Alto
on May 13, 2014 at 2:08 pm
You can't house the homeless on Zuck's front lawn, unless they can get in through his gate.
Mircea is pissing and moaning all over the place. Dude, you've been had - deal with it.
Embarcadero Oaks/Leland
on May 13, 2014 at 2:18 pm
I don't think he's been had, I think he is simply not telling the truth. Public records show that the house he claims Zuckerberg purchased for $1.7 million was actually purchased for $4.8 million. I think he is simply pissed that the houses on either side of him sold for $14 and $14.5 million, I would assume to Zuckerberg.
Charleston Meadows
on May 13, 2014 at 3:11 pm
Sounds to me as though Voskerician is attempting an old fashioned shakedown of Zuckerberg, using the courts as his enforcer. We don't know all the facts in the case [portion removed.]
College Terrace
on May 13, 2014 at 3:15 pm
That is why he created facebook...Got to facebook for referrals just like the rest of us...
College Terrace
on May 13, 2014 at 3:45 pm
Downtown North
on May 13, 2014 at 4:56 pm
Is this billionaire barter economy even legal? Sounds to me like they
are trying to evade legitimate property and sales taxes with
off-the-book price discounts.
Embarcadero Oaks/Leland
on May 13, 2014 at 7:12 pm
@legality - the property is being taxed at a assessed value of $4.8 million. Not the $1.7 million claimed in the lawsuit.
Palo Alto Hills
on May 14, 2014 at 9:52 am
This is just a developer being resentful and stupid.
More fraudulent and lawsuit-worthy was when Zuck promised his employees a
minimum amount of money when FB went public. That is against the law
and SEC regulations, yet he got away with that!
Community Center
on May 14, 2014 at 10:10 am
A known fact.. whoever sold house years ago in PA are under-price. His house is no exceptional but he makes himself popular now!
Community Center
on May 14, 2014 at 10:21 am
Crescent Park
on May 14, 2014 at 11:38 am
@palo alto resident:
RTFA
You appear to be very confused. Zuck did not pay $1.7M for the property.
He paid $1.7M to get Mircea Voskerician (who was already in contract) to release it so Zuck could buy it for himself.
Duveneck/St. Francis
on May 14, 2014 at 11:52 am
"Mircea is pissing and moaning all over the place. Dude, you've been had - deal with it. "
That's not the way I read this. It looks to me like he tried to
capitalize in a rather scummy way off MZ, and MZ paid big bucks to stop
the scheme. Not the guy is complaining and looking for a way to extort
more money from MZ. He needs to just crawl back under his rock and find
an more honorable way to make a living.
Professorville
on May 15, 2014 at 11:56 am
Sounds like Developer Mircea Voskerician just lost any chance of anyone using him in the future.
So sad that someone can be so focused on money versus what is right.
Good luck Voskerician finding a new career. Realize that actions always
speak louder than words. Had he just done outstanding work, people
notice and want to use the same contractor.
Menlo Park
on May 21, 2014 at 1:45 pm
Voskerician and Sinnott used the same tactics in Menlo Park. Whenever
they lose out on a real estate deal, they threaten to sue. Most people
don't have their resources so they cave. It's an invidious and
ultimately frivolous use of the court system.
Palo Alto Hills
on Jun 9, 2014 at 11:16 am
Zuck did not pay $1.7M for the property, Zuck paid $1.7M to Voskerician to buy the contract. Zuck paid $4.8M to the property owner which is the cost of the property. Basically, Voskerician made $1.7M by doing nothing but greedy, wants more so suing Zuck for more. Hope Voskerician got nothing, greedy!
Embarcadero Oaks/Leland
on Jun 9, 2014 at 11:24 am
Voskerician is just mad some other houses that Zuckerberg bought went for $14 million plus.
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