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Another Ex-Goldman Employee (And His Lawyer) Take Aim At Goldman Sachs

"He left Russia for freedom, justice, and the American way and he got Franz Kafka and Goldman Sachs," the Russian computer programmer's lawyer said. But there are many more issues at stake.

“If you mess with Goldman Sachs, you better get ready for the fight of your life.”

These words might not ring true for Greg Smith, the ex-Goldman employee who is about to spill the beans on his years at the firm in a tell-all book for which he was paid a reported $1.5m.

But another former Goldman employee isn’t having quite such a good time. The words above were spoken by a lawyer for Sergey Aleynikov, the Russian computer programmer who has been charged twice with stealing secret computer code from the bank.

In New York State court on Thursday, Kevin Marino, his lawyer, didn’t mince his words.

“He left Russia for freedom, justice, and the American way and he got Franz Kafka and Goldman Sachs,” Marino told the court after his client pleaded not guilty to the state charges, referring to "The Trial," Kafka’s novel about an unassuming office worker who is arrested on mysterious charges.

The Manhattan district attorney’s office arrested 42-year-old Aleynikov this summer, accusing him of stealing proprietary software for Goldman’s high-frequency trading business in 2009 as he was leaving to join Teza Technologies LLC, a hedge fund based in Chicago, where he had accepted a $1 million-a-year job, according to reports.

Just over three years ago, Aleynikov appeared in Federal District Court in Manhattan to plead not guilty to similar charges brought by the United States attorney in Manhattan.

He had been arrested and charged with illegally downloading 32 megabytes of computer code from Goldman's computers and sending it to a computer server in Germany.

In 2010, a jury convicted him and a judge sentenced him to an eight-year prison term. But a Federal Appeals Court reversed that conviction this year, finding that prosecutors misapplied the federal corporate-theft laws against him, the New York Times reports. Aleynikov was released from a jail after serving one year.

The Chicago Tribune reports that the case has been closely watched as U.S. authorities are currently on a “push to tackle complex cyber crime, an area of criminal law that has not been well-tested in courts amid debate about which laws apply and what types of conduct can be considered criminal behavior.”

In fact, no one is disputing the fact that Aleynikov did actually download the computer code from Goldman’s computers. Federal prosecutors alleged that he used the code to help him build a similar high-speed trading platform at Teza Technologies, the start-up founded by Mikhail "Misha" Malyshev, a former executive at hedge-fund Citadel, according to the Wall Street Jorunal.

Still, Marino argued at the trial that his client intended to use only the portions of the downloaded code that were "open source," or freely available.

One Wall Street Journal reader comments that what the ex-Goldman computer programmer did might not actually be that unusual anyway.

“What you don't realize is that programmers generally carry their employers intellectual property around with them... it's just bits. They are usually contractors and come and go and they own their own laptops. The "version control" software that programmers use tend to make it VERY easy to create copies all over the place,” he writes.

Open source or not, high-speed-trading and other financial firms aggressively protect their code, considering it a competitive advantage, and are therefore understandably likely to equally aggressively pursue anyone they consider to be stealing their intellectual property.

“Goldman required that its employees sign a confidentiality agreement as part of their employment and that any software created by them in their jobs was the property of the investment bank,” the WSJ writes.

So are Goldman and the government over-aggressive in their prosecution of the computer programmer?

The Wall Street Journal points out that it is rare - but not unprecedented - for prosecutors to charge a defendant who already has been convicted and served prison time, or a federal appeals court has overturned the conviction. The law allows it, though.

Plus, Goldman might not have that much to do with the case at this point, at least according to David Szuchman, chief of the District Attorney's Cybercrime and Identity Theft Bureau, who told the Wall Street Journal that the office's decision to bring a new case against Aleynikov came from the appeals-court decision and not Goldman Sachs.

Still, Marino had a lot to say about Goldman Sachs, and suggested that the bank was behind the government’s aggressive prosecution of Aleynikov, the Times reports.

“Here he is in the well of another courtroom, facing the exact same charge because Goldman Sachs has enormous power and they are bringing it to bear in this case,” Marino said. “If you mess with Goldman Sachs, you better get ready for the fight of your life.”

Goldman Sachs declined to comment, the NYT said.

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio

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