From Patricia Hurtado, over at Bloomberg, a few hours ago: “Ex-Goldman Programmer Aleynikov’s Conviction for Stealing Code Is Reversed.”
Here’s a link to Reuters finance blogger Felix Salmon’s thoughts on this fascinating story: “Aleynikov goes free.”
And, here’s the link to the New York Times’ Dealbook coverage of it, courtesy of those hard working folks at Daily Kos’ Overnight News Digest.
Court Overturns Conviction of Ex-Goldman Programmer
Peter Lattman
New York Times
February 17, 2012
A federal appeals court reversed the conviction late Thursday of Sergey Aleynikov, a former Goldman Sachs programmer found guilty of stealing proprietary code from the bank’s high-frequency trading platform.
The United States Court of Appeals for the Second Circuit overturned the conviction and ordered the trial court to enter a judgment of acquittal. A judgment of acquittal generally bars the government from retrying a defendant.
The reversal was without explanation; it said an opinion would follow “in due course.”
The appeals court ruling came just hours after a three-judge panel heard oral arguments on Mr. Aleynikov’s appeal. Mr. Aleynikov, who was convicted in December 2010, is serving an eight-year sentence at a federal prison in Fort Dix, N.J...
The stories, linked above, note that Aleynikov was immediately freed on Friday after the acquittal.
From Bloomberg…
…During oral arguments on Feb. 16, the three-judge appeals panel criticized the government’s application of the espionage act to Aleynikov’s actions, asking the prosecutor how the crime occurred and how it affected commerce.
The judges -- Dennis Jacobs, 67, Guido Calabresi, 79, and Rosemary Pooler, 73 -- also asked if taking Goldman Sachs’s trading code was comparable to taking copyrighted material or bringing an employee manual to a new job.
Marino argued that the trial judge had “bent over backward” to let the government apply the espionage statute and argued the case should have been prosecuted in state court.
Marino argued, as he had during the trial, that Aleynikov only took open-source code he had written at Goldman Sachs. He said the government had tried to expand its reading of the Economic Espionage Act to encompass that...
From
Felix Salmon, over at Reuters…
…Now the EEA was designed — and was initially used — to prosecute very different behavior, chiefly employees at defense contractors taking top-secret information and giving it straight to the Chinese government. The kind of thing which can absolutely be considered espionage.
The secrets at defense contractors, of course, are secret for reasons of national security. The secrets at investment banks and hedge funds, by contrast, are secret purely for reasons of profit: they reckon that if they have some clever algorithm which nobody else has, then that makes it easier for them to profit from it. Which is why it was always a stretch for the government to use the EEA to prosecute Aleynikov — indeed, it is why it was always a stretch for Aleynikov to be criminally prosecuted at all. Goldman could have brought a civil case against him, but instead they got their wholly-owned subsidiary, the U.S. government, to come down on him so hard that he ended up with an eight-year sentence. Violent felons frequently get less.
The forthcoming decision from the Second Circuit is likely to be a doozy; I’m told that the judges shredded the prosecutors during the oral hearing. And certainly their decision to enter a judgment of acquittal, rather than any kind of retrial, is a strong indication that they handed down this order with extreme prejudice against prosecutorial overreach.
Is it the government’s job to expend enormous prosecutorial resources protecting Goldman Sachs from competition? The Second Circuit certainly doesn’t seem to think so, and neither do I. Aleynikov’s actions were certainly stupid, and quite possibly illegal. But the way that Goldman managed to sic New York prosecutors on him bearing the sledgehammer of the EEA was far from edifying. And I’m glad that both Goldman and the Manhattan U.S. Attorney are surely feeling very chastened right now…
Commenting with fairly extensive, firsthand knowledge on some of these issues, when you own a small software company in the U.S., and you want to go after someone for stealing your company’s most valuable proprietary source code, your chances of getting an audience with a state or county
criminal prosecutor who’s willing to spend more than 30 seconds--assuming you’re lucky enough to get past the prosecutor’s receptionist where, even at that point, the odds are about as good as winning the Powerball jackpot--reviewing the merits of your case are somewhere between zero and less than zero. (Read:
a snowball’s chance in hell.)
If you’re real lucky, and you have a few hundred thousand extra bucks lying around for a rainy day, or some equity in your home which you may borrow against, you could file a civil lawsuit in your state’s court system. And not too long after that, as is the case with most intellectual property/software commercial litigation, you’ll quickly find out that you’ll need about twice as much cash as you originally thought to fully pursue the matter because--simply due to the fact that in order for it to be competently reviewed from a judicial standpoint, you’ll need to have the case tried in a venue with the proper resources to fully research and comprehend the complexity of it--it will have to be escalated to the federal court system, instead.
But, if you’re Goldman Sachs, and one of your most senior, high-frequency trading (“HFT”) algorithm programmers takes some open source code with them the same day they quit their job to start a new gig (for three times as much as you’re paying them) with one of your competitors, you just call a few of your minions in government; and, hours after you’ve put down the receiver, the guy gets arrested by the FBI while boarding a plane at Newark Liberty International Airport. Then it’s trumped-up charges, a quick conviction, and eight years in a federal prison on a military base.
Essentially, that’s what happened to Sergey Aleynikov in the early Summer of 2009. (I covered this story extensively at the time it all went down. SEE: HERE, HERE, HERE, and HERE.)
Meanwhile…
Lehman Brothers Subpoenas Geithner In J.P. Morgan Fight
Wall Street Journal
By Joseph Checkler and Patrick Fitzgerald
February 16, 2012 10:55PM
Lehman Brothers Holdings Inc. (LEHMQ) and its creditors late Thursday said they want to subpoena Treasury Secretary Timothy Geithner to question him under oath over allegations J.P. Morgan Chase & Co., (JPM) illegally siphoned billions of dollars from the collapsing investment bank in the days before it filed for the largest bankruptcy in U.S. history.
In a filing accompanying Lehman's filing, made in U.S. District Court in Washington, Lehman's official committee of unsecured creditors said Geithner has thus far refused to comply with an Aug. 9, 2011, subpoena, and it wants a court to force Geithner to give a deposition by a March 16 deadline.
"Despite being a crucial fact witness on these issues, Secretary Geithner has refused to appear at a deposition in accordance with a valid subpoena issued by the Committee," the committee's lawyers said in the filing. Geithner was president of the Federal Reserve Bank of New York at the time of the Lehman collapse...
I wrote quite a bit about that story at the time, too (SEE:
HERE and
HERE).
With justice, there is hope.
That’s what I’m talkin’ about!