Bloomberg News

Ex-Goldman Sachs Programmer Seeks End of N.Y. Prosecution

January 18, 2013

A former Goldman Sachs Group Inc. programmer who won reversal of a federal conviction for stealing internal code from the bank asked a New York judge to dismiss state charges against him based on the same allegations.

At a hearing today in New York State Supreme Court in Manhattan, Kevin Marino, an attorney for Sergey Aleynikov, asked Justice Ronald Zweibel to dismiss the charges, arguing that Aleynikov had the right to copy the code and that the charges are barred by the state’s double-jeopardy statute as well as the Fifth Amendment of the U.S. Constitution.

Aleynikov, 42, was charged in August by the Manhattan District Attorney’s Office and indicted the following month on two counts of unlawful use of scientific material and one count of unlawful duplication of computer-related material. He has pleaded not guilty.

“The reality is Sergey Aleynikov has suffered enough,” Marino said in court. “He has been punished enough.”

Aleynikov, a naturalized U.S. citizen born in Russia, was freed from federal prison in New Jersey in February after a U.S. appeals court reversed his December 2010 conviction for stealing the bank’s trading code, saying the two laws that prosecutors used to charge Aleynikov -- the National Stolen Property Act and the Economic Espionage Act -- didn’t apply to his case.

June 2009

Federal prosecutors claimed that, on his last day of work at New York-based Goldman Sachs in (GS:US) June 2009, Aleynikov uploaded hundreds of thousands of lines of source code from the firm’s high-frequency trading system.

Aleynikov, a vice president in the bank’s Global Equities Division until June 30, 2009, was part of a team responsible for developing and improving source code related to high-frequency trading.

New York prosecutors have said that while the federal appellate judges ruled Aleynikov’s conduct didn’t constitute a federal crime, they suggested it could be a violation of state law.

While New York’s statute on previous prosecutions is broader than the double-jeopardy protection provided by the state and U.S. constitutions, it isn’t unlimited and the case falls within one of the rules that allows for successive prosecutions, prosecutors said in court papers responding to Marino’s bid to dismiss the case.

Same Acts

U.S. courts have held that a federal prosecution doesn’t bar a subsequent state prosecution of the same person for the same acts under the principle of dual sovereignty, prosecutors said.

New York prosecutors argued that they weren’t a party to the federal case and had no relationship to anyone who was. They said the jury and the judges in the federal case found beyond a reasonable doubt that Aleynikov had misappropriated computer data and that the prosecution failed only because of elements irrelevant to the state case.

While Marino argued that the state wouldn’t have prosecuted the case without the encouragement from the FBI and federal prosecutors, Aleynikov can’t “seriously suppose” that the Manhattan District Attorney’s Office would have declined to prosecute if the victim had contacted it first, according to the response.

“In every case, the prosecutors rely not on bombast but on evidence,” Chief Assistant District Attorney Daniel R. Alonso said in a statement. “The Second Circuit reversed the defendant’s conviction on federal jurisdictional grounds in the face of insistent arguments by this same lawyer that the case was a quintessential state crime. We look forward to proceeding with the case.”

Broader Scope

President Barack Obama signed a measure on Dec. 28 broadening the scope of the Economic Espionage Act to include services intended for use in commerce beyond state lines, including computer source codes.

The 1996 law had applied only to products made specifically for use in interstate or foreign commerce, such as manufactured goods. It was broadened to apply to cases such as Aleynikov’s.

Marino said his client has lost his life savings, his marriage, his home, his job, his reputation and his opportunity to work in his chosen field. Aleynikov has already served more than a year in federal prison for the conduct he is being accused of, Marino said.

“There is a word for this prosecution, your honor,” Marino said. “It’s inhuman.”

Zweibel adjourned the case until Feb. 15 for a decision, although the judge said he may rule before then.

The criminal case is New York v. Aleynikov, 04447-2012, New York State Supreme Court (Manhattan). The New Jersey case is Aleynikov v. Goldman Sachs Group Inc. (GS:US), 12-cv-05994, U.S. District Court, District of New Jersey (Newark).

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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