Ex-Goldman programmer charged, again, over code theft

NEW YORK Thu Aug 9, 2012 5:27pm EDT

NEW YORK (Reuters) - A former Goldman Sachs Group Inc computer programmer who was cleared in February of federal charges of stealing high-frequency trading code has been hit with new charges arising from the same activity.

Sergey Aleynikov, the former programmer, now faces charges brought by the office of Manhattan District Attorney Cyrus Vance, a new twist in a case first filed by U.S. federal prosecutors in July 2009.

The case has been among the highest-profile prosecutions as government investigators try to crack down on computer crimes and corporate espionage. Federal courts across the country are divided on how to apply laws to criminalize the actions of employees who violate employer policies.

Federal prosecutors had accused Aleynikov of copying and removing trading code from Goldman in 2009 as he was preparing to take a new job at Teza Technologies LLC, a high-frequency trading start-up firm in Chicago.

A federal jury found Aleynikov guilty in December 2010. But a federal appeals court in New York overturned that verdict in February, setting Aleynikov free after he had served 11 months of an eight-year prison term.

At an initial hearing in Manhattan criminal court on Thursday on the latest arrest warrant, Aleynikov's lawyer told Judge Robert Mandelbaum his client had spent the last week in jail in New Jersey, where he lives.

Mandelbaum granted Aleynikov's release on $35,000 bail as he stood in the courtroom, his hands cuffed behind his back.

Aleynikov, dressed in a white tee-shirt, checked shorts, white socks and sandals, was not asked to enter a plea. Aleynikov, 42, who is a dual citizen of the United States and Russia, was ordered to surrender his passports.

The latest arrest warrant, dated last week and signed by an FBI agent, charges Aleynikov under New York state law with "unlawful use of secret scientific material" and "unlawful duplication of computer related material."

Aleynikov's lawyer, Kevin Marino, said he would fight the new charges.

"It is clear that the Manhattan District Attorney is acting as a tool of the U.S. Attorney for the Southern District of New York and the FBI," Marino said in court.

Ellen Davis, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, declined to comment. FBI spokesman Peter Donald also declined comment.

In throwing out Aleynikov's conviction, the 2nd Circuit had ruled that the taking of source code was not a crime under a federal law that makes it illegal to steal trade secrets, and that the code did not qualify as stolen goods under another federal law.

Vance, however, is trying to prosecute Aleynikov under New York state law, and that could raise double jeopardy concerns, according to Eugene Cerruti, a professor at New York Law School who has been a federal prosecutor and public defender.

"New York courts have interpreted its state statute to preclude a separate prosecution in New York following a prosecution in another jurisdiction," he said.

Cerruti said he could not recall another situation in New York with a procedural history similar to Aleynikov's.

His lawyer, Marino, told reporters outside the courtroom that "it's hard for me to believe what this has come to."

He added: "If you're Sergey Aleynikov you have to wonder why you would ever leave Russia to come to the United States."

Vance said in a statement that the code "is so highly confidential that it is known in the industry as the firm's ‘secret sauce.'" The prosecutor warned: "Employees who exploit their access to sensitive information should expect to face criminal prosecution in New York State in appropriate cases."

Goldman spokesman Michael DuVally declined to comment.

The case is People v. Aleynikov, New York State Supreme Court, New York County, No. 60353/2012.

(Reporting by Grant McCool; Additional reporting by Emily Flitter and Jonathan Stempel; Editing by Martha Graybow, Gerald E. McCormick, Gary Hill and David Gregorio)

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