Former Goldman Programmer's Stealing Conviction Overturned

Friday, 17 Feb 2012 03:41 PM

 

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A former Goldman Sachs Group Inc. computer programmer was released from prison on Friday, a day after a federal appeals court threw out his conviction for stealing part of the Wall Street bank's high-frequency trading code.

A three-judge panel of the 2nd U.S. Circuit Court of Appeals in Manhattan overturned the conviction of Sergey Aleynikov on Thursday night and said an opinion explaining its reasoning would follow "in due course."

It also directed the trial court to enter a judgment of acquittal, which by Friday afternoon had yet to be done. Generally such a judgment means a defendant cannot be retried.

Aleynikov, 42, was convicted by a federal jury in December 2010 of stealing trade secrets in violation of the Economic Espionage Act of 1996.

He was released on Friday from a Fort Dix, New Jersey federal prison, where he had since March been serving an eight-year prison term, said his lawyer, Kevin Marino.

Reversal of Aleynikov's conviction is a major setback for government efforts to crack down on the theft of intellectual property, including computer code.

"The government wanted to send a very strong message about online economic espionage," said Joel Reidenberg, a professor at Fordham University School of Law and director of the Fordham Center on Law and Information Policy.

"This is a fast-growing crime, not just from theft of trade secrets but also the hacking into computer systems of American companies," he said. "It poses increasingly significant risks to the U.S. economy."

Ellen Davis, a spokeswoman for federal prosecutor Preet Bharara in Manhattan, declined to comment on the reversal. Goldman spokesman Michael DuVally also declined to comment.

 NO IMMEDIATE ACQUITTAL

While ordering Aleynikov's release from prison, U.S. District Judge Denise Cote, who oversaw the trial, had by Friday afternoon not yet entered a judgment of acquittal.

Prosecutors in a Friday court filing said that they may ask the 2nd Circuit panel or the entire 2nd Circuit to review the decision, and that acquitting Aleynikov would complicate those efforts. A hearing on the matter is scheduled for later Friday.

The appeals court decision was swift, coming just hours after Aleynikov's lawyer asked it to reverse the conviction.

"We are extremely gratified that the court of appeals refused to let this unjust conviction stand," Marino said.

Aleynikov was once a competitive ballroom dancer, has three children, and has held dual U.S. and Russian citizenship.

Prosecutors accused him of copying and removing trading code from Goldman in 2009, shortly before taking a new job at Teza Technologies LLC, a high-frequency trading start-up firm in Chicago. Teza was not accused of wrongdoing.

Marino argued that his client's conduct did not violate the espionage law, or a separate federal law barring the transportation of stolen property across state lines.

He argued in court papers that prosecutors "expanded two federal criminal statutes beyond anything Congress could have imagined," and that Aleynikov was punished as severely as someone who stole $20 million.

In a similar case, former Societe Generale trader Samarth Agrawal was sentenced to three years in prison last February for his conviction on stealing speed-trading computer code secrets and transporting the code across state lines.

Ivan Fisher, who represented Agrawal, said "it's not at all clear what the issue was" in the Aleynikov case without a fuller explanation.

Last month, federal authorities arrested Chinese computer programmer Bo Zhang, a resident of Queens, New York, on charges that he stole nearly $10 million of software code from the Federal Reserve Bank of New York.

The case is U.S. v. Aleynikov, 2nd U.S. Circuit Court of Appeals, No. 11-1126. The lower court case was U.S. v. Aleynikov, U.S. District Court, Southern District of New York, No. 10-00096.

© 2014 Thomson/Reuters. All rights reserved.

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