Ex-Goldman programmer's conviction overturned

NEW YORK Fri Feb 17, 2012 6:15pm EST

Sergey Aleynikov departs from federal court in New York February 17, 2010.  REUTERS/Chip East

Sergey Aleynikov departs from federal court in New York February 17, 2010.

Credit: Reuters/Chip East

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NEW YORK (Reuters) - 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, mere hours after it heard oral argument in the case, and said it would explains its reasons "in due course."

It also directed U.S. District Judge Denise Cote to enter a judgment of acquittal, only to reverse that part of its decision in a brief order on Friday.

Generally such a judgment means a defendant cannot be retried. Both sides agreed at a Friday afternoon hearing that Aleynikov can stay free without bail while the government decides its next move.

"Justice occasionally works," a beaming Aleynikov, dressed in a light gray sweatshirt, plain white cap and white shoes, said after the hearing, which had concluded with his giving his lawyer Kevin Marino a bear hug.

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 had since March been serving an eight-year prison term in a Fort Dix, New Jersey, federal prison.

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 FEAR OF FLIGHT

It is not immediately clear whether the government will seek to persuade the 2nd Circuit to reverse Thursday's decision.

Still, prosecutor Justin Weddle suggested at Friday's hearing it might serve no purpose to reimpose bail on Aleynikov.

"Now would be a silly time to become a fugitive," he said.

Prosecutors had accused Aleynikov 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.

"This was a radical exaggeration of both of these statutes," he said after Friday's hearing, adding that the case was a "wrongheaded prosecution that never should have been brought." Marino said his client's case remains "on very firm ground."

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" why the 2nd Circuit reversed Aleynikov's conviction.

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

He said he woke up Friday morning at 5:30 a.m. -- "for some reason, I couldn't sleep" -- and got an email from his lawyer 30 minutes later saying that his conviction had been overturned.

"The words were: we won," Aleynikov said. "I just jumped all over the place."

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.

(Reporting by Jonathan Stempel and Joseph Ax; Editing by Tim Dobbyn and Lisa Shumaker)

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