By Joseph Ax
NEW YORK Oct 22 Goldman Sachs Group Inc
must pay some legal fees incurred by a former computer
programmer accused of stealing code from the bank because his
title of vice president made him a bank officer at the time, a
New Jersey federal judge ruled Tuesday.
In the latest twist in an unusual white-collar criminal
case, U.S. District Judge Kevin McNulty ordered the bank to pay
for Sergey Aleynikov's defense against state charges, which has
cost $700,000 thus far, according to his lawyer, Kevin Marino.
However, McNulty postponed a decision on whether Goldman
must also pay for the money Aleynikov spent defending himself
against previous federal charges, as well as costs incurred in
fighting the bank over the legal-fee dispute. Those fees exceed
$3.3 million, Marino said.
A Goldman spokesman declined to comment.
Federal prosecutors first charged Aleynikov in 2009 with
stealing code as he prepared to join a high-frequency startup
firm in Chicago. He was convicted by a jury in 2010, but a
federal appeals court overturned the verdict in February 2012,
saying federal corporate espionage laws did not apply to his
alleged actions, and freed him after nearly a year in prison.
Manhattan District Attorney Cyrus Vance then brought state
felony charges against Aleynikov. A Manhattan state judge denied
Aleynikov's bid to dismiss the case because of double jeopardy,
finding that the federal and state charges were different even
though the underlying allegations were the same.
In his 34-page ruling, McNulty said Goldman's own by-laws
require the bank to pay legal fees for any "officer" named as a
civil or criminal defendant in connection with their role at the
bank. The question, he said, was whether a "vice president"
should be considered an officer.
Goldman argued that vice presidents are frequently mid-level
employees without the kind of managerial responsibility
typically associated with an officer.
But McNulty said the bank's by-laws failed to define clearly
who is entitled to legal fees, leaving him to rely on the
"uncontroversial" notion that vice presidents are officers.
"Goldman might easily have chosen to be more sparing with
job titles, or to confer them in some other way," he wrote. "It
might have easily drafted its by-laws to restrict
indemnification to a well-defined class. It did not."
The judge said he understood that Goldman, the alleged
victim, might find it "galling" to pay for Aleynikov's defense.
But he noted that Goldman has paid the legal costs for 51 of the
53 employees who have sought coverage in recent years.
That tally includes Fabrice Tourre, a former vice president
found liable for securities fraud after a civil trial this year,
and former director Rajat Gupta, convicted of insider trading.
If Aleynikov is convicted of the state charges, the bank
could attempt to claw back his defense fees.
The case is Aleynikov v. The Goldman Sachs Group, U.S.
District Court for New Jersey, No. 12-5994.